Westpac will likely pay $81 million in compensation to customers over suspected breaches of the law by letting convicted criminals open accounts, the bank’s lawyer said Wednesday.
Westpac’s decision to approach financial regulator, ASIC, followed several public disclosures of breaches by banks and other financial institutions, including ANZ, Commonwealth Bank and National Australia Bank.
“In order to take full account of all potential issues and potential breaches, as well as to address any matters which have not been previously disclosed, Westpac took the decision to notify ASIC of its extensive historical compliance failures,” said Neil Coffey, Westpac’s national general counsel.
A government-appointed bank fixing panel, comprising former ministers Orica, Tyabji and Bishop, has also taken up the issue of lax sanctions on convicted criminals who have been left with untapped bank accounts, commonly referred to as “dead-beat accounts.”
Westpac’s decision to admit poor compliance at a public hearing at the Productivity Commission last year may have spurred the move to move past past issues, according to industry sources.
Westpac expects to pay out $10 million in compensation to customers who opened accounts with no checking or savings, the prosecution’s draft claims document said. The other $65 million would go to customers who have been affected by regular dishonorable overdrafts that were not flagged to credit regulators.
Even though Westpac will likely argue most of the breaches occurred before 2016, ASIC argued that the “failing conduct does not and cannot justify a letter of caution from ASIC” rather than legal proceedings. Westpac will continue to defend the remaining $15 million in the proposed infringement proceeding.
“In our view, the failing conduct for the breach of ASIC’s complaints handling guidelines primarily occurs from the early 2000s onwards in circumstances which are entirely outside the control of any individual Westpac employee,” Coffey said.
“These breaches were avoidable and avoidable where Westpac implemented suitable procedures,” Coffey said.