Australia’s financial intelligence agency has begun legal action against Westpac, alleging breaches of money laundering and counter-terrorism finance laws.
Austrac has filed an application to the Federal Court of Australia, claiming the major lender did not report more than 19.5 million international funds transfers involving $11 billion in transactions over five years.
The intelligence agency said Westpac allegedly failed to assess ongoing money terrorism financing risks related to movement off money, pass on information about the source of funds and keep records relating to the origin of some of the international transfers.
It also said part of the more than 23 million contraventions included a failure to “carry out appropriate due diligence on customers sending money to the Philippines and South East Asia for known child exploitation risks.”
Austrac said Westpac was aware of the child exploitation risks relating to low-value payments made through one of its systems LitePay since 2013, but had not fixed them until June 2018.
It said the bank had not appropriately dealt with a customer who opened a number of Westpac accounts after serving a custodial sentence for child exploitation.
“Westpac promptly identified activity on one account that was indicative of child exploitation, but failed to promptly review activity on other accounts,” Austrac said.
Austrac chief executive Nicole Rose said Westpac’s noncompliance was serious.
She told reporters that the bank’s actions defied laws designed to protect Australia’s financial system, businesses and the community.
“The failure to pass on information about IFTIs (international funds transfer instruction) to AUSTRAC undermines the integrity of Australia’s financial system and hinders AUSTRAC’s ability to track down the origins of financial transactions when required to support police investigations,” she said in the application,” Ms Rose said.
She said Austrac was working with Westpac “to strengthen their anti-money laundering and counter-terror financing (AML/CTF) processes and frameworks.”
“Westpac disclosed issues with its IFTI reporting, has co-operated with AUSTRAC’s investigation and has commenced the process of uplifting its AML/CTF controls.”
The bank has confirmed the civil proceeding with chief executive Brian Hartzer stating the allegations were “serious and important.”
“These issues should never have occurred and should have been identified and rectified sooner,” he said in a statement.
“It is disappointing that we have not met our own standards as well as regulatory expectations and requirements.”
Last year, Commonwealth Bank agreed to pay $700 million and legal costs to resolve proceedings brought by Austrac after admitting to breaching anti-money laundering and counter-terrorism laws.
Austrac claimed CBA failed to monitor tens of thousands of transactions through its smart ATM network.