APRA’s investigation will deal with the conduct that led to Westpac’s alleged 23 million AML breaches, and whether or not its senior managers breached the Banking Act, together with the BEAR.
APRA (Australian Prudential Regulation Authority) has formally launched an investigation into Westpac for potential breaches of the Banking Act, imposing a AUD 500 million (USD 343 million) capital surcharge on the financial institution to replicate its “heightened operational danger profile”.
The banking regulator’s transfer follows legal action launched in Federal Court docket final month by AUSTRAC alleging over 23 million contraventions of the AML/CTF Act, together with by permitting clients to switch cash to the Philippines in a way in step with baby exploitation.
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APRA’s investigation will deal with the conduct that led to the issues alleged by AUSTRAC and the actions taken by the financial institution to rectify and remediate the problems after they have been recognized.
Particularly, the investigation will look at whether or not Westpac, its administrators and/or its senior managers breached the Banking Act – together with the BEAR (Banking Government Accountability Regime) – or contravened APRA’s prudential requirements.
APRA can even examine whether or not Westpac’s governance and danger administration have been enough, whether or not its remuneration and accountability preparations have been applicable, and whether or not it did not promptly notify APRA of potential breaches.
“Given the magnitude and nature of the problems alleged by AUSTRAC, APRA is aiming to make sure that elementary deficiencies in Westpac’s danger administration framework are recognized and addressed and that Westpac and people accountable are held accountable as applicable,” the banking regulator mentioned in an announcement.
A capital surcharge of AUD 500 million capital will likely be imposed on Westpac to replicate the heightened operational danger profile of the financial institution, bringing its whole operational danger capital add-ons to AUD 1 billion, following the rise announced by APRA in July 2019 to replicate the financial institution’s danger governance self-assessment.
APRA can even provoke an intensive overview programme to evaluate Westpac’s danger governance, danger administration, accountability, remuneration and tradition. The overview will embrace an examination of the steps the financial institution has been taking to strengthen danger governance lately.
“AUSTRAC’s assertion of declare in relation to Westpac comprises critical allegations that query the prudential standing of Australia’s second largest financial institution,” mentioned APRA deputy chair John Lonsdale. “Whereas Westpac is financially sound, there are doubtlessly substantial gaps in danger governance that have to be closed.”
“Given the character of the issues raised by AUSTRAC, the variety of alleged breaches and the time frame over which they occurred, this may essentially be an intensive and doubtlessly prolonged investigation.”
The investigation will afford APRA the chance to train its expanded authorized powers, together with enhanced investigative powers and the implementation of the BEAR in 2018, the regulator mentioned.
APRA will conduct its investigation concurrently with an investigation by ASIC (Australian Securities and Investments Fee), in addition to AUSTRAC’s authorized proceedings, with every company cooperating the place applicable.