The Westpac Banking Corp (ASX: WBC) share price will be on watch on Monday after the banking giant released its response plan to the AUSTRAC scandal.
What is Westpac's response plan?
Westpac's chairman, Lindsay Maxsted, released the plan which includes a comprehensive set of actions across three areas. These include immediate fixes, lifting its standards, and protecting people.
Combined, these commitments will increase expenses by up to $80 million (pre tax) in FY 2020.
Immediate fixes.
Westpac revealed that it is taking immediate action to fix the issues raised in AUSTRAC's Statement of Claim to ensure these cannot happen again.
This has seen the bank close the relevant cash management product and its LitePay international funds transfer system. In addition to this, it will remediate and analyse all unreported IFTIs to AUSTRAC and implement updated child exploitation filters.
Lifting its standards.
Westpac is reviewing all financial crime systems and processes to pursue best-in-class global standards.
It has increased its focus on priority screening. This will see Westpac flag transactions that suggest potential child exploitation in high risk locations. These transactions are now prioritised for action and reported to AUSTRAC within 24 hours. This is faster than regulatory standards require.
The bank will also invest $25 million to improve cross-border and cross-industry data sharing and analysis to better support regulators and authorities to fight financial crime.
Protecting people.
Westpac is undertaking a series of immediate actions and investments to reduce the human impact of financial crime.
These actions include funding for the International Justice Mission, funding for SaferKidsPH, and a focus on prevention. The latter will see the bank seek the guidance of industry experts to develop a program of actions to support the prevention of online child exploitation. Westpac will provide funding of up to $10 million per year for three years to implement these recommendations.
What now?
Mr Maxsted once again apologised for the bank's errors. He said: "We understand the gravity of the issues presented by AUSTRAC and reiterate our deep sorrow for failings by Westpac."
"We are determined to urgently fix these issues and lift our standards to ensure our anti-money laundering and other financial crime processes are industry leading. As a major bank we play a critical role in helping law enforcement agencies prevent criminals from carrying out illegal activity," he added.
The chairman also revealed that the executive team will be made accountable.
Maxsted said: "We accept that we have fallen short of both our own and regulators' standards and are determined to get all the facts and assess accountability. In the interim, the Board has determined that either all or part of the grant of the 2019 Short Term Variable Reward will be withheld for the full Executive team and several members of the general management team subject to the assessment of accountability."
