Australian bank Westpac Banking Corporation expects to be slapped with an $81 million fine for its failure to comply with banking regulations. The company has been accused of compliance failure across its various businesses, including allegations that it charged financial advice fees to thousands of deceased clients.
Westpac, Australia's third-largest bank, has admitted to six civil penalty proceedings. Securities regulators have accused the company of violations across its banking, wealth management, superannuation, and general insurance units.
Westpac allegedly charged over $7.2 million in advising fees to over 11,000 deceased persons and sold duplicate insurance contracts to over 7,000 consumers.
It was estimated that at least 25,000 consumers were charged over $5 million in surcharges that were not appropriately disclosed. Westpac has conceded the claims made in federal court.
The Australian Securities and Investments Commission claimed that the practice occurred over a ten-year period.
Since a Royal Commission probe identified significant flaws across the industry in 2018, Australia's financial sector has been under close scrutiny. Westpac's case, particularly its charging of deceased clients, has been the most controversial.
The Royal Commission, Australia's highest form of public inquiry, investigated misconduct by some of the country's most powerful institutions for more than a year.
Westpac CEO Peter King did not deny that there was something wrong with how the company had been operating. He said that these things shouldn't have occurred and that the company's processes and monitoring systems "should have been better."
Westpac has agreed to the penalty amount together with regulators, with both parties planning to propose the matter to the federal court. Westpac also agreed to compensate customers up to $57 million for its violations.
ASIC Deputy Chair Sarah Court said the violations made by the bank had severely harmed customers. She added that the case is unprecedented, and it is the first time that her office has filed multiple proceedings against one respondent at the same time.
The penalty is Westpac's latest severe regulatory setback. It agreed to pay a record $930 million-penalty in September last year over money laundering violations. Following the bank's involvement in the money-laundering incident, Westpac's then-CEO Brian Hartzer was forced to step down.
In addition, a national inquiry into Australia's scandal-plagued banking sector urged broad changes to the business in an effort to halt widespread corruption.
After an independent investigation revealed "significant shortfalls" in the board's control, the Reserve Bank of New Zealand stated this week that Westpac's local business needed to address risk governance and compliance issues.
