Most Australians were horrified when real-life examples of bad behaviour by banks came tumbling out during last year’s Royal Commission into Finance and Banking.
But this week’s news that AUSTRAC (Australian Transactions Reports and Analysis Centre) has accused Westpac of facilitating transactions that have enabled child exploitation in the Philippines, has sent shockwaves of disgust around the nation.
AUSTRAC is the Australian government financial intelligence agency set up to monitor financial transactions in order to identify money laundering, organised crime, tax evasion, welfare fraud and terrorism.
It says Westpac failed to notify it of more than 20 million international transactions that have potentially breached anti-money laundering and counter-terrorism finance laws.
The bank is facing fines totalling more than $1 billion.
Here’s why, in very simple terms: About 30 years ago, Australia introduced a set of wire reporting regulations for banks – in fact, it was the first country globally to do so.
And then, in 2009 as part of a global crackdown on money laundering, a platform called SWIFT (The global standard is the Society for Worldwide Interbank Financial Telecommunication) was introduced, it is used across most countries.
Both systems govern International Funds Transfer Instructions (IFTI) also known as ‘wire transfers’ ensuring that a bank reports on every inbound and outbound funds transfer, with specific information on the transaction – this is intended to help catch anyone who breaks the law – by evading taxes, money laundering or supporting criminal activity elsewhere.
When SWIFT was introduced, Westpac did not comply – it felt that the system was too expensive and inefficient. As such, the bank introduced its own system, but even in doing so, it was still expected to comply with the Australian regulations.
AUSTRAC says it has uncovered evidence that supports the fact that Westpac has not complied with Australian regulations.
Now, it’s important to note that while this explanation of the circumstances is intended to be simple, the allegations themselves are exceptionally serious.
Beyond several specific child exploitation allegations, AUSTRAC alleges Westpac failed to report more than 19.5 million international funds transfers over a five year period, amounting to $11 billion.
Investigations by the Federal Police, the corporate regulator (Australian Securities and Investments Commission) and the prudential regulator (Australian Prudential Regulation Authority) are now also underway.
And, since the allegations surfaced, Westpac’s share price has plummeted more than $6 billion. It is highly likely that the bank will face a downgrading of its financial rating by Moody’s and it has subsequently been reported that a class action against the bank is being progressed by shareholders.
Potentially financing child trafficking
But most concerning of all is the fact that one of Australia’s oldest banks has been possibly financing paedophiles. AUSTRAC’s lawsuit relates to about half a million dollars that a dozen or so Westpac customers paid to people in the Philippines.
One customer allegedly paid someone in the Philippines who was later charged with “live streaming of child sex shows and offering children for sex”. Another customer already had a conviction for child exploitation but was allegedly not properly monitored. Six Westpac customers repeatedly travelled to the Philippines or South-East Asia.
AUSTRAC says these payments and activities should have been detected, stopped and investigated.
Hypocrisy and ignorance
And what’s more, the transactions occurred during a period of time when the bank was focused on exposing the very human rights abuses it now stands accused of helping to facilitate.
In 2016, Westpac hosted a lavish business function with US-based human trafficking expert Christine Dolan as the guest speaker. It’s understood that in the very same year, senior managers within the bank were warned about the weaknesses in the bank’s screening processes for international fund transfers – specifically that these had the potential to send money to child sex trafficking ‘hot spots’ around the globe.
After the event, the bank released an annual “Slavery and Human Trafficking” statement touting its “zero tolerance” for the criminal practice. “The Westpac Group believes that respecting and advancing human rights helps us to achieve our vision to help our customers, communities and people to prosper and grow,” says the 2018 statement – signed by CEO Brian Hartzer. “Accordingly, we have zero tolerance for all forms of modern slavery and human trafficking.”
The AUSTRAC allegations tell a very different story.
What happens next?
So, it is perhaps no surprise that the Chairman Lindsay Maxsted and CEO Brian Hartzer, have now both resigned from their positions in the wake of the scandal. But the salt in the wound for Westpac staff, shareholders and customers, is that despite the fact that all of this occurred on his watch, the CEO, Brian Hartzer will still be paid out his contract – a staggering $2.7 million – as he serves out his notice period, although he will forgo bonuses.
The onus is now on Westpac to respond to the allegations by AUSTRAC and the bank says in a statement on its website that it is committed to working with the regulator and law enforcement agencies to ‘fix the problem.’ As such, it has developed a plan to do so, that includes appointing an independent expert to oversee the process.
It has also pledged multimillions to various charities and projects that support the prevention of child sexual exploitation and provide help to victims.