Westpac CEO resigns over money scandal

Westpac chief executive Brian Hartzer is stepping down and chairman Lindsay Maxsted plans to follow suit, leaving Australia's second largest bank to respond to its money laundering and child exploitation scandal under new leadership.

Mr Hartzer will step down on Monday and be replaced on an interim basis by chief financial officer Peter King, while Mr Maxsted is no longer seeking re-election at next month's AGM and will retire in "the first half of 2020".

Hartzer will reportedly walk out the door with $2.6 million for his salary for the next year.

Westpac faces a huge fine and its reputation is in tatters after financial crime watchdog AUSTRAC accused it of 23 million breaches of money laundering laws, and failing to properly monitor payments potentially linked to the streaming of child exploitation.

Shadow treasurer Jim Chalmers "welcomed" the decision.

But he said it doesn't fix all the issues that have emerged about Westpac's behaviour.

"(Labor) will be looking for every avenue for the bank to be made accountable for what are appalling, astounding and disgraceful actions, which have been uncovered," he said.

"We need to make sure that the Australian people can have confidence in their banks and in their financial system. It's a key part of the economy. Actions like that, which has been uncovered at Westpac, only damage confidence in the banking system."

It comes after Mr Hartzer reportedly told staff that "for people in mainstream Australia … this is not a major issue", referring to the paedophile money scandal in the Philippines that has rocked the bank.

Westpac CEO Brian Hartzer. Picture: AAP
Westpac CEO Brian Hartzer. Picture: AAP

The Australian reports that in an hour-long, closed door meeting held on Monday morning, Mr Hartzer said the scandal was "no Enron or Lehman Brothers" and that "we don't need to overcook this" as most Australians would not be overly concerned by the allegations.

"We all read the Fin (The Financial Review) and The Australian, and we all read that and think the world is ending," he said according to The Australian.

"But actually for people in mainstream Australia going about their daily lives, this is not a major issue so we don't need to overcook this."

Mr Hartzer instead encouraged his employees to focus on getting "mortgages going and we've got to get NPS (net promoter score) going", according to The Australian.

Mr Hartzer also said that the bank's planned Christmas parties would have to be cancelled that year.

"Unfortunately in the heightened media environment it will not look good if we have our staff whooping it up with alcohol," he said.

Mr. Hartzer notified employees of the decision to cancel the parties in an email that was sent on Monday afternoon.

Financial crime watchdog Austrac has alleged that Westpac failed in its duty to properly assess, monitor and record millions of potentially suspicious money transfers to and from international banking partners for at least six years.

Westpac CEO Brian Hartzer … ‘This is not an Enron’. Picture: AAP
Westpac CEO Brian Hartzer … ‘This is not an Enron’. Picture: AAP

Another of AUSTRAC's findings is that Westpac failed to carry out due diligence on 12 customers who sent money to the Philippines and South East Asia for known child exploitation risks via LitePay, a low-cost international payment service called LitePay, which facilitates low-value international transfers out of Australia, including to 'higher risk' jurisdictions.

AUSTRAC identified 23 million breaches of anti-money laundering and terrorism funding laws between 2013 and 2018, and is pursuing a fine of up to $21 million for each breach.

Meanwhile, Nine Newspapers reports that the corporate watchdog has launched an investigation into Westpac over potential legal breaches linked to the bank's money laundering compliance scandal, ahead of a series of critical meetings between chairman Lindsay Maxsted and investors.

Picture: Jane Dempster/The Australian
Picture: Jane Dempster/The Australian

The Australian Securities and Investments Commission (ASIC) on Monday took the unusual step of publicly confirming it had started looking into possible breaches of laws it administers - most likely a reference to the Corporations Act.

Mr. Hartzer, who has been under pressure to step down, spent Monday morning calling Westpac's largest customers, pleading with them to stick by the bank in its time of crisis.

The money-laundering scandal has wiped more than $8b off the bank's market capitalisation and analysts say its share price will remain under pressure in the absence of a leadership change.

In closing Monday morning's briefing, Mr Hartzer said, "This is not an Enron or Lehman Brothers, we will get through this. What I need you to do more than anything is keep this business going."