Published: Tue, November 26, 2019
Markets | By Otis Pena

Westpac Australia boss Brian Hartzer to step down in wake of scandal

Westpac Australia boss Brian Hartzer to step down in wake of scandal

Australia's Westpac Banking Corp said on Tuesday its CEO will step down and its chairman will bring forward his retirement as a money-laundering scandal rocks the country's second-largest retail bank.

Australian banking giant Westpac said Tuesday its beleaguered CEO Brian Hartzer was stepping down after regulators accused the bank of major breaches of money laundering laws involving more than US$7 billion.

AUSTRAC also alleged that the organization did not keep records relating to the origin of some global fund transfers, particularly in troubled hot spots where child exploitation is rife.

The 23 million breaches alleged by AUTRAC, the anti-money-laundering and counter-terrorism financing regulator, included the failure by the bank to adequately monitor the accounts of a convicted child sex offender who was regularly sending money to the Philippines.

"I made clear the seriousness of those issues, but also the bank itself and the board itself has been having many meetings - including with its own shareholders - and, in our conversation this morning with the chairman, he told me, before the public announcement, of what was to take place".

While the scandal hasn't yet had an impact on the local market, the Reserve Bank said it was working closely with its offshore regulatory counterparts on the matter.

Austrac has noted that each of the bank's alleged breaches carries a maximum a penalty of A$21m.

Brian Hartzer will leave the bank as of December 2, Westpac's Board announced in a statement.

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"As CEO I accept that I am ultimately accountable for everything that happens at the bank".

The bank's share prices were up more than 1% on Tuesday, having slumped 8% over the previous four trading days in the wake of the revelations.

"We don't have all the details", he said, adding it appeared that Westpac had been offered an update to protections for its offshore payments system, LitePay, which it did not adopt.

"I think it's welcome, I think it's appropriate", cabinet minister Greg Hunt told Sky News on Tuesday. "And it is clear that we have fallen well short of what the community expects of us, and we expect of ourselves", Mr Hartzer said.

Westpac has an annual general meeting scheduled for December 12.

Austrac said the bank had been aware of heightened risks associated with frequent small payments destined for Southeast Asia since 2013 and had been "specifically briefed" on the risks with respect to one of its money transfer channels in June 2016.

The Australian Council of Superannuation Investors (ACSI), whose pension fund members are investors in Westpac, said it believed the crisis "warrants further board renewal in the new year".

Australia's four biggest banks - ANZ, Commonwealth Bank, Westpac and National Australia Bank - were the targets earlier this year of a royal commission of inquiry which exposed rampant malpractice.

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