The plan has been adopted following the bank's breaches of anti-money laundering legislation
The Australian Prudential Regulation Authority has signed off on Westpac’s plan for corrective measures to bolster its risk governance. The plan was submitted under the terms of a December enforceable undertaking.
APRA’s concerns arose from a risk governance review of Westpac after Austrac found the bank had committed multiple breaches of anti-money laundering legislation.
The plan includes explicit timelines and individual accountability for specific measures, according to a report by The Australian. Westpac CEO Peter King said the plan would ensure the bank’s risk culture and governance “met the high standards expected of us.”
“We have made progress on improving our management of risk over the past 12 months; however, there is much more work to do to ensure sustainable change,” King told The Australian. “The implementation of our integrated plan is a critical part of delivering on our ‘fix, simplify, perform’ strategic priorities and is one of my top focus areas.”
Westpac acknowledged millions of breaches of anti-money laundering legislation. The transgressions got the bank slapped with a $1.3 billion penalty – the nation’s largest corporate fine.
APRA also scrutinised risk governance reviews conducted by Westpac and third parties over 2020. In the enforceable undertaking, APRA said it had concerns about weaknesses in the bank’s risk governance, and the pace at which it was rectifying those issues, The Australian reported. The regulator said that the culture, governance and accountability program Westpac launched in January 2019 had only delivered “incremental” progress.
Westpac acknowledged in the enforceable undertaking that the remediation plan posed “significant execution risks” that needed to be addressed.
APRA deputy chair John Lonsdale said at the time that a serious commitment to change was required at all levels of the bank.
Read more: APRA drops investigation into Westpac
“As one of the country’s largest and most important financial institutions, Westpac should be a leader in risk management,” Lonsdale said. “Although the bank has made progress in some areas over the past year, it is not good enough. We continue to observe new prudential issues arising while longstanding weaknesses persist, and we believe Westpac’s governance, culture and accountability frameworks and practices are still in need of a substantial uplift.”
One of the enforceable undertaking’s requirements was for independent assurance of Westpac’s integrated plan, according to The Australian. The bank tapped Promontory to provide quarterly assurance, with reports to be released biannually. The first report was released Wednesday.
In the report, Promontory acknowledged the completeness of the plan and said that it included appropriate governance and accountability measures to ensure effective implementation.
“Westpac has been open and responsive to issues and challenges raised by Promontory during this period,” the report said. “The plan is designed to address the root causes of Westpac’s risk governance shortcomings.”