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Westpac pledges to clean up act after money laundering scandal


The banking regulator has strongarmed Westpac to lift its risk governance standards following its tumultuous money laundering scandal last year.

The country’s second largest bank has agreed to a court enforceable undertaking (CEU) with the Australian Prudential Regulation Authority (APRA) to overhaul its risk culture and oversight of financial crimes.

APRA’s legal leash on Westpac is in response to the 2019 AUSTRAC report that revealed the major bank breached anti-money laundering and counter-terrorism financing laws 23 million times.

The report showed Westpac failed to report accounts to the financial crimes watchdog that were being used to finance human and child sex trafficking in Southeast Asia.

APRA said it expressed concern over the bank’s progress in remediating structural weaknesses that included “immature and reactive” risk culture, unclear accountabilities, capability shortfalls and inadequate oversight.

APRA deputy chair John Lonsdale said the CEU would ensure the risk governance restructure at Westpac would meet standards.

“Although the bank has made progress in some areas over the past year, it is not good enough,” Mr Lonsdale said.

“Entering into a CEU is a serious step that indicates the severity of the situation. The integrated plan required by the CEU must be designed to deliver the sustainable risk governance step change that APRA requires.”

APRA identified that Westpac’s customer outcomes and risk program were not far reaching enough to address the full extent of the risk governance failings.

It also noted the risk governance issues continued to occur, including a breach on Tuesday of APRA’s liquidity standards.

“APRA’s concerns have been communicated directly to the board and senior management with the clear message that the magnitude of improvements that Westpac needs to deliver requires a deep commitment to change at all levels across the organisation,” Mr Lonsdale said.

Westpac chief executive Peter King said the bank acknowledged the findings and would deliver on the requests from the prudential regulator.

“My top priority is to ensure the bank’s risk culture and management of risk meet the

high standards expected of us,” Mr King said.

“We have had constructive discussions with APRA and know we have to deliver a

disciplined step change in our management of financial and non-financial risk.”

The CEU will require Westpac to develop an integrated plan that incorporates addressing both financial and non-financial risks.

APRA will also oversee the implementation of the plan and will assign accountability to certain executive and board members.

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