The Westpac Banking Corp (ASX: WBC) share price is down more than 2% in early trade with the major ASX bank facing legal action by AUSTRAC.
In an ASX announcement, the big four ASX bank disclosed it had received a statement of claim from AUSTRAC, commencing civil proceedings regarding alleged contraventions of Westpac's obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act.
Westpac has previously warned that it had self-reported a failure to report a large number of international funds transfer instructions (IFTIs) to AUSTRAC and that AUSTRAC was also investigating a number of other areas relating to Westpac's processes, procedures and oversight.
According to reporting by the Australian Financial Review, AUSTRAC's claims are less diplomatic. AUSTRAC claims Westpac engaged in widespread, systemic and frequent failures to adhere to anti-money laundering laws and hampered its ability to prevent child exploitation.
AUSTRAC said the bank was deficient in multiple areas and didn't report 19.5 million international fund transfers over five years. It alleges contraventions of AML/CTF laws relating to money transfers between Australia and Europe & Asia amounting to $11 billion.
This lack of reporting allegedly resulted in a significant loss of intelligence for AUSTRAC.
How much will the fine be?
A fine isn't certain yet, but it would be material if there is going to be one.
Commonwealth Bank of Australia (ASX: CBA) previously paid a $700 million as a result of reporting failures.
The penalty can seemingly be $210 per breach, although the Federal Court will limit the total fine when a large number of breaches are involved.
Foolish takeaway
This is yet another black mark against Westpac in recent times to go along with the royal commission remediation. Westpac may have a large grossed-up dividend yield of 8.8%, even after the recent dividend cut, but the banks and their earnings seem to be under a lot of pressure at the moment.
