Westpac penalties top A$113 million over “widespread” compliance failures

Westpac Banking Corporation has received an A$40 million penalty for charging advice fees to dead customers, bringing its total bill for “widespread compliance failures” to A$113 million.

The penalties followed six actions launched by the Australian Securities and Investments Commission (ASIC) over the breaches uncovered during the Hayne Royal Commission.

When added to the record penalty for anti-money laundering breaches in 2020, Westpac’s bill for a spate of regulatory compliance breaches over the past two years has risen to more than A$1.4 billion. The pattern of misconduct dates back more than a decade.

Federal Court Justice Jonathan Beach has handed down the decisions in the six ASIC cases over the past month. Friday’s A$40 million penalty brings to a close the record spate of ASIC enforcement actions. The court found that Westpac had charged fees illegally to more than 11,800 deceased customers over a 10-year period. The illegal advice fees amounted to more than A$10.9 million for financial advice services that were not provided due to the customers’ death.

ASIC said the latest decision marked the end of a long-running project for the enforcement division. It said the cases reflected “widespread compliance failures across multiple businesses, including Westpac’s banking, superannuation, wealth management and insurance brands.”

Across all the six cases, Justice Beach identified “systems and compliance failures” as a common problem across the bank. The findings mirror the criticisms in the Australian Transaction Reports and Analysis Centre (AUSTRAC) case against the bank, which led to a record A$1.3 billion penalty for financial crime compliance failures.

Justice Beach described the bank’s misconduct as “serious”. In relation to the charging of fees to dead customers, the judge found that Westpac had “utterly failed to address the issues systematically”.

In four of the cases, the court found that Westpac did not provide financial services “efficiently, honestly and fairly”.

Westpac has agreed to spend an additional A$80 million in remediation for customers.

“Profound failure”

Sarah Court, ASIC’s deputy chair, said the cases revealed a “profound failure by Westpac over many years and across many areas of its business to implement appropriate systems and processes to ensure its customers were treated fairly.”

The cases stood as a reminder that all financial services firms have an obligation to be honest and fair in the provision of financial services, she said.

“Over the course of 13 years, more than 70,000 customers have been affected by these failures, either by being incorrectly charged or given the wrong information. The sheer scale of this impact suggests that, at the time, Westpac had a culture that did not prioritise compliance,” Court said.

The Federal Court also found that Westpac had failed to invest in compliance systems to enable it to meet its complex regulatory obligations.

Court said this under-investment had been identified as a problem across the sector during the Financial Services Royal Commission.

“Consumer harm caused by systems failures is unacceptable. Financial institutions must invest in systems that allow them to meet their obligations to customers,” Court said.

“ASIC expects the industry to do this work quickly and efficiently. Consumers are entitled to be confident that the compliance systems of the financial services firms they trust with their financial security are up to standard.”

The Federal Court has not yet released the decision in the “fees for no service” case.

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This article first appeared on Thomson Reuters Regulatory Intelligence.

Nathan Lynch is an experienced writer, public speaker, manager and technology enthusiast in the field of financial regulation and risk management. At Thomson Reuters, Nathan leads a team of experts who provide breaking news, deep analysis and practical guidance to risk practitioners in the global financial services sector.
Nathan manages Thomson Reuters’ award-winning Regulatory Intelligence team across the Asia-Pacific region, tracking developments in financial services law, regulation, financial crime and risk management.
Nathan has been involved in building innovative, tech-based businesses in the financial services “regtech” sector — including Complinet Australia and the Thomson Reuters Risk business.

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