Naughty Naughty, Westpac By Peter West

     Whatever is the world coming to? My dad who was a bank of New South Wales man all his life, not living to see Westpac emerge, would just cry in his beer, then have had another beer, and another, until he did not know what he was crying about, all nice and alcoholic numb. We all are a bit like that with banking, a truly personal numbing experience:
  https://www.theaustralian.com.au/business/financial-services/austrac-sues-westpac-over-serious-noncompliance-on-antimoney-laundering-rules/news-story/2fa8f841dfada3b49b9f0bcc25a10b09

“Westpac chief executive Brian Hartzer has shrugged off suggestions he should resign after Australia’s anti money-laundering and counter-terrorism financing regulator took legal action against the bank, even as he said he’s “disgusted and appalled” by the allegations. Austrac has taken Westpac to court, alleging the bank contravened anti-money laundering and terrorism rules on over 23 million occasions and failed to properly monitor and report transactions with a known child exploitation risk. Speaking to the media on Wednesday afternoon, Mr Hartzer said he would personally spearhead the bank’s response to the action.  “Like everyone who has read the statement of claim I am personally disgusted and appalled by the subject matter of some of these transactions,” he said. I deeply regret that this has occurred and as I said, I will get to the bottom of this personally and fix it.” Australia’s anti money-laundering and counter-terrorism financing regulator, Austrac has taken Westpac to court, alleging the bank contravened anti-money laundering and terrorism rules on over 23 million occasions and failed to properly monitor and report transactions with a known child exploitation risk.

Austrac’s civil proceedings, launched in the Federal Court took aim at Westpac executives for their “indifference”. Austrac also claimed the bank failed to pass on information about the source of funds to other banks.  “This conduct deprived the other banks of information they needed to understand the source of funds to manage their own AML/CTF (anti-money laundering/counter terrorism financing) risks,” Austrac said.

Child exploitation risks
Austrac’s statement of claim is damning for Westpac chief Mr Hartzer and his executive team, claiming they were briefed in mid 2016 on the risks linked to payments that could have involved child exploitation. “Since at least 2013, Westpac was aware of the heightened child exploitation risks associated with frequent low value payments to the Philippines and South East Asia, both from Austrac guidance and its own risk assessments. In June 2016, senior management within Westpac was specifically briefed on these risks with respect to the LitePay channel,” the statement of claim said. The statement of claim also alleges Westpac has still not implemented automated systems to monitor for child exploitation risks.

“It was not until June 2018 that Westpac implemented an appropriate automated detection scenario to monitor for known child exploitation risks through its LitePay platform. Westpac still has not implemented appropriate automated detection scenarios to monitor for the known child exploitation risks through other channels,” it said. “ As a result, Westpac has failed to detect activity on its customers’ accounts that is indicative of child exploitation.” Austrac said the contraventions were the result of “systemic failures” in Westpac’s control environment, “indifference by senior management and inadequate oversight by the board”. Morrison ‘appalled’
Scott Morrison says he is “absolutely appalled” by the allegations, declaring the “banks need to lift their game”. The Prime Minister said the allegations against Westpac, which includes failing to monitor and report transactions that had child exploitation risks, showed more change was needed in the financial services industry. Banks need to keep lifting their game but it also shows that our cop on the beat, Austrac, is doing their job,” Mr Morrison said on Wednesday morning. “They have just got to lift their game on this stuff. It is a fairly damning indictment about some of the processes and procedures they have had in place.”

Known offender
The statement of claim noted: “One customer opened a number of Westpac accounts after serving a custodial sentence for child exploitation offence”. “Westpac promptly identified activity on one account that was indicative of child exploitation, but failed to promptly review activity on other accounts. This customer continued to send frequent low value payments to the Philippines through channels that were not being monitored appropriately,” the Austrac statement of claim said. The document lodged with the court alleges Westpac failed to conduct proper diligence on 12 customers linked to child exploitation risks. “Westpac has failed to carry out appropriate due diligence on 12 of its customers, with a view to identifying, mitigating and managing known child exploitation risks. Over a number of years, there were repeated patterns of frequent low value transactions on accounts held by each of these 12 customers that were indicative of child exploitation risks,” it said. “Since at least 2013, Westpac was aware of the heightened child exploitation risks associated with these patterns of transactions.” Prime Minister Scott Morrison said he was appalled by allegations. “Banks need to keep lifting their game but it also shows that our cop on the beat, Austrac, is doing their job,” Mr Morrison said on Wednesday morning. “They have just got to lift their game on this stuff. It is a fairly damning indictment about some of the processes and procedures they have had in place.”

     Don’t you worry about that, beam-me-up-Scotty, our banking guru is onto the problem, and will solve it as faster than you can say: “identifying, mitigating and managing known child exploitation risks.”

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Wednesday, 11 December 2019
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