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How Westpac missed money-laundering ticking bomb in bowels of the bank


“Indifference” suggests they knew and didn’t care. More realistically, they didn’t care enough to know.

These reports clearly suggest this area of compliance risk was barely on the bank’s radar before 2017, let alone a focus. And this is the very reason Westpac can confidently draw a line under the matter. It is now front and centre, it’s well resourced, there are appropriately experienced executives responsible for it and there are clear lines between management and the board.

Never again should this issue become a problem – at least not for a long, long time.

For that matter, the non-financial risks, mainly around wealth management that were exposed by the banking royal commission, were similarly not an area of board focus and nor were they sufficiently understood until they blew up.

They won’t happen again either. This is not just because banks have, or are in the process of, selling off wealth management, it’s because they are receiving appropriate oversight.


The panel’s report – which is the definition of measured – found the board was not satisfactorily focused on the anti-money laundering and counter-terrorism financing (AML/CTF) issue before 2017 and a bit slow off the mark thereafter. To be fair the report also found that information flows from the management had been poor in some circumstances.

The panel gave the board a tick on its oversight of financial credit risk, less so on its oversight of non- financial risk. To be sure, the bank’s board carries less culpability than the executives whose responsibility it was to oversee anti-terrorism and money-laundering.

But if one takes a step back, the board should have been aware of the increased interest from governments and regulators around the world to these issues. The panel report acknowledges that these issues had been brewing for a while.

(Privately the banks would argue they were lulled into a false sense of security by what had been a fairly user-friendly regulator in AUSTRAC. When it changed a few years back and developed fangs, the banks were caught off guard.)

Still, you have to wonder why over 10 years to 2017 the board of Westpac (and the Commonwealth Bank for that matter) didn’t start to ask questions about the potential for any such unexploded landmines to blow even if it hadn’t been raised by management.

The suggestion that the board and senior management didn’t know that down in the bowels of the organisation there was a nest of IT systems that weren’t fit for purpose and staff with insufficient experience doesn’t stack up as an excuse.

‘We completely accept that some important aspects of Westpac’s financial crime risk culture were immature and reactive.’

John McFarlane, Westpac chairman

In the meantime, the new governance team led by chairman John McFarlane and chief executive Peter King have been forthcoming about the mistakes and determined to put them in the rear view mirror. “We will have no tolerance for controllable negative events. Our transformation program has begun and will bring deep cultural change,” McFarlane 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,” Mr King said.

So how can they ensure this large and complex organisation doesn’t experience future left field blow-ups? It has to be simplified, says McFarlane – a banker with 40 years experience under his belt.

This probably means smaller.

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