Westpac Group has been hit with a $1.3bn fine in relation to the 23 million breaches of anti-money laundering and terrorism laws AUSTRAC took the major to court for late last year.
Upon announcing the penalty, Westpac Group CEO Peter King again “apologise[d] sincerely” for the bank’s failings.
“We are committed to fixing the issues to ensure that these mistakes do not happen again. This has been my number one priority,” he said.
“We acknowledge the important role Westpac must play in protecting the integrity of the financial system. Westpac has made substantial investments to strengthen its systems, processes, and controls to detect and report suspicious transactions.”
The group has recruited “about 200 financial crime people”, created an executive position responsible for improving financial crime capability, and established a new legal, regulatory and compliance sub-committee.
The substantial settlement agreed upon seems primed to not only significantly impact Westpac, but trigger a “step-change” for Australian governance at large, according to Leica Ison, CEO and founder of regtech Skyjed.
“At A$1.3bn, AUSTRAC has signalled clearly that it's going to come down hard on financial institutions that don't properly self-govern their own services and products,” she explained.
"[This] will bring compliance onto the agenda of Boards across the finance industry, and drive home the need to transform their product governance so they can consistently monitor the risk of their financial products.”
To Ison, this transforms a cautionary tale into a real opportunity for the entire banking industry.
“Headlines like these set the industry back in terms of public perception and trust. Consumers and investors are actively choosing to go with institutions without these black marks on their record…reform in this area to improve product governance can and will be traced to real financial returns for those that tackle the issues head-on, which is a win for everyone in the long run,” she said.
With a fine as hefty as $1.3bn now on the table, Ison has predicted a regtech boom as financial institutions onboard cost-effective, digital tools which can be programmed to adapt to changes in regulation and alert board members when there might be an issue with compliance.