Westpac has initiated legal action against several insurers to claim $400 million in insurance payouts, following the record penalty levied against it in 2020 for breaches in anti-money laundering protocols.
According to an exclusive report by Lucas Baird, at the Australian Financial Review (AFR), the Sydney-based banking giant has filed a lawsuit against Zurich-headquartered Chubb in the New South Wales Supreme Court. Sources familiar with the matter reportedly disclosed that Westpac is also pursuing claims against 43 other insurers, including major companies like AXA, Allianz, and Zurich.
The legal dispute revolves around the interpretation of the insurance policies and whether they cover the $1.3 billion penalty imposed by AUSTRAC in 2020. This penalty, the largest ever issued by AUSTRAC, led to the departures of then-CEO Brian Hartzer and chairman Lindsay Maxsted.
Westpac said it had a comprehensive insurance strategy designed to manage risks, including coverage for potential civil penalties.
“The decision to commence proceedings is one we’ve taken very seriously and has been considered in line with our legal and regulatory obligations as well as the interests of our shareholders,” a spokesman told AFR. “As the matter is now before the court, we are unable to comment further.”
Westpac asserts it is entitled to claim $400 million from its insurers to offset the AUSTRAC fine.
In 2020, Westpac admitted to failing to properly report 19.5 million international fund transfer instructions, amounting to over $11 billion in transactions, and to inadequately monitoring risks associated with overseas money transfers.
Additionally, the bank acknowledged 76,000 further violations when it reached a settlement with AUSTRAC.
By contrast, the Commonwealth Bank of Australia (CBA) encountered a similar issue with AUSTRAC in 2017 and managed to recover $145 million in professional indemnity claims from its insurers over its $700 million penalty, as reported in its 2020 annual report. CBA did not resort to legal action to secure these claims.
Recently, CBA prevailed in two shareholder class actions related to breaches of anti-money laundering laws. Federal Court Justice David Yates ruled that the bank was not obliged to inform investors in 2015 about the breaches that led to the $700 million fine, noting that such disclosures would not have had a material effect on the share price.
