Since the AUSTRAC scandal broke, the Westpac board held at least two board meetings with Australian Prime Minister Scott Morrison demanding the board show some accountability.
Westpac, Australia’s first and oldest banking institution, has announced CEO Brian Hartzer will step down after the banking powerhouse was charged with more than 23 million contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act involving A$11 billion.
As The CEO Magazine reported, The AUSTRAC, an Australian government financial intelligence agency set up to monitor financial transactions to identify money laundering, organised crime, tax evasion, welfare fraud and terrorism, alleges Westpac Banking Corp failed to report more than 19.5 million international funds transfer instructions it received over a period of five years.
“As was appropriate, we sought feedback from all our stakeholders including shareholders and having done so it became clear that Board and management changes were in the best interest of the bank,” Westpac’s Chairman Lindsay Maxsted said in a statement released to the Australian Stock Exchange.
Hartzer told the ASX: “As CEO I accept that I am ultimately accountable for everything that happens at the Bank. And it is clear that we have fallen well short of what the community expects of us, and we expect of ourselves.”
The decision follows a report in The Australian that Hartzer attempted to lobby support from Westpac’s senior leaders by saying the scandal “was not playing out as a high street issue”.
“We all read the Fin (The Australian Financial Review) and The Australian, and we all read that and think the world is ending,” he said, according to the newspaper’s sources. “But actually for people in mainstream Australia going about their daily lives, this is not a major issue so we don’t need to overcook this.’’
Since the AUSTRAC scandal broke last Wednesday, the Westpac board held at least two board meetings. In between those meetings Australian Prime Minister Scott Morrison demanded the board show some accountability and the Attorney-General Christian Porter warned that Westpac could expect a fine in excess of the Commonwealth Bank’s A$700 million settlement with AUSTRAC.
AUSTRAC uncovered that 12 customers, one who had been convicted of child exploitation, had been able to open a series of Westpac accounts and made suspicious transactions to the Philippines which indicated child exploitation.
Another customer made 625 transactions between 2013 and 2019, including transferring money to a person in the Philippines, who was arrested in 2015 for child trafficking and live streaming of child sex shows and selling children for sex.
On Sunday, five days after AUSTRAC’s charges, Maxsted provided an update on Westpac’s response to the issues raised by AUSTRAC.
“We understand the gravity of the issues presented by AUSTRAC and reiterate our deep sorrow for failings by Westpac,” Maxsted said.
“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.”
Hartzer announced a plan of action but it was too little too late. He stepped up to the CEO role in February 2015.
Westpac today said Peter King, currently chief financial officer, will act as CEO as the board seeks a long term replacement for Hartzer, who steps down on Friday, 2 December. Hartzer will leave with a golden handshake of 12 months’ pay, which amounts to A$2.7 million. Hartzer will forfeit performance share rights that were potentially worth up to A$20 million if they had vested, which would have required meeting performance targets. Westpac also said Hartzer would not be eligible for short-term bonuses in 2020 or 2021.
Maxsted also announced he will bring forward his retirement as chairman to the first half of 2020, while long-standing director Ewen Crouch will not seek re-election at the upcoming Westpac AGM. Maxsted has been the bank’s chairman since 2011.