The bank’s response plan, announced yesterday, includes millions in funding for various charities and to strengthen its financial crime division. The $80 million figure is separate from any possible fine levied against the bank by AUSTRAC, which could well push the cost of the debacle to well over a billion dollars.
The board has put bonuses on hold while they figure out who to blame for 23 million breaches of money laundering legislation. An independent auditor will have the unenviable job of getting to the bottom of all the finger-pointing, with the results of their review to be made public.
Westpac has also closed its LitePay international funds transfer system and had a second look at those 12 customers who have caused them so much trouble, taking action “where appropriate”.
The response is a fairly transparent attempt to buy time that probably won’t result in Brian Hartzer keeping his head, but it’s an admirable attempt all the same. Few banks would choose the path of most resistance post-royal commission, but by opting not to immediately fire the CEO – or even just a couple of middle managers – Westpac has signalled that it intends to put up a bit of a fight.
Unfortunately for the bank, it might find itself fighting on two fronts.
Treasurer Josh Frydenberg popped into ABC Insiders on Sunday to duck questions about whether he thinks Westpac executives should keep their jobs, in the process divulging that APRA is “looking at it”.
“APRA has the ability, under the Banking Executive Accountability Regime, to disqualify boards and to disqualify executives where there’s a failure to appropriately enforce and uphold the duties under the legislation,” Mr Frydenberg said.
AUSTRAC alleged that the breaches occurred in part due to indifference by senior management – something that Hartzer and Lindsay Maxsted have repeatedly denied as part of a curious public relations strategy that has so far done nothing to help their image. Westpac has even enshrined it in their response plan.
“Based on its current understanding, the board does not believe that there has been any indifference by any member of the executive team, including the CEO, but accepts that Westpac has fallen short of its own and regulatory expectations and that a detailed review is required to investigate the facts alleged by AUSTRAC.”
The insistence that executives weren’t indifferent is slightly puzzling. If the board was instead unaware, as both Maxsted and Hartzer have implied, APRA and AUSTRAC will probably still want to know why, and that might be more damning than simple indifference.
If the board is indifferent then the problem is confined to the top. But if they were unaware – if they weren’t told, for one reason or another – it suggests systemic failures at multiple levels of the organisation.
Post-royal commission, that’s not going to pass the pub test – or an investigation.
