Australia’s Westpac Banking Corp said it expects a A$900 million ($578 million) fine over accusations it enabled millions of illegal payments including between known child sex offenders, the first time it has put a price on the scandal.
The country’s second-largest lender gave the estimate on Tuesday as part of a broader update about one-off charges it expects will eat into half-yearly profit which it plans to report next month.
Though Westpac has publicly taken responsibility for payments at the heart of a lawsuit by the financial crime watchdog, the dollar figure gives a sense of the scale of the impact of one of its darkest chapters.
Last November, the regulator AUSTRAC filed a civil lawsuit accusing the Sydney-based bank of presiding over 23 million payments that violated anti-money laundering protocols, including payments by Australians to child pornography purveyors in the Philippines.
The lawsuit saw the bank’s CEO leave and its chairman bringing forward his retirement but the lawsuit has continued, leaving investors unsure of the cost to the bank which is – like its rivals – already setting aside money to reimburse customers for wrongly charged fees.
When it reports profit for the six months to end-March, the bank said it expects to make a provision of A$900 million “for its potential liability in relation to the AUSTRAC claim.” The actual fine imposed by the court “may be materially higher or lower than the provision,” it added.
Analysts had forecast a fine of about A$1 billion.
On top of the penalty provision, the bank said it expected to report one-off costs totalling A$130 million to improve its financial crime program, support industry initiatives on financial crime monitoring, and support organizations fighting child exploitation.
“In addition to closing relevant products and recruiting an additional 200 people in financial crime and compliance, I am putting in place a clearer accountability regime that will speed up decision making, improve implementation and more clearly define responsibility and its associated risk management,” said CEO Peter King in the update.
King, formerly the bank’s chief financial officer, was formally promoted to CEO earlier this month.
The cost of the AUSTRAC lawsuit comes as banks around the world cope with shrinking asset values and the prospect of higher loan impairments as the new coronavirus shuts down economies. The virus has so far infected about 6,400 Australians and led to 61 deaths.
The Australian bank regulator has asked lenders to consider postponing dividends to ensure they remain stable during the crisis. Westpac said it will factor in a likely decline in half-year profit when calculating its interim dividend, but it would give a final decision at its results announcement.
The bank gave a host of smaller provisions it would likely make with the half-year result, including a A$70 million decline in asset values due to the coronavirus and A$260 million to reimburse customers who were wrongly charged fees. All up, it expected provisions of around A$1.43 billion.
Westpac announces results for the six months to end-March on May 4.
($1 = 1.5564 Australian dollars)
(Reporting by Byron Kaye; Additional reporting by Rashmi Ashok in Bengaluru; Editing by Lisa Shumaker and Christopher Cushing)
Photographer: Carla Gottgens/Bloomberg
- Westpac’s Money Laundering Breaches Gave ‘Free Pass to Pedophiles:’ Australia Official
- Australia’s Westpac Bank Apologizes for Money Laundering, Links to Child Abuse Funds
Was this article valuable?
Here are more articles you may enjoy.