Independent experts would be selected to conduct a “multi-layered” review into accountability at the bank, he said. The move may fend off the prudential regulator calling a similar inquiry, as it did in the wake of AUSTRAC’s action against Commonwealth Bank in 2017.
Mr Maxsted pledged to take actions called for by the review, and to report on its progress. It will examine how Westpac can accelerate improvements to its anti-money laundering and counter-terrorism financing programs.
The pledge buys time for Mr Hartzer, who has come under intense pressure over the past 48 hours to stand down in the wake of the crisis.
Mr Maxsted also said the bank has begun discussions “with relevant community groups about any further steps we can take to fight child exploitation”.
The move comes after Prime Minister Scott Morrison said the Westpac scandal had inflicted more damage on the image of banks and called for failings in bank risk systems to be fixed.
“And boards need to take accountability for that, for their shareholders and for their customers and the public at large. Everybody is watching them,” Mr Morrison said on 3AW radio on Friday before the Westpac directors met.
“They have got to take the calls that I think reassure people’s confidence in the bank’s systems and the processes they have, and that there is accountability that is at work in these institutions.”
Mr Maxsted said the board “will provide an update in coming days to share more information on what has occurred and what steps we are taking”.
Ahead of meetings next week with institutional shareholders before the bank’s December 12 annual meeting, which could determine Mr Hartzer’s ultimate fate, Mr Maxsted said the board, Mr Hartzer and the broader management team were “fully committed to fixing these issues and we are taking all steps necessary to urgently close any remaining gaps and fix our policies and procedures so that this can never happen again”.
Shares fall for a third day
The AGM is shaping up as a flashpoint for shareholders to express concerns about the bank’s financial performance and governance, after weak full-year earnings, a dividend cut and a capital raising. Westpac shares have dropped 10 per cent in the month.
The stock fell a further 1.5 per cent on Friday, after losses the two previous days, to close the week at $24.77, down 6.5 per cent since the scandal broke.
The Australasian Centre for Corporate Responsibility, a not-for-profit association representing retail investors, said it would advise members to vote against the re-election of Ewen Crouch, who has served as the chair of the Westpac board’s risk and compliance committee since 2017.
Mr Maxsted said Westpac was reviewing “and taking action” on all of the individual customers mentioned by AUSTRAC.
The regulator’s claim details how a dozen Westpac customers made multiple, small value payments for services in the Philippines that resulted in children being exploited. At lead one of the customers paid a man subsequently arrested on sex-trafficking charges.
With both AUSTRAC and Westpac understood to be keen to settle the case rather than run it through the court, Mr Maxsted said the bank is continuing to work closely with AUSTRAC to accelerate resolution of the matter”.
Treasurer Josh Frydenberg said on Friday the allegations were “very concerning … and a timely reminder that all institutions, financial or otherwise, must comply with the law”.
“As for Westpac’s executive it is up to boards to decide management positions and up to shareholders to decide board positions. It is therefore not up to government to determine who is in those jobs,” he added.
‘We care deeply’
Mr Hartzer told Westpac staff in an email that he understands they might be “grappling with this personally … and I want to assure you that we care deeply about your wellbeing and we are here to support you”. He added that “our response will demonstrate our integrity”.
Analysts said the saga, one of the most dramatic in the bank’s 202-year history, could result in major changes to governance, and leadership at the top.
“This event may become a trigger for significant management and structural change,” said Citi’s Brendan Sproules.
“The Westpac board may take the opportunity in a tough operating environment to hold senior management accountable.”
However, he said the circumstances at Westpac were different to CBA “where a series of missteps made change a more obvious option” in 2017, when CBA said then-chief Ian Narev would retire the following year after it faced a tirade of calls for accountability in the wake of its own money-laundering scandal.