AUSTRAC, Australia’s anti money-laundering and terrorism financing regulator, has applied to the Federal Court of Australia for civil penalty orders against Westpac Banking Corporation (Westpac).
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The civil penalty orders relate to systemic non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). AUSTRAC alleges Westpac contravened the AML/CTF Act on over 23 million occasions.
AUSTRAC Chief Executive Officer, Nicole Rose, says that AUSTRAC’s decision to commence civil penalty proceedings was made following a detailed investigation into Westpac’s non-compliance.
It is alleged that Westpac’s oversight of the banking and designated services provided through its correspondent banking relationships was deficient.
Westpac’s oversight of its AML/CTF Program, intended to identify, mitigate and manage the money laundering and terrorism financing risks of its designated services, was also deficient. These failures in oversight resulted in serious and systemic non-compliance with the AML/CTF Act.
Westpac failed to:
1. appropriately assess and monitor the ongoing money laundering and terrorism financing risks associated with the movement of money into and out of Australia through correspondent banking relationships.
Westpac has allowed correspondent banks to access its banking environment and the Australian Payments System without conducting appropriate due diligence on those correspondent banks and without appropriate risk assessments and controls on the products and channels offered as part of that relationship.
2. report over 19.5 million International Funds Transfer Instructions (IFTIs) to AUSTRAC over nearly five years for transfers both into and out of Australia. The late incoming IFTIs received from four correspondent banks alone represent over 72% of all incoming IFTIs received by Westpac in the period November 2013 to September 2018 and amounts to over $11 billion dollars.
IFTIs are a key source of information from the financial services sector that provides vital information into AUSTRAC’s financial intelligence to protect Australia’s financial system and the community from harm.
3. pass on information about the source of funds to other banks in the transfer chain. This conduct deprived the other banks of information they needed to understand the source of funds to manage their own AML/CTF risks.
4. keep records relating to the origin of some of these international funds transfers.
5. carry out appropriate customer due diligence on transactions to the Philippines and South East Asia that have known financial indicators relating to potential child exploitation risks. Westpac failed to introduce appropriate detection scenarios to detect known child exploitation typologies, consistent with AUSTRAC guidance and their own risk assessments. ■