Case Study: Financial Crimes and Westpac Bank's Violations

This case study examines the financial crimes committed by Westpac, Australia's second-largest bank. The assignment highlights allegations of $11 billion in international fund transfers lacking proper record-keeping and financial reporting, potentially facilitating money laundering and tax evasion. The analysis focuses on Westpac's failure to adhere to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system, and the breaches of Australia's International Funds Transfer Instructions (IFTI) reporting regulations. It explores the roles of key stakeholders like AUSTRAC, and the potential penalties Westpac may face. The study provides a detailed overview of the alleged criminal activities and the associated regulatory violations.

Case of the financial crimes by Westpac
Relevant Facts
Westpac holds the status of being the second biggest bank in Australia. It has been accused of
committing serious financial crimes of violating rules. One of the major charges was
associated with the fund transfer of $11 billion without proper record keeping and financial
reporting, it was believed that intention behind the creation of this dark spot was deliberated
to promote the acts of money laundering and tax evasion.
The reports of government agency Australian Transaction Reports and Analysis Centre
(AUSTRAC), suggested that Westpac failed in maintaining the records in accordance with
the norms set by globally accepted reporting system which is SWIFT. When an agency
taking care of money laundering, organized crime, tax evasion, welfare fraud and terrorism,
makes such a claim, the gravity of offense increase multiple folds.
The SWIFT system has an active history since 2009 when it was constituted with an
intention to monitor global money laundering; this system has a high utility in the majority of
high-value cross border transactions around the world. As a protocol, this system ensures to
maintain the records of the sender, receiver and the lifecycle of the money which is involved
in the case.
The version of Westpac suggests that the SWIFT payment system is inefficient for small
payments when a bank is handling large volume low-value transactions. In order to bridge the
gap, they launched their own platform under the flagship name of LitePay for small transfers
of up to $3,000. Another platform under the name Australasian Cash Management (ACM)
was also set up for payments of up to $100 million.

The rules prescribed by the SWIFT indicates that “all small and large transactions need to be
accompanied by sender and recipient data and without the data tax authorities”, SWIFT
ensures that financial regulators and agencies can have selective access with the data.
The internal reporting system developed by Westpac, on the other hand, acts independently, it
has no caps or limits on the values and volumes. Description of the nature of the transaction
is another area where it lacks many things. A comparative study can tell us about the
difference here, SWIFT allows and demands 300 words entry for the purpose of record-
keeping whereas Westpac’s system only allows 15 characters maximum for the purpose. It
restricts the visibility of the purpose in the transaction quite considerably.
Australia's International Funds Transfer Instructions (IFTI) reporting regulations make it
necessary for various banks to report inbound and outbound international transfers in a
separate column where competent authorities can take note of them.
AUSTRAC is the main agency that takes care of the task of the regularization of international
transaction, this agency blamed that Westpac has committed more the 19.5 million IFTI
breaches while performing $11 billion non-SWIFT international transactions.
Now it is expected that Westpac might end up paying a penalty ranging from tens of millions
of dollars from hundreds of millions of dollars. We can also benchmark it with the example
of commonwealth Bank, this company was penalized for $ 700 million for having
irregularities in international transactions
Primary Stakeholders
While having a look at the stakeholders in the process of the alleged criminal activities at the
Westpac, we can identify many stakeholders, for instance, we have primary shareholders of

the bank, direct customers of the bank, Australian Transaction Reports and Analysis Centre
(AUSTRAC) and The Australian Taxation Office (ATO).
The primary stakeholders can be treated as an offender because of the breach, the customers
can be treated as the victims, bodies like ATO and AUSTRC can be considered as the
indirect victims of the fraud because of their responsibility to collect necessary revenues for
the Australian government.