The revelations regarding Westpac and systemic breaches of money laundering obligations are another shock to corporate Australia. The issues raised in AUSTRAC's statement of claim are substantial and inexcusable. Westpac’s resources and reputation up to this point survived the crucible of the Royal Commission. However, the statement of claim sets out where Westpac is alleged to have breached the law. A great deal more work is needed to understand how they moved from being compliant with their obligations to being non-compliant, without their checks and balances and reporting picking it up.
As Commissioner Hayne highlighted in his Final Report of the Financial Services Royal Commission, compliance with the law is the basic minimum standard for corporate conduct. When breaches of the law are identified there must be consequences for those accountable. Westpac has acknowledged the gravity of these issues and the changes announced to its board and executive team are critical steps in demonstrating accountability.
The investigation initiated by Westpac will shed light on how these issues occurred and what processes could have prevented them, and the prospect of additional regulatory investigation will further our understanding. But this serves as a reminder of the complexity of governance frameworks in large organisations. Boards are tasked to take the steps necessary to satisfy themselves that internal systems are adequate to detect breaches of the law and must insist on swift resolution where problems are found. The sheer magnitude of the breaches, quite apart from the nature, demonstrates how large and complex this challenge can be.
The AICD will monitor the Westpac case and communicate the governance implications. As with other case studies, as more information is revealed the AICD will also incorporate the learnings into our education programs.
You can read our summary of the issues here.