One Bank Was Just Accused Of Violating Money Laundering Laws...23 Million Times

Australia's once squeaky clean banking industry has lost its good reputation, and now the country's second largest bank, Westpac, has broken anti-terror and AML laws requiring the bank to closely screen transactions with an international component. All told, the bank said it has documented no fewer than 23 million transactions that didn't receive an adequate level of scrutiny. This includes failing to report $7.5 billion in international transfers.

But here's the kicker: According to Australian banking laws, each individual breach could warrant a fine of up to A$21 million ($14 million). That means AUSTRAC, the country's financial watchdog, could legally choose to pursue hundreds of trillions of dollars in fines, though that likely far outpaces the bank's ability to pay, WSJ reports.

Though it's not clear exactly what the bank's oversight failures mean, in the case it brought against the bank on Wednesday, AUSTRAC accused Westpac of enabling payments from "high risk" countries, and counterparties with specific histories of sex trafficking.

According to Reuters, the lawsuit dwarfs a case AUSTRAC brought against the larger Commonwealth Bank of Australia, which agreed last year to pay a record A$700 million ($476 million) penalty after admitting that it didn't properly screen 53,750 payments that violated similar protocols.

Court filings from AUSTRAC said the transactions that Westpac failed to monitor took place between 2013 and 2018.

The filing said Westpac maintained relationships with offshore banks without assessing their risks, products, customers or payments, even when those banks disclosed relationships with counterparties in "high risk or sanctioned countries including Iraq, Lebanon, Ukraine, Zimbabwe, and Democratic Republic of Congo."

"The risk posed to Westpac was that these high risk or sanctioned countries may have been able to access the Australian payment system," AUSTRAC said.

The Sydney-based bank has known about some of these risks since 2013, when it became aware of "heightened child exploitation risks associated with frequent low value payments to the Philippines and South East Asia" but it didn't set up an automated detection system until 2019.

One customer who had served a prison sentence for child exploitation set up several of the Westpac accounts in question. Westpac detected suspicious activity in one account, but failed to review the other accounts and “this customer continued to send frequent low value payments to the Philippines through channels that were not being monitored appropriately”, AUSTRAC said.

The breaches were "the result of systemic failures in its control environment, indifference by senior management and inadequate oversight by the board," Austrac said in court documents. "They have occurred because Westpac adopted an ad-hoc approach to money laundering and terrorism financing risk management and compliance."