McKim: Why is Westpac Still in Business?

Media release – Westpac, 30 November 2021

Westpac and ASIC reach agreement on six regulatory matters

Westpac has announced today that it has reached agreement with ASIC to resolve six separate longstanding matters through agreed civil penalty proceedings filed in the Federal Court of Australia. The issues have all been previously disclosed and are summarised in the table below.

These matters follow regulatory investigations conducted by ASIC, many instigated following the issues being self-reported by Westpac, including some which were raised during the Royal Commission.

The majority of affected customers have been compensated, and any remaining payments will be completed as quickly as possible.

Westpac CEO, Peter King, said: “As flagged, we have been working to resolve a number of outstanding regulatory matters before the bank. We have cooperated with ASIC through the investigations and the process to get to this resolution today.”

“This outcome is an important step forward for us as we continue to fix issues and build stronger risk foundations.

“In each of these matters, Westpac has fallen short of our standards and the standards our customers expect of us. The issues raised in these matters should not have occurred, and our processes, systems and monitoring should have been better. We are putting things right and unreservedly apologise to our customers,” Mr King said.

Westpac and ASIC will jointly submit agreed proposed penalties for each of the proceedings, totalling $113 million. These penalties are subject to court approval and have been substantially provisioned (together with anticipated legal costs) in Westpac’s Full Year 2021 results. Westpac and ASIC have also prepared Statements of Agreed Facts for each matter.

Westpac will continue to work cooperatively with ASIC to resolve the proceedings as quickly as possible.

Media release – ASIC, 30 November 2021

ASIC launches multiple legal actions against Westpac

ASIC has commenced six civil penalty proceedings against Westpac in the Federal Court. The proceedings, each the result of an individual ASIC investigation, allege widespread compliance failures across multiple Westpac businesses. The alleged conduct occurred over many years and affected many thousands of consumers.

The Westpac businesses against whom the allegations are made include its banking, superannuation and wealth management brands as well as Westpac’s former general insurance business.

ASIC Deputy Chair Sarah Court said ‘ASIC is disappointed to have to yet again commence legal proceedings, on this occasion no fewer than six times, against a major bank. The conduct and breaches alleged in these proceedings caused widespread consumer harm and ranged across Westpac’s everyday banking, financial advice, superannuation and insurance businesses.

‘A common aspect across these matters has been poor systems, poor processes and poor governance, which is suggestive of an overall poor compliance culture within Westpac at the relevant time. Customers are entitled to have trust and confidence in Westpac being able to deliver what it promises, without suffering financial harm. Westpac must urgently improve its systems and culture to ensure these systemic failures do not continue.

‘It is unprecedented for ASIC to file multiple proceedings against the same respondent at the same time,’ said Ms Court. ‘However, these were exceptional circumstances. ASIC had numerous Westpac-related matters under investigation through the course of 2021, and we decided to expedite those matters for consideration by the Court at the earliest opportunity.’

Westpac has admitted the allegations in each of the proceedings and will remediate approximately $80 million to customers.

ASIC and Westpac will submit to the Court that combined penalties of more than $100 million are appropriate.

Each matter will now be separately considered and determined by the Court.

The six matters filed against Westpac concern:

Fees for no service – deceased customers: ASIC alleges that over a 10-year period, Westpac and related entities within the Westpac group, charged over $10 million in advice fees to over 11,000 deceased customers for financial advice services that were not provided due to their death.

General insurance: ASIC alleges that Westpac distributed duplicate insurance policies to over 7,000 customers for the same property at the same time, causing customers to pay for two (or more) insurance policies where they had no need for the additional policies. ASIC also alleges that Westpac issued insurance policies to, and sought payment of premiums from, 329 customers who had not consented to entering into an insurance policy.

Insurance in super: ASIC alleges that Westpac subsidiary BT Funds Management charged members insurance premiums that included commission payments, despite commissions having been banned under the Future of Financial Advice reforms. BT Funds Management represented that the insurance fees had been properly deducted from members accounts when in fact the insurance fees that were deducted included commissions that were not permitted. Some members also paid commissions to financial advisers via their premiums even though they had elected to have the financial adviser component removed from their account. BT Funds is remediating over $12 million to over 8,000 affected members who were incorrectly charged.

