Westpac Bank Money Laundering Scandal: Corporate Responsibility Report

This report analyzes the Westpac Bank money laundering scandal, examining corporate responsibility and governance failures. It discusses the resignation of CEO Brian Hartzer and the chairman's departure in response to AUSTRAC's allegations of non-compliance with money laundering laws. The report highlights the perspectives of shareholders and the community, as reflected in editorials from The Courier Mail and Australian Financial Review, respectively. It details the breaches, including those related to transactions to the Philippines involving child exploitation, and the failures in due diligence and risk management. The report also explores the remuneration of the CEO despite the severity of the allegations and the company's commitment to reforming its risk and governance frameworks, including the establishment of an independent community of experts to guide the review. The analysis emphasizes the importance of accountability, ethical leadership, and the impact of corporate failures on both domestic and international crimes.

CORPORATE
RESPONSIBILITY AND
GOVERNANCE

EDITORIAL 1: The Courier Mail: Shareholder/ Business Perspective
The Chief Executive Officer of the one of the oldest banks of Australia Mr Brian
Hartzer recently stepped down from his prestigious post in midst of the money laundering
allegations related to the children exploitation and the shareholders mandate. The CFO Peter
King would take over the post as the board of directors of the company is searching the long-
term replacement.
Some of the key highlights to be noted in relation to the allegations and the stepping
down of the CEO Hartzer are stated as follows. The exit of Mr Hartzer is in response to the
financial regulator AUSTRAC filing the suit against the entity related to the failure of the
money laundering laws compliance. It is to be noted that while Mr Hartzer would be entitled
to 12 months’ notice period, and the remuneration for the same; his performance share rights
would be forfeited (Yeates, 2019). The share rights were worth $ 20 million on the complete
vesting of the same. In addition to the above, the additional short-term bonuses for the year
2020-2021 would also not be paid. It is essential to note further that Mr Hartzer has already
accepted his responsibility as the senior executive of the company and that the company had
failed the expectations of the society. Further, in a statement released by the Chairman
Maxsted, it has been stated that the board understands and accepts its responsibility and the
gravity of the issues raised by the AUSTRAC. In response to this, the company additionally
obtained the feedback of the shareholders and as per the mandate decided that the change in
the board would be in the best interests of the company. It has been additionally stated by the
chairman that in the tenure of 25 years of service of the exiting CEO, and 7 years in the
Westpac, the company has achieved considerable growth, and each of the company’s
businesses are number one or number two in the market. Additionally, the organisation is
committed to reform its risk and governance frameworks to avoid such issues in the future
period and thus, an independent community of experts would guide the review (Morgan &
Janda 2019). In addition the responsibility failure has been well acknowledged by the
Chairman Mr Maxsted is also not seeking to be re-elected in the next annual general meeting
and is set to retire in the year 2020 (Druce, 2019).
Thus, it can be concluded that the entity Westpac has taken reasonable steps in mid of
the money laundering allegations and has included the feedback of the stakeholders as well
which includes the resignation of the CEO. The company is set to undertake the
accountability and governance responsibility more seriously.

EDITORIAL 2: Australian Financial Review: Community Perspective
One of the renowned banks of the country Westpac is in news lately for the breach of
the money laundering legislations as the bank failed to identify and stop the transactions to
the country of Philippines which involved the exploitation of the children. In midst of the
political pressure, criticisms in media and the stakeholders vote, the CEO of the organisation
is set to step down after being remunerated for the notice period as well of about $2.69
million.
As stated by the AUSTRAC, the company has committed around 23 million breaches,
and out of the same, the gravest breach is related to the money being transferred to various
locations in the South East Asia. Further, the regulator has stated in the suit filed that there
has been a widespread neglect from the organisation in context of the due diligence on the
international transfer transactions and the risky payments. The mode of such payments was
that of the bank's digital payments service LitePay that facilitates the clients to make the
payments of the small amounts outside Australia. The key point to be noted here is that the
faults and the risks in the stated platform were already highlighted to the senior officials of
the company in the year 2016 (Toh, 2019). There was a failure of the company in establishing
a mechanism for the detection of the suspicious activity until the year 2018.
In addition to the failure of the key compliances of the financial laws, the company
CEO failed to acknowledge the failure of the corporate governance and was quoted as saying
that the issue is not severe in context of the interests of the people of Australia (Butler, 2019).
This shows that the CEO had further attempted to garner the support from the senior leaders
of the company by understating the gravity of the issue. The fact that the CEO would be paid
full remuneration in spite of serious allegations highlights the issues in the corporate
functioning where the senior executives are duly paid, and they fail to realise their assets or
reputation are influenced by the failure of corporate responsibilities. Though the company is
now reviewing its internal processes, the fact that the company executives did not fulfil their
duties efficiently contributed to the domestic and international crimes in numerous ways.
Thus, the above facts lead to the conclusion that there was a technical as well as
governance failure on the part of the members of the organisation that led to such serious
allegations. Had the timely actions were taken by the organisations in securing the processes
and making the executives answerable instead of remunerating heavily, the scandal could
have been prevented.

References
Yeates, C. (2019). Westpac chief Brian Hartzer to step down in wake of scandal. Retrieved
from: https://www.smh.com.au/business/banking-and-finance/westpac-chief-brian-
hartzer-to-step-down-20191126-p53e2l.html
Druce, A. (2019). Westpac CEO Brian Hartzer to step down, chairman Lindsay Maxsted to
follow. Retrieved from: https://www.canberratimes.com.au/story/6511053/westpac-
ceo-to-step-down-chairman-to-follow/
Butler, B. (2019). Westpac's CEO Brian Hartzer resigns over money-laundering scandal.
Retrieved from: https://www.theguardian.com/australia-news/2019/nov/26/westpac-
chief-executive-brian-hartzer-resigns-over-money-laundering-scandal
Toh, M. (2019). Top bank CEO in Australia steps down over money laundering scandal.
Retrieved from: https://edition.cnn.com/2019/11/26/investing/westpac-ceo-brian-
hartzer/index.html