The Westpac Banking Corp (ASX: WBC) share price has given back its morning gains and is trading lower this afternoon.
At the time of writing, the banking giant's shares are down 0.3% to $25.58.
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Why is the Westpac share price trading lower?
It has been a busy day for Australia's oldest bank. This morning the company revealed that it has been hit with an $87 million bill for failing to provide 32,000 customers with critical information from its financial advice business.
Whereas this afternoon, the bank advised that it has discovered a significant potential fraud.
According to the release, Westpac has commenced proceedings in the Federal Court of Australia against Forum Finance. This follows the discovery of significant potential fraud relating to a portfolio of equipment leases with Westpac customers arranged by Forum Finance, which were referred to Westpac's Institutional Bank.
What is Forum Finance?
According to its website, Forum Finance provides technology and automation solutions that aim to unlock a business' potential. As well as equipment leasing, its solutions include asset tracking, business processing automation, cloud and managed IT, and managed print services.
Forum Finance claims that its clients include Boston Scientific, Findex, Guide Dogs NSW/ACT, and WesTrac.
What now?
Positively, while investigations are ongoing and the NSW Police, ASIC, and APRA have been notified, at this stage it appears that no Westpac customer has suffered a financial loss from the fraud.
However, Westpac hasn't been so lucky. It estimates that it has a potential exposure of around $200 million after tax, with the extent of any loss dependent on the outcome of its investigations and recovery actions underway.
The bank has obtained certain asset freezing and search orders to preserve available assets and relevant information. It has also investigated how this was able to happen, including an external review.
Westpac's CEO, Peter King, commented: "Westpac takes fraud very seriously and will take all necessary actions to protect the interests of the bank and its customers. This is a complex issue, and we are working at pace to address it, including engaging with the police and regulators. At this preliminary stage, the potential fraud is sophisticated and appears to have been perpetrated externally. Our new Chief Executive of the Institutional Bank, Anthony Miller, is working with our customers to ensure no disruption to their operations."
