5AA Radio Interview 21/11/2019

November 21, 2019


SUBJECT: AUSTRAC investigation of Westpac.

LEON BYNER, 5AA: There’s a lot of questions being asked now of Westpac. You would have been aware on AA news that the Prime Minister said he is appalled by allegations that Westpac broke financial crime rules 23 million times. His comment somewhat of an understatement. Banks need to lift their game. Now this is serious stuff because the civil proceedings were announced on Wednesday by the anti-money laundering and counterfeit terrorism financial regulator known as AUSTRAC. This company is in massive trouble. But what’s it going to mean for the shareholders? Because you know who they are? A lot of super funds and many others. Let’s talk to the Shadow Treasurer, Jim Chalmers. Jim, thank you for talking with us today. I appreciate the fact that you've given us some time. What is your reaction to this and what from this point, in your opinion, needs to happen?

JIM CHALMERS, SHADOW TREASURER: Good morning, Leon, and thanks for the opportunity. I think this is astonishing and as the Prime Minister said, it's appalling. It beggars belief that over a multi-year period we could have 23 million alleged breaches of the law, including something like almost 20 million transactions, including some extraordinarily dodgy transactions.

There's a legal process and we need to be conscious of that as we talk about the issues surrounding it, but there needs to be accountability here. We can't have a situation where one of the biggest companies in Australia, one of the big four banks, the second of the big four banks to have been caught engaged in this kind of alleged behaviour. We need to get to the bottom of it. We need to make sure that where they've done the wrong thing, that the book is thrown at them.

BYNER: Look, we've just gone through a Royal Commission and this comes up. How is it that given it was known by AUSTRAC some years back, that these things were going on? Why didn't this get raised in the Royal Commission?

CHALMERS: It's not entirely clear to me, Leon, when AUSTRAC first got onto it. It's behaviour that's been going on for something like five years so it is longstanding behaviour. The Commonwealth Bank was sprung engaged in similar failures and that was part of the pressure that led to the Royal Commission. Your listeners would probably remember that for a couple of years Labor was campaigning for a Royal Commission.


CHALMERS: The Morrison Government, before that Turnbull, were resisting that. They voted against it 26 times. These issues were some of the reasons why we thought that that Royal Commission would be appropriate. Back then we knew it was around the Commonwealth Bank. We didn't know at that point, or I didn't know at that point, that Westpac was similarly impacted but these are the sorts of reasons why we wanted a Royal Commission for so long. We were surprised that that was resisted by the Government because we need to get the bottom of these kinds of issues.

We've got four big, profitable banks here. At different times in our economic history that's been a strength but we need people to have confidence in the banks. We need them to feel like the banks are doing the right thing, that they've got the right processes, that they are as tight as a drum when it comes to complying with laws, particularly these kinds of laws about money laundering and counter-terrorism. I think a lot of people will be very disappointed with what's being uncovered here.

BYNER: Do you think Brian Hartzer, the CEO of Westpac, should go over this?

CHALMERS: It's not up to us in the Federal Opposition whether or not that's one of the outcomes of all of this. There has to be accountability. There's a legal process to determine what that accountability looks like in terms of the bank. The CEO of the bank is a matter for the board. Part of the discussion over the coming days and weeks will be around this issue but it's not for us to determine.

BYNER: Tell me, the other thing I was thinking about, we talk about accountability and those things are very important. But for the ordinary investor, which in many cases can be a super fund, this is going to have a deleterious impact. The next thing is if the bank's going to be paying out billions in fines, they're going to want to claw that back somehow, aren't they?

CHALMERS: It remains to be seen how big any financial settlement might be. We know from the Commonwealth Bank that a big settlement was reached there, in their case hundreds of millions of dollars. Who knows where this one might end up and I have to be a bit careful because of the legal proceedings. Obviously, a big settlement has implications for how shareholders view the company and you're right to say that a lot of people are shareholders via their super funds so there will be an impact. You probably remember that when the Royal Commission was handed down and the Government responded, share prices of the banks actually went up.

BYNER: I remember that, yeah.

CHALMERS: So people will make their assessment about the value of the company as these proceedings go on. It's not really for me to comment on where the share price might head. It took a little bit of a hit yesterday and we'll see where it goes in the future.

BYNER: Do you think the revelations from this are going to revamp the way the banks behave in a big way?

CHALMERS: I hope so. If there are processes and governance issues which are still unresolved despite all of the attention of the last couple of years then it's in the interests of every Australian that the banks get their act together and they make sure that where their processes, their governance, and their technology are below par that they quickly get them up to scratch. Our role in the Federal Opposition is to make sure that the Government does their bit. I've already told you I was disappointed that they resisted the Royal Commission for a couple of years. It then took them six months to tell us how they were going to go about implementing the recommendations of the Royal Commission, which we said was dragging their feet. I think a lot of people conclude when it comes to the Federal Liberals that their heart's not in it when they talk about making the banks do the right thing. On the Labor side our hearts are certainly in it. We want to make sure these things are cleaned up so that people can have confidence in the financial system and in the institutions within it because it's such an important part of our economy.

BYNER: Jim Chalmers, thank you for joining us. Appreciate the chat. Stepped out of a couple of meetings for us. That's the Shadow Treasurer.