On November 26, various media reported that the Chairman of Westpac Banking Corporation (Westpac), Lindsay Maxsted, as well as Westpac’s Chief Executive Officer (CEO), Brian Hartzer, and a Westpac senior non-executive director announced their resignations. Hartzer’s last day as CEO is reportedly December 2, while Maxsted is expected to step down by mid-2020.
Those resignations are directly traceable to the Australian Transaction Reports and Analysis Centre (AUSTRAC)’s November 20 filing in Australia’s Federal Court for civil penalties against Westpac. The ASUSTRAC filing charges Westpac with pertaining to some 23 million alleged violations of the Australian Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act 2006.
On November 24, Westpac reportedly “announced a response that included appointing an external expert to investigate its failings” In a November 26 teleconference, however Maxsted stated that when company officials met with investors on November 25, however, investors ”made it clear they required sterner action.”
The principal reason for the intensity of adverse reaction by the public and elected officials was the AUSTRAC statement that Westpac had failed to “carry out appropriate customer due diligence on transactions to the Philippines and South East Asia that have known financial indicators relating to potential child exploitation risks.” That failure, as further described in its statement of claim, extended to “failing to introduce appropriate detection scenarios to detect known child exploitation typologies, consistent with AUSTRAC guidance and their own risk assessments.”
In the teleconference, Maxsted admitted that as soon as he read AUSTRAC’s statement of claim, he was “horrified by what was in it,” and that details that AUSTRAC presented regarding transactions made by 12 customers were “shocking.” He also stated that Westpac’s board and management wanted to demonstrate accountability, but that “further turnover of the board would be ‘very dangerous’.”
N.B.: In his teleconference, Maxsted cautioned that “we don’t want to go too far so that it’s very disruptive to the business.” That admonition, though well-intentioned, is being overtaken by events. Even though Westpac has announced a Response Plan that promises “immediate fixes,” “lifting our standards,” and “protecting people,” it reportedly now faces multiple investigations into the scandal by the Australian Federal Police, the Australian Securities and Investments Commission, and the Australian Prudential Regulation Authority.
This recent series of events demonstrates not only how quickly a public crisis can arise for a company, but why financial institutions need to establish and maintain effective compliance programs, such as AML/CTF, to minimize the risks of facing such crises.
1 thought on “Westpac Chairman, CEO, and Director Resign As Money-Laundering Scandal Continues to Envelop Westpac”