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Big task ahead, but we will put this right

10:23am December 12 2019

Westpac Acting CEO Peter King says AUSTRAC’s claims show the bank needs to improve end-to-end processes and that he will make the hard decisions. (Emma Foster)

As many shareholders and employees know, I recently announced my intention to retire from Westpac at the end of next year.

But things change. 

Despite the circumstances leading to my appointment as acting chief executive officer, it is an honour to lead this company. After 25 years at Westpac, I understand the responsibility I’ve taken on, I’m ready for it, and I’ll do it for as long as it takes. 

I’m personally devastated by the allegations in AUSTRAC’s Statement of Claim. In particular, that a mistake by Westpac may have exposed anyone, particularly children, to the risk of harm is distressing for all of us.

For this, I am truly sorry. 

As Acting CEO, I am clear on my two major priorities.

The first is to implement every aspect of our response to AUSTRAC’s claims, to own our mistakes, fix them and to do everything we can to make sure they don’t happen again.

The second is to ensure we stay focused on the work we do, every day, to serve our 14 million customers.

On the first, it’s worth explaining what we know about two issues raised by AUSTRAC that have attracted the greatest attention, bearing in mind investigations and legal proceedings are on foot. 

One relates to our failure to report a large number of international funds transfer instructions, or “IFTIs”, to AUSTRAC. These were mainly low value, recurring payments from foreign government pension funds and corporates to people living in Australia. But there were a lot of them – more than 20 million – because, due to a mistake when we set up our systems, we failed to report them over a number of years. 

The other major allegation, that is particularly disturbing, relates to Westpac’s failure to appropriately monitor and identify transactions to the Philippines and South East Asia indicative of potential child exploitation risks. AUSTRAC’s claims show we should have implemented more robust transaction monitoring earlier than we did. Westpac absolutely accepts responsibility for this mistake. 

I’ve established a dedicated team to manage our response to AUSTRAC’s claims and we’ve moved quickly on a number of immediate fixes. Importantly, these include closing relevant products and reporting outstanding historical files related to AUSTRAC’s IFTI claims. 

Work is also underway to lift our standards. We have made a number of changes to our transaction monitoring and are continuing to review our processes and report to AUSTRAC suspicious matters that are identified.  We are also recruiting more people in our compliance and financial crime areas. And we’re seeking to step up industry data sharing, which is critical to fighting financial crime.  

Beyond fixing our mistakes, we are committed to do something about the larger problem, and we're working with experts in child welfare so we can assist in their efforts to reduce the awful human impact of child exploitation. 

We’ve also established a new Board Financial Crime Committee that has appointed Promontory to undertake an External Accountability and Financial Crime Program Review. Importantly, we will publicly release the recommendations of reviews underway and, where responsibility for failings are confirmed, further action will be taken.  

As for staying focused on our customers, I have asked the leaders of our businesses to double down on our efforts to be there for our customers, which remains key to our purpose, strategy and performance.

We need to make banking easier, more efficient, and exceed the level of service customers expect, and I intend to step up this focus.

We undertake this work from very solid foundations – we are well capitalised, our funding and liquidity is sound, and asset quality is strong. Our franchise is in good shape with a highly committed workforce dedicated to supporting customers. 

But AUSTRAC’s claims show that we must change the way we work. We need to improve end-to-end processes and accountability, and I will make the hard decisions.

Importantly, we need to further strengthen our ‘speak up’ culture, and I have sent a strong message to our people: If something is wrong, I want to know about it – big or small. 

It is a big task ahead, and I’m grateful going into this knowing I have the 35,000 people of Westpac behind me, who come to work every day, with high integrity, committed to doing their best.

I believe that, ultimately, the measure of our character is not in the mistakes we make, but how we learn from them.

We must put this right. And we will.

Peter was appointed Westpac Group Chief Executive Officer in April 2020. Peter previously held this role on an acting basis between December 2019 and March 2020. Prior to this, he was Chief Financial Officer since April 2014, with responsibility for Westpac's finance, group audit, tax, treasury and investor relations functions, following three years as Deputy CFO. Since joining Westpac in 1994, Peter has held senior finance positions across the Group, including in Group Finance, Business and Consumer Banking, Business and Technology Services, Treasury and Financial Markets. He commenced his career at Deloitte Touche Tohmatsu.

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