Australia’s financial intelligence agency has launched legal action against one of the country’s biggest banks, Westpac, accusing it of more than 23m breaches of anti-money laundering and counter-terrorism finance laws involving $11bn in transactions.
In a statement filed with the federal court, Austrac said Westpac had failed to “carry out appropriate due diligence on customers sending money to the Philippines and South East Asia for known child exploitation risks”.
Austrac said Westpac had been aware of the child exploitation risks relating to low-value payments made through one of its systems, Litepay, since 2013 but had not fixed them until June 2018.
“Westpac still has not implemented appropriate automated detection scenarios to monitor for the known child exploitation risks through other channels,” Austrac told the court. “As a result, Westpac has failed to detect activity on its customers’ accounts that is indicative of child exploitation.”
Westpac also failed to properly deal with a customer who “opened a number of Westpac accounts after serving a custodial sentence for child exploitation offences”, Austrac said.
“Westpac promptly identified activity on one account that was indicative of child exploitation, but failed to promptly review activity on other accounts.
“This customer continued to send frequent low value payments to the Philippines through channels that were not being monitored appropriately.”
Austrac also accused Westpac of failing to properly assess the risk in dealing with correspondent banks with which it did business.
“This is in spite of a number of correspondent banks disclosing higher ML/TF (money laundering and terror finance) risks, such as themselves having correspondent banking relationships with high risk or sanctioned countries including Iraq, Lebanon, Ukraine, Zimbabwe, and Democratic Republic of Congo,” Austrac said.
“Some correspondent banks who had disclosed such relationships had been fined by overseas regulators for sanctions or AML/CTF breaches resulting from inadequate controls.
“The risk posed to Westpac was that these high risk or sanctioned countries may have been able to access the Australian payment system through these nested arrangements, unbeknownst to Westpac.”
In a statement to the stock exchange, Westpac said it was “reviewing Austrac’s statement of claim and will issue a further statement to the ASX once it has been assessed”.