The financial intelligence watchdog has accused Westpac of failing to conduct due diligence on “high-risk transactions” relating to potential child exploitation.
AUSTRAC is pursuing Westpac for alleged breaches of money laundering and counter-terror laws across "several key areas".
This includes Westpac failing to properly assess 12 of its customers with a view to “identifying, mitigating and managing known child exploitation risks.”
“Westpac failed to carry out appropriate customer due diligence on high-risk transactions to the Philippines and South East Asia concerning known financial indicators relating to potential child exploitation risks,” AUSTRAC chief executive officer Nicole Rose said.
In a statement detailing AUSTRAC's civil penalty action against Westpac, it explained the bank’s failure to deal with customers sending money to the Philippines and South East Asia.
“Some of the undetected transactions involved payments to alleged or suspected child exploitation facilitators,” AUSTRAC said.
Prime Minister Scott Morrison has demanded the major banks lift their game on money laundering and terror financing laws, saying he's appalled by allegations levelled at Westpac.
The financial intelligence agency has alleged Westpac broke the law 23 million times by not reporting 19.5 million international funds transfers.
AUSTRAC chief executive Nicole Rose said the transactions amounted to more than $11 billion over nearly five years.
Mr Morrison said the investigation showed the government's cop on the beat was doing its job.
"I'm appalled. I'm absolutely appalled," he told reporters in Brisbane.
"They've just got to lift their game on this stuff."
Westpac is accused of 23 million breaches of money laundering laws, forcing the bank to take the step of scrapping or trimming its executives’ bonuses. Source: AAP
AUSTRAC said Westpac was aware of heightened child exploitation risks associated with frequent low-value payments to South East Asia since at least 2013.
But despite this, the bank “did not implement” appropriate automated detection measures to monitor known child exploitation risks on its LitePay platform until June 2018.
“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 alleges “highly suspicious activity” would have been "identified sooner” had automated detection measures been applied across all channels.
“Westpac was aware of the heightened child exploitation risks associated with these patterns of transactions,” it said.
Ms Rose said Westpac also failed to pass on information about the origin of international funds transfers and keep required records.
"AUSTRAC alleges that Westpac's oversight of its corresponding banking services was deficient, and that its oversight of its anti-money laundering and counter-terrorism financing program was ... deficient," she said.
National Australia Bank last week admitted it faces a huge fine for multiple possible breaches of counter-terrorism and anti-money laundering laws.
Commonwealth Bank was fined a record $700 million in 2018 for serious breaches of the same laws.
Mr Morrison said despite the controversies, the banks needed to continue supporting home buyers and small businesses.
"All of this is not a leave pass to pull up the drawbridge in terms of the credit extension into the Australian economy," he said.
Westpac says it self-reported the failure to report a large number of international funds transfer instructions to AUSTRAC.
"AUSTRAC was also investigating a number of other areas relating to Westpac's processes, procedures and oversight," the company said in a statement.
"Westpac is currently reviewing AUSTRAC's statement of claim and will issue a further statement to the ASX once it has been assessed."
Any penalties will be decided in court, with civil proceedings now underway.
With AAP.
