What is Westpac?
Westpac is one of Australia’s ‘Big Four’ banks and a financial-services provider headquartered in Sydney. It is one of Australia’s largest lenders to homeowners, investors, individuals (via credit cards and personal loans) and business.
Westpac’s AUSTRAC update
Westpac is facing an AUSTRAC penalty of something like $1 billion for its failure in reporting international transfers properly. A small percentage of those appear to allegedly have been for child exploitation.
Today the major bank announced the results of its investigation into the matter.
Westpac said the failure of non-reporting occurred due to a mix of technology and human error dating back to 2009.
The child exploitation risk failures were due to financial crime processes, compounded by “poor individual judgements”.
Westpac said it had identified three primary causes of the anti money laundering and counter terrorism financing (AML/CTF) compliance failures.
First, some areas of AML/CTF risk were not sufficiently understand within the bank. Second, there were unclear end-to-end accountabilities for managing AML/CTF compliance. Third, there was a lack of sufficient AML/CTF expertise and resourcing.
What is Westpac doing?
Westpac said it has taken remuneration and discipline action against 38 individuals. Over $20 million of remuneration has been withheld or cancelled.
However, Westpac did say that whilst the compliance failures were serious, the problems were faults of omission. There was no evidence of intentional wrongdoing.
The major bank said it has established a new board legal, regulatory and compliance sub-committee, appointed an experienced executive to a new position responsible for financial crime compliance and made a number of other organisational changes.
Westpac CEO Peter King said: “We recognise we need to change. We completely accept that some important aspects of Westpac’s financial crime risk culture were immature and reactive, and we failed to build sufficient capacity and experience in some important areas.
“We have learned from this and are absolutely committed to making amends for this event.”
Is the Westpac share price a buy?
Investors clearly seem to think so with how much the Westpac share price has risen today. The share price is still down by 27.5% from before the COVID-19 crash.
The AUSTRAC penalty is still going to be large and the economic hit from the pandemic is still going to be large. I wouldn’t want to buy shares now. I’d rather buy Macquarie (ASX: MQG) as a financial blue chip.
Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.