Court approves largest civil penalty in history

In September, the Westpac Group announced that it had reached an agreement with the Australian Transaction Reports and Analysis Centre (AUSTRAC) to settle civil proceedings launched in the Federal Court of Australia on 20 November 2019.

The court has now approved the agreed penalty.

Background to the case

The case focused around breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).

AUSTRAC had applied for civil penalty orders against Westpac after alleging that the major bank contravened the act on more than 23 million occasions.

In its settlement with AUSTRAC, Westpac admitted to additional 76,000 breaches set out in a revised statement of claim.  

Specifically, Westpac admitted to failing to: 

• Properly report over 19.5 million international funds transfer instructions (IFTIs) amounting to over $11 billion to AUSTRAC.
• Pass on information relating to the origin of some of these international funds transfers, and to pass on information about the source of funds to other banks in the transfer chain, which these banks needed to manage their own ML/TF risks.
• Keep records relating to the origin of some of these international funds transfers.
• Appropriately assess and monitor the risks associated with the movement of money into and out of Australia through its correspondent banking relationships, including with known higher-risk jurisdictions.
• Carry out appropriate customer due diligence in relation to suspicious transactions associated with possible child exploitation.

As part of the settlement, Westpac agreed to incur a penalty of $1.3 billion, subject to Federal Court approval.

Severity of the penalty reflects the seriousness of the issue

The court has now approved this penalty, making it the highest civil penalty in Australian history.

The penalty includes a $400 million fine due to its failures to maintain a compliant AML/CTF programme and nearly $300 million for failing to properly report the IFTIs.

The presiding judge, Justice Beach, noted the seriousness of failing to maintain a compliant AML/CTF program, but added that the size of the total $1.3 billion was substantial.

“Even where a contravention of the act is not deliberate, in my view the requirements of general deterrence must necessitate the substantial penalty so that it is known that even minor on inconsequential breaches of the act have very serious consequences,” Justice Beach said.

AUSTRAC chief executive Nicole Rose said the outcome sent a strong statement to Westpac and the financial institutions that they are obliged by law to take their obligations seriously or significant penalties will be applied.

“Financial institutions must ensure they have strong compliance systems, processes and resources in place to protect the Australian community and their businesses from criminals and criminal threats,” Mr Rose said.

“To maintain public confidence in Australia’s financial system and prevent future non-compliance, AUSTRAC will not hesitate to take action when these obligations are not met. This is aligned with AUSTRAC’s role and community expectations.”

Ms Rose said it was “critical” that the industry recognised it is the first line of defence against criminals, and that failing to meet AML/CTF obligations “puts the safety of our community at risk”.

“AUSTRAC is committed to working collaboratively with Westpac and all regulated businesses to support them to understand and meet their obligations to protect Australia’s financial system from criminal threats,” he said.

Westpac has acknowledged the approval of the penalty by the Federal Court but has not issued any further commentary on the matter.

[Related: Westpac agrees to pay historic $1.3bn penalty]