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Bloomberg
Westpac Banking Corp. has set aside A$900 million ($574 million) to settle a massive breach of anti-money laundering laws, in what would be the biggest fine in Australian corporate history.
The potential fine is part of A$1.43 billion of charges — including increased customer remediation — that will slash first-half profit, with newly appointed Chief Executive Officer Peter King warning further bad-debt provisions from the coronavirus crisis are coming.
The Sydney-based lender is still working out the extent of expected credit losses and will provide a further update before releasing first-half results on May 4, it said in a statement on Tuesday. However, it expects to have a “significant†increase in bad-debt provisions.
Earnings at all of Australia’s major banks are set to plunge this year as the coronavirus outbreak shuts down large swathes of the economy. Dividend payments, one of the key attractions of bank stocks for retail shareholders, are also under pressure after the regulator urged lenders to reduce payouts to shore up capital.
In addition to those challenges, Westpac is dealing with the overhang of the money-laundering scandal which cost both the bank’s former chief executive and chairman their jobs, and badly bruised the reputation of the nation’s oldest bank.
The financial crimes agency last year alleged the lender breached anti-money laundering laws more than 23 million times, including failing to detect payments. King, who was appointed permanent CEO earlier this month, has said he wants to settle the case if he can.
While negotiations are continuing and there remains “considerable uncertainty†about the final outcome, Westpac said it is putting aside A$1.03 billion, comprising a potential A$900 million penalty, as well as costs to upgrade its financial crimes systems.
That would top the record A$700 million paid by Commonwealth Bank of Australia in 2018 to settle more than 53,000 breaches of anti-money laundering laws. It would be within the ballpark of analyst estimates of a potential fine.