Westpac will scrap or trim the bonuses of its executive team and shut down its international transfer platform LitePay amid allegations the service was used to make payments related to child exploitation.
Financial crime watchdog AUSTRAC is taking Westpac – the country’s second-largest lender – to court over an alleged 23 million breaches of money laundering laws.
Westpac on Sunday released a statement outlining its response plan to AUSTRAC’s legal action, with chairman Lindsay Maxsted saying the bank was “determined to urgently fix (the) issues”.
The bank revealed on Monday these new commitments – which include closing LitePay and lifting standards through priority screening – would incur an extra $80 million pre-tax expense in FY20.
“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,” Mr Maxsted said in a statement.
“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.”
AUSTRAC’s claims hammered Westpac’s share price for three straight trading sessions at the end of the week – wiping as much as $6.78 billion from the bank’s value – and sending its stock down to a 10-month low.
Shares in the bank were worth $24.77 before the ASX began trade on Monday.
Some investment groups have urged Westpac shareholders angered by the bank’s failure to properly monitor payments potentially linked to the streaming of child exploitation to reject its remuneration report for a second consecutive year.
The bank is scheduled to hold its annual general meeting in Sydney on December 12.
Westpac’s pledge at the weekend to lift its standards came after Treasurer Josh Frydenberg repeatedly declined to say whether the board of the embattled bank should resign or be sacked.
Asked on ABC’s Insiders program whether he would be happy if the CEO and chair of Westpac are still in place in six months time, Mr Frydenberg said: “History shows you that these issues build a momentum of their own and where boards start is not necessarily where boards finish.”
He noted the previous CEO of the Commonwealth Bank eventually left after the bank was also found to have breached money-laundering laws.
He said the Australian Prudential Regulation Authority has the ability to disqualify boards and executives under the Banking Executive Accountability Regime introduced by his government.
However, that came into force in 2018 and is not retrospective, while some of the alleged breaches date back to 2013.
Asked what action he would like to see, Mr Frydenberg said: “As I said, these issues develop a momentum of their own. They’ve got an AGM on December 12 and, no doubt, there’ll be some very hard discussions between now and then.”
He said he had spoken to the CEO and chair of Westpac and made it clear the seriousness of these issues.
Asked again whether these people should keep their jobs, the treasurer said: “Again, our position has consistently been, decisions about who are on boards are matters for shareholders and who are on executive teams are matters for boards.”
“That being said, these are very serious issues. There must be accountability.”
AAP