Westpac has frozen bonus payments for its entire executive team and several members of general management as it gets to the bottom of its money laundering scandal.
Financial crimes watchdog AUSTRAC is taking Westpac to court, accusing it of committing 23 million breaches, including failing to adequately monitor the accounts of a convicted child sex offender who was regularly sending money to the Philippines.
In a statement released on Sunday, the bank said it was investigating who was at fault, and revealed its executives and select members of general management would be paying the price.
“The board has determined that either all or part of the grant of the 2019 short-term variable reward will be withheld for the full executive team and several members of the general management team subject to the assessment of accountability,” it read.
Chief executive Brian Hartzer is included in the freeze on this year’s salary reward scheme, and he remains in the Government’s sights as well.
Westpac’s executive and its board of directors are also on notice that they are being investigated by the Australian Prudential Regulation Authority (APRA), which has the power to disqualify them from their positions.
In the statement, Westpac chairman Lindsay Maxsted said the bank understood the gravity of the issues presented by AUSTRAC.
“We reiterate our deep sorrow for failings by Westpac,” he said.
[su_quote]We accept that we have fallen short of both our own and regulators’ standards and are determined to get all the facts and assess accountability,” he added.[/su_quote]
The chair said an external expert would be appointed to “provide independent oversight of the [response] process”, with recommendations made public.
Mr Maxsted said the bank was committed to implementing its response plan, which includes immediate fixes and actions scheduled to take place over several years, and would be working with AUSTRAC throughout the process.
“One of our key roles is to help AUSTRAC and government to fight financial crime and we need to have systems and controls in place to prevent our services being exploited,” he said.
‘There has been a systemic failure by the bank’
Treasurer Josh Frydenberg on Sunday hinted Westpac executives might struggle to hold onto their jobs with the bank embroiled in a money laundering scandal.
Mr Frydenberg revealed APRA had also been called in to scrutinise the bank’s actions.
He said the regulator had the power to effectively sack senior executives and members of the board found to be doing the wrong thing, as well as fine the organisation up to $500 million.
“There must be accountability, and that will obviously involve decisions [taken] about the futures of senior management, as well as the board,” Mr Frydenberg told ABC’s political discussion program Insiders on Sunday.
[su_quote]There has been indifference by the board, there’s been a systemic failure by the bank, and there’s been inadequate oversight.[/su_quote]
When asked whether he would be happy if the CEO or the chair of Westpac were still in place in six months’ time, Mr Frydenberg raised history.
“Don’t forget we had the Commonwealth Bank experience with, again, breaches of anti-money laundering laws — history shows you that these issues build a momentum of their own.”
Mr Frydenberg would not say what action he wanted to see as Treasurer, but reiterated the Government’s stance.
“Our position has consistently been [that] decisions about who are on boards are matters for shareholders and [that] who are on executive teams are matters for boards.
“That being said, these are very serious issues. There must be accountability. AUSTRAC have been highly critical in their statement.
“And now, APRA is looking into it. So I don’t think there’s any doubt as to the seriousness of these issues and the Government’s position.”
He said shareholders would also have the chance to express their view at Westpac’s annual general meeting next month, where five board members will be up for re-election.
“They’ve got an AGM on December 12 and, no doubt, there’ll be some very hard discussions between now and then.”
Westpac chief executive Brian Hartzer survived an emergency board meeting on Friday after days of speculation that his head would be the first to roll in the wake of the scandal.
Mr Frydenberg said he had directly contacted Mr Hartzer and bank chair Lindsay Maxsted to make the seriousness of the issue clear.
“The board, management — they’re all seized of this issue, and they’re now going through a process. But with APRA providing additional focus, as well as AUSTRAC, certainly the heat is on the company,” Mr Frydenberg said.
Last year, the chief executive of the Commonwealth Bank, Ian Narev, retired after it emerged the bank breached anti-money laundering laws.
The CBA was this year fined $700 million — the biggest in Australian corporate history — for more than 53,000 transactions that allowed millions of dollars to flow through to drug importers.