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Just last month, I wrote about how banks are cracking down on behavior that they find sketchy or fraudulent. Banks often shut down customers when they feel that their activities may resemble those who indulge in money laundering. Banks have shut down customers who buy gift cards in bulk by using their credit cards. Lately, Amex has clawed back referral bonuses from customers for referring themselves. In certain cases, Amex has shut down customer accounts completely.
Scandal Rocks Westpac
The latest money laundering scandal has rocked Australia’s second largest lender. The chief executive of Australia’s Westpac Banking Corp stepped down after a money laundering scandal that hit the company. While details still emerge, the initial information suggests that among other things, this involved child exploitation. Westpac is accused of facilitating payments 23 million payments between known child exploiters. Westpac allegedly let these payments pass even in spite of knowing this in advance.
Money Laundering Accusations
According to this Report by Reuters, the former chief of Westpac had only assured employees a day before his resignation that it wasn’t a major issue and then he planned on staying on. The report by Reuters delves into further details about the scandal and the ensuing political ramifications that have flared up in Australia.
Regulator AUSTRAC last week launched legal action accusing Westpac of enabling 23 million payments in breach of anti-money laundering laws, including the facilitation of offshore payments relating to child exploitation.
Prime Minister Scott Morrison was among those calling for the bank’s board to consider the future of its executives, but chairman Lindsay Maxsted had said over the weekend that a change at the top would be destabilizing for the bank.
That all changed on Tuesday, when Maxsted announced both Hartzer’s exit and that his own retirement in the first half of next year. He had said in September he had no intention to retire.
The Pundit’s Mantra
It’s pretty evident that Hartzer eventually had to step down as the political and public pressure mounted on him. The board made public statements to assuage the feelings of the angry public. I’m not sure it will be enough to restore faith in the way the bank is being run. As pressure mounts, regulators will need to take actionable steps to investigate and bring the criminals to justice.
I find it a bit amusing that Hartzer told senior staff that there wasn’t much to worry about. In his own words, he said that the crisis was “not an Enron or Lehmann Brothers”. It seems like the leadership just took a wait and watch policy under the pressure boiled over. While we only know the initial details, I’m pretty certain there’s a lot more to the scandal.
What do you think about this latest banking scandal? Do you trust the regulators to do their job and hold accountable those people who were involved in this scandal? Tell us in the comments section.