The Australian Prudential Regulation Authority (APRA) has also been reviewing these matters and ASIC and APRA have taken a coordinated approach to their respective inquiries.

Inadequate fee disclosure: ASIC alleges that Westpac licensees BT Financial Advice, Securitor and Magnitude (all no longer operating) charged ongoing contribution fees for financial advice to customers without proper disclosure. Some fees were not disclosed to the customer at all, at other times the amount disclosed was less than the amount charged. It is estimated that at least 25,000 customers were charged over $7 millon in fees that had not been disclosed, or adequately disclosed.

Deregistered company accounts: ASIC alleges that Westpac did not have appropriate processes to manage accounts held in the names of deregistered companies. As a result, Westpac allowed approximately 21,000 deregistered company accounts to remain open. Westpac continued to charge fees on those accounts and allowed funds to be withdrawn from these accounts that should have been remitted to ASIC or the Commonwealth.

Debt onsale: ASIC alleges that Westpac sold consumer credit card and flexi-loan debt to debt purchasers with incorrect interest rates. These interest rates were higher than Westpac was contractually allowed to charge on at least part of the debts, resulting in more than 16,000 customers, who were likely to be in financial distress, being overcharged interest. Westpac and/or the debt purchasers have refunded over $17 million to affected customers.

ASIC further alleges that in all matters, excluding Debt onsale and Insurance in super, Westpac failed to ensure that its financial services were provided efficiently, honestly and fairly.

The full list of Westpac businesses against which the allegations are made are:

• Westpac Banking Corporation
• Advance Asset Management Limited
• Asgard Capital Management Limited
• BT Funds Management Limited
• BT Funds Management No. 2 Limited
• BT Portfolio Services Limited
• Securitor Financial Group Pty Limited
• Magnitude Group Pty Ltd

Download

Fees for no service – deceased customers: Originating Process (PDF 855 KB) and Statement of Agreed Facts (PDF 4 MB)

General insurance: Originating Process (PDF 498 KB) and Statement of Agreed Facts (PDF 1 MB)

Insurance in super: Originating Process (PDF 580 KB) and Statement of Agreed Facts (PDF 11 MB)

Inadequate disclosure of fees: Originating Process (PDF 833 KB) and Statement of Agreed Facts (PDF 3 MB)

Deregistered company accounts: Originating Process (PDF 529 KB) and Statement of Agreed Facts (PDF 10 MB)

Debt onsale: Originating Process (PDF 636 KB) and Statement of Agreed Facts (PDF 3 MB)

Media Release – Nick McKim, Greens Senator for Tasmania, 30 November 2021

Why has Westpac still got a license to print money?

Greens Treasury spokesperson, Senator McKim, has called for ASIC and APRA to explain why Westpac is still able to hold a banking license after it agreed to pay $113 million in fines for its shoddy treatment of customers.

“$113 million is chump change for Westpac,” Senator McKim said.

“It’s barely 2% of last year’s $5.46B profit.

“Westpac are a serial offender and yet they are still licensed to make mega profits thanks to ASIC and APRA’s wet lettuce regulation.

“Only AUSTRAC has meted out any serious punishment to Westpac with a record $1.3B fine for 23 million breaches of anti-money laundering laws.”

But, since the Royal Commission, Westpac has also:

• Admitted to understating customer expenses on 100,000 home loans, but ASIC failed to persist with legal action.
• Been fined $10.5m and ordered to repay 30,000 customers for breaches of best interest duties by wealth management subsidiaries.
• Been responsible for two of the thirteen superannuation funds (BT Super and Asgard Employees) that failed performance tests under new rules.
• Been accused of insider trading on a $12B financing deal related to the privatisation of Ausgrid.
• Been operating effectively insolvently in New Zealand, with their liquidity coverage being below 100% for most of 2019.
• Admitted to being a ‘correspondent bank’ to Euro Pacific, a Puerto Rican based bank suspected of facilitating tax evasion and money laundering.
• Been exposed for failing to meet seven of ten benchmarks in a targeted review of their mortgage book.

“Yet their bottom line remains barely affected.

“ASIC or APRA need to explain why Westpac and all of its subsidiaries are still able to hold financial services licences.

“Until Westpac is shown some serious stick they will continue to break the law and rip off customers because it’s good for business.”