The Westpac (ASX: WBC) AUSTRAC fine could end up being more than $1 billion.
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.
What’s going on?
In November last year we learned that AUSTRAC had alleged 23 million breaches of the anti-money laundering and counter-terrorism financing laws by Westpac.
One of the worst parts of the claims was that allegedly 12 customers made a large number of low value payments consistent with the purchase of child exploitation materials. There were around 3,000 of these transactions which amounted to a total of $497,612 to the Philippines and other South East Asian countries.
Westpac has admitted that there were failures at the bank. However, the question is how big the AUSTRAC fine will be.
According to reporting by the AFR, the regulator is using the same tactics now that it used on CBA to get a big penalty.
AUSTRAC has requested information on another 272 of Westpac’s customers that could be suspected paedophiles and threatened to amend its statement of claim to add them to the case. This is similar to what AUSTRAC did when CBA chair Catherine Livingstone said at the AGM the bank had no prior knowledge of some matters.
According to the reporting by the AFR, Westpac wants to settle for $900 million whilst AUSTRAC is looking to penalise the major ASX bank for $1.5 billion.
Is it time to buy Westpac shares?
It can be a smart idea to buy shares when they’re down heavily and under pressure. The Westpac share price may be up 3% today, but it’s down 30% since the COVID-19 declines started and it’s down 40% since 1 October 2020. If you think banks can return to the same underlying profit levels of FY19 after COVID-19 ends then Westpac could be a cheap buy today. But there’s a danger that banks won’t be as profitable in the future. That’s why I’d rather look at other shares in different industries.
Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.