By Byron Kaye and Paulina Duran
SYDNEY (Reuters) - Regulators accused Australia's Westpac Banking Corp of 23 million breaches of anti-money laundering laws, saying the banking giant ignored red flags and for years enabled payments from convicted child sex offenders and "high risk" countries.
The oversight failure at Australia's second-largest bank led to deep systemic non-compliance with anti-money laundering laws, financial crime watchdog AUSTRAC said in a civil court filing on Wednesday.
The regulator is pursuing fines of up to A$21 million ($14 million) for every transaction Westpac failed to monitor adequately or report on time in the country's biggest ever money laundering scandal. In theory, that could add up to whopping A$483 trillion in fines.
The lawsuit dwarfs a case AUSTRAC brought against larger Commonwealth Bank of Australia which agreed last year https://www.reuters.com/article/australia-cba-moneylaundering/australias-commonwealth-bank-to-settle-civil-proceedings-by-austrac-idUSL3N1T50QC to pay a record A$700 million penalty after admitting to allowing 53,750 payments that violated similar protocols. It also brings fresh scrutiny to an industry still trying to rebuild community trust after a bruising Royal Commission public inquiry.
"These contraventions are the result of systemic failures in its control environment, indifference by senior management and inadequate oversight by the Board," AUSTRAC said in the court filing.
Westpac said it had self-reported the breaches to AUSTRAC and had since shut down the service at the centre of the complaint which let customers and affiliate overseas banks process payments from Australia.
"Like everyone who has read the statement of claim, I am personally disgusted and appalled," Westpac CEO Brian Hartzer said on a call with reporters, adding the bank "should have done better".
Hartzer said he accepted most of the regulator's assertions but "at a senior executive level, for the board, for me personally, in no way have we been indifferent on this."
The lawsuit sent Westpac shares down 3% by the close, outpacing a broader share market decline of 1.4%, as investors began counting the financial and reputational cost of the lawsuit.
Brian Johnson, an analyst at Jefferies, said he expected a "meaningful, painful but not catastrophic civil penalty" in the hundreds of millions of dollars range.
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Bank of America Merrill Lynch analysts said they saw downside risks for bank capital persisting until fines, penalties and remediation provisions subside.