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Australia Westpac 'shattered' over money laundering bombshell

Other News Materials 12 December 2019 08:51 (UTC +04:00)
Westpac Banking Corp (WBC.AX) said it was “shattered” by a money laundering lawsuit over payments it unwittingly facilitated among suspected child exploiters and apologized to all affected as it faced a fire storm of shareholder criticism on Thursday,
Australia Westpac 'shattered' over money laundering bombshell

Westpac Banking Corp (WBC.AX) said it was “shattered” by a money laundering lawsuit over payments it unwittingly facilitated among suspected child exploiters and apologized to all affected as it faced a fire storm of shareholder criticism on Thursday, Trend reports citing Reuters.

“We are shattered by what has happened,” Chairman Lindsay Maxsted told about 600 investors at the annual shareholder meeting in Sydney of Australia’s second-biggest bank.

“It’s a total anathema to what we stand for,” added Maxsted, who brought forward his retirement in light of the scandal.

“We have always understood we don’t just exist to create return for shareholders at the cost of other stakeholders.”

Westpac was sued three weeks ago by Australian regulators who cited 23 million breaches of anti-money laundering laws, in the country’s biggest ever such scandal. Westpac has said it accepts most of the regulator’s assertions, and its chief executive and compliance head have quit.

The bombshell lawsuit, as the country was still digesting a damaging financial misconduct inquiry, has sent Westpac’s shares down 9% in the three weeks since it was announced, wiping A$8.6 billion off its market value. The bank could pay a fine of more than A$1 billion ($678.60 million), analysts have said.

The stock was down another 1% in morning trade on Thursday, while the broader Australian market was down 0.6%.

“All of us are members and owners of a company that, even at the best, you could say accidentally allowed child abuse to go on for five years,” said Chris Schott, a former Australian senator, at the meeting in his capacity as a shareholder.

“How the hell did this go on for five years? It’s inconceivable someone didn’t have the wit to think something was wrong,” added Schott, who told the meeting he voted for the establishment of AUSTRAC during his time in office.

In light of the money laundering matter, Westpac could see investors vote later in the meeting against its proposals on executive pay and the re-election of a long-serving director.

But Australia’s oldest and second-largest bank is unlikely to see its board ousted at the annual shareholders’ meeting as institutional investors are not in favor of such a move, investors and analysts said.

A vote against the pay proposals for top executives would make Westpac the biggest Australian company where such proposals have been rejected for two years in a row.

Under Australian law, if more than a quarter of shareholders vote against a company’s executive pay at back-to-back annual meetings, they may hold another vote at the meeting to remove the whole board. That “board spill” motion requires support from 50%.

Fund managers say more than a quarter of shareholders may vote against Westpac’s executive pay because of grassroots outrage over the payments scandal, but institutional investors will use their muscle to prevent a board spill.

“We acknowledge we should have implemented more robust transaction monitoring earlier than we did. This would have generated more suspicious matter reports to AUSTRAC,” Maxsted said earlier in prepared remarks.

He said the company would withhold all or part of its executive bonuses for 2019, subject to an assessment of accountability for the transactions at the heart of the AUSTRAC lawsuit.

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