Westpac braces for $1.03b hit for money-laundering, child exploitation breaches
Westpac’s child exploitation and money laundering scandal
could blow a $1.03 billion hole in its first-half cash profit, with the bank
setting aside an eye-watering $900 million for a potential legal penalty.
The figure would eclipse the record $700 million fine
Commonwealth Bank copped in 2018 for its own breaches of AUSTRAC laws.
Westpac, which is accused of 23 million breaches of
anti-money laundering laws, flagged the hit on Tuesday as part of $1.43 million
in expected first-half writedowns and provisions.
AUSTRAC’s claims include the bank knew since 2013 of child
exploitation risks associated with frequent small payments to South-East Asia
but did not act appropriately until 2018 and still does not monitor all
channels for transfers potentially linked to the live-streaming of child abuse.
On top of the expected AUSTRAC fine, the bank said costs
related to its financial crime response plan could reach $130 million, partly
due to higher legal expenses.
Westpac chief executive Peter King, who was appointed early
this month, said 200 people were being hired to prevent financial crime and a
clearer accountability regime was being set up.
The big four lender will also book another $260 million in
customer remediation related to the royal commission, and a $70 million asset
hit from the coronavirus fallout.
The many Australians left unemployed from the pandemic will
also have consequences for banks.
Westpac expects many customers will be unable to repay loans
and it is factoring in a significant increase in its impairment charge.
The charge will be announced before its first-half results
are published on May 4.
A provision of about $70 million has been made relating to
changes to group life insurance.
Westpac Life Insurance Services will stop providing group
life insurance to BT Super, and the former has written off acquisition costs.
Westpac is also yet to respond to the Australian Prudential
Regulation Authority’s advice to banks to consider postponing paying dividends
to shareholders.
The bank said a decision on first-half dividends would be
announced with its results.
APRA earlier this month asked banks to conserve capital and
reduce dividends, given the uncertain economic outlook.
This would ensure banks could continue to lend and
underwrite insurance.
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