Westpac share price: implications of the latest AUSTRAC update

AUSTRAC proceedings revisited

On Friday, Westpac Banking Corporation (WBC) provided the market with a brief update on AUSTRAC’s civil proceedings against the bank.

For reference, in late 2019, AUSTRAC announced that it was pursuing civil penalty orders against Westpac for breaching Australia’s Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF) on a staggering 23 million occasions.

As part of Friday's market release, Westpac reiterated that during its recent defence filing in Federal Court, the bank had 'admitted to a substantial majority of the contraventions alleged by AUSTRAC.’

This comes after the bank on 4 June released its findings into AUSTRAC’s statement of claims. Here, Westpac noted that the contraventions of the AML/CTF act were driven by a combination of human and technological error, though ‘there was no evidence of intentional wrongdoing’ within the bank.

In addition to this, it was noted that some areas of the bank's 'AML/CTF risk were not sufficiently understood,’ there was ‘unclear end-to-end accountabilities for managing AML/CTF compliance,' and ‘a lack of sufficient AML/CTF expertise and resourcing' within Westpac.

As part of that 4 June release, Westpac’s CEO, Peter King further commented:

'Consequences that have been applied to individuals include significant renumeration impacts and disciplinary actions.’

'We recognise we need to change. We completely accept that some important aspects of Westpac’s financial crime risk culture were immature and reactive.'

Regardless of those recognitions, AUSTRAC recently informed Westpac that its investigations into the bank’s breaches of the AML/CTF act had continued. These resumed investigations may potentially result in AUSTRAC amending its current Statement of Claim.

The next case management hearing is set to be held on 17 June.

Westpac share price: the value of reputation

In a note released today, Citi analysts said that amongst Australia's lenders, they favoured the major banks, though it was also flagged that the regional banks will likely benefit from the current competitive landscape, in time.

Interestingly, while Citi analysts believe CBA is the best placed of the big four banks to capitalise on the current competitive enviroment, Westpac will likely prove to be a more complex case. Here it was noted that:

‘Although WBC should benefit from its market position, it is likely that lost momentum and reinvestment due to reputational issues may see some benefits conceded back to other players.’

At the time of writing, the Westpac share price traded at $17.91.

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