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Friday February 21st, 2020 10:31AM

Westpac Bank chief resigns over money-laundering scandal

By The Associated Press
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PERTH, Australia (AP) — The chief executive of Australia’s second biggest bank said Tuesday he plans to resign following accusations Westpac committed 23 million breaches of anti-money laundering and counterterrorism financing laws.

The financial crime regulator AUSTRAC is pursuing Westpac in the Federal Court for allegedly failing to report millions of international fund transfers including payments allegedly linked to child exploitation in Southeast Asia.

The bank’s CEO, Brian Hartzer, was given 12 months' notice and will still get his $2.7 million Australian dollar salary ($1.83 million). He will forfeit unvested bonuses and is ineligible for future bonuses.

He is the third top executive from the country’s four major banks to depart in the past 18 months amid the scandal-plagued Australian banking sector.

“As CEO, I accept that I am ultimately accountable for everything that happens at the bank," Hartzer said in a statement. "And it is clear that we have fallen well short of what the community expects of us, and we expect of ourselves.”

Hartzer will be replaced by Westpac’s current CFO, Peter King, as of December 2. King announced his retirement in September but will remain until a permanent replacement is appointed.

Amid the bloodletting, chairman Lindsay Maxsted announced he will bring forward his retirement to "the first half of 2020”, while long-standing director Ewen Crouch will not seek re-election.

"As was appropriate, we sought feedback from our stakeholders, including shareholders, and having done so it became clear that board and management changes were in the best interest of the bank," Maxsted said.

The bank is suspected of failing to report 19.5 million international fund transfers worth more than US $7 billion from November 2013 and September 2018.

The financial watchdog in its submission to the Federal Court noted that each of the breaches attracted a civil penalty “between 17 million-21 million Australian dollars.”

In theory, Westpac could face a fine up to 483 trillion Australian dollars (US $330 trillion).

Treasurer Josh Frydenberg said “there needed to be accountability”.

“The alleged breaches that have been leveled at Westpac are very serious, both in terms of the numbers of those alleged breaches, but also the nature of them,” he told reporters on Tuesday.

“I've had conversations with Westpac and those discussions were constructive,” he added.

Health minister Greg Hunt told reporters on Tuesday the leadership changes were “appropriate” and “necessary”.

"It follows the strongest, clearest comments from the prime minister and the treasurer about community expectations, and government expectations, in the face of what is a serious and profound breach,” he said.

Australia’s four biggest banks — ANZ, Commonwealth Bank, Westpac and National Australia Bank — were the targets earlier this year of a royal commission of inquiry which exposed rampant malpractice.

The Commonwealth Bank last year faced a theoretical maximum fine of 1 trillion Australian dollars after AUSTRAC found it had failed to report on 53,500 transactions. It negotiated a 700 million Australian dollar settlement.

The bank’s then chief executive Ian Narev had his retirement brought forward, while National Australia Bank chief executive Andrew Thorburn and chair Ken Henry departed in the aftermath of the royal commission.

Westpac has an annual general meeting scheduled for December 12.

The bank’s share prices were up more than 1% on Tuesday, having slumped 8% over the previous four trading days in the wake of the revelations.

  • Associated Categories: Associated Press (AP), AP Business, AP Business - Industries, AP Business - Financial Services
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