Australian Banks Paying the Price
Australia’s attempts to reinvigorate its financial system continues with further fines for major financial providers. Here’s what lessons can be learned.
Major Australian banks have faced considerable fines for a number of different offenses including anti money laundering and unfair fee charges. These fines relate to a challenging period for the financial sector as it attempts to continue rebuilding after the revelations of the Royal Commission.
The latest bank to come under the spotlight has been Westpac who have been fined a record $1.3bn after AUSTRAC discovered illegal transactions totalling $11bn. They say the bank failed to impose the global standard for international transactions, (Society for Worldwide Interbank Financial Telecommunication’ also known as ‘SWIFT’) because it was too expensive. Instead, they set up their own. SWIFT was set up to ensure the details of the sender and receiver, but without this in place these details were not recorded.
Financial institutions have now paid billions in compensation. The reputational damage for the sector, meanwhile, is much more difficult to quantify. However, the focus now turns to what comes next.
The fines demonstrate the determination of regulators to be seen to be tightening their oversight. The penalties delivered here demonstrate the need for firms to ensure they comply with know your customer requirements, follow the best standards in transactions and have adequate processes in place to mitigate against the risk of fraud.
These become even more important in an environment in which COVID 19 restrictions are creating opportunities for money launderers, cyber criminals and other malicious actors, while hampering the efforts of financial institutions to maintain oversight over their operations.
The challenge, therefore, is twofold. Institutions must understand the expectations of regulators and make changes accordingly. Each of the big banks have made progress in this regard and were quick to announce what changes they were putting in place in the light of the Royal Commission’s recommendations.
For example, ANZ Bank was one of the first out of the blocks outlining 16 separate initiatives in which it said would improve the treatment of customers, small businesses and farmers in Australia as well as remediating past failures. In November, they also announced that they were reviewing their anti money laundering provisions to ensure its AML and counter terrorism safeguards were fit for purpose.
In doing so they were learning direct lessons from WestPac’s own problems and this represents a positive step forward for banks in Australia. Pressure is mounting from all sides. Money laundering has surged during the pandemic, while regulators, the public and politicians all have heightened expectations on what they expect to see from financial institutions.
By looking at the wider market, analysing statements from regulators and learning the lessons from other breaches, they can improve their own processes to ensure they are as well positioned as possible to guard against any potential compliance issues.
To speak to us or subscribe to our newsletter please contact us here.
Or message us via the chat icon in the bottom right corner of your screen.