The Westpac Banking Corp (ASX: WBC) share price has fallen another 2% today after yesterday's bombshell from AUSTRAC.
We learned yesterday that Westpac hadn't been reporting some international transfers on time to AUSTRAC. It was actually millions of transfers that hadn't been properly reported, perhaps amounting to over $10 billion in total.
Commonwealth Bank of Australia (ASX: CBA) has previously paid a hefty fine, to the tune of $700 million, for not properly reporting transactions to AUSTRAC.
The reputational damage for Westpac is even worse because some of these transactions were reportedly paying for child exploitation materials from South East Asia.
It's this revelation that led to David Kinley, chairman of human rights law at the University of Sydney, being quoted by the Australian Financial Review "They simply don't understand their human rights obligations and what is expected of them. Westpac displays a keenness and robustness on matters relating to their core business, and a marginalisation of human rights concerns they clearly believe are peripheral."
Ouch. Westpac of course said it's not taking this lightly. Westpac CEO Brian Hartzer said in a statement "We are also taking very seriously AUSTRAC's concerns around appropriate customer due diligence on transactions to the Philippines and South East Asia, including reviewing relevant processes.
"We will shortly be reporting a small number of remaining IFTIs related to our LifePay product."
The headlines have already been made and soon Westpac may face a very large penalty. It's a little surprising this came to light a long time after CBA's reporting issues, which should have been a warning to the whole industry.
Foolish takeaway
There isn't a firm end to the royal commission remediation payments and now Westpac faces another big hit to profit in FY20. I can see why some investors are selling, I wouldn't want to hold shares in this current climate – banks are really taking a beating.
