The Australian Prudential Regulation Authority (APRA) has delegated certain enforcement powers to the Australian Securities and Investments Commission (ASIC) in connection with the agencies’ investigations into matters arising from AUSTRAC’s proceeding against Westpac Banking Corporation1.
APRA commenced an investigation in December last year into possible breaches of the Banking Act 1959 (including the Banking Executive Accountability Regime) by Westpac, its directors and senior executives following allegations by AUSTRAC that Westpac failed to monitor and report millions of international fund transfer instructions.
ASIC is also investigating certain conduct in connection with the matters alleged by AUSTRAC in its proceeding against Westpac.
APRA and ASIC have determined that with respect to the conduct ASIC is investigating, there is the potential for a significant overlap of the factual background as well as any legal contraventions under the Corporations Act 2001 and the Banking Act. To avoid both agencies separately investigating and potentially litigating related matters, ASIC will consider whether the conduct that it is investigating also gives rise to contraventions of the accountability obligations under the Banking Executive Accountability Regime and standards of fitness and propriety under the Banking Act.
APRA has delegated functions and powers to allow ASIC to apply to the Courts for fines and disqualification of individuals as set out in subclause 1(1) of Schedule 2 and section 21 of the Banking Act with respect to these matters. This will allow ASIC to take court action which it considers appropriate as a result of its investigation. ASIC will, however, consult and collaborate with APRA in relation to any such proceedings.
No decision has yet been taken by ASIC as to whether or not any enforcement action in this matter may be appropriate.
APRA’s decision to delegate, made in consultation with ASIC, is designed to achieve greater efficiencies in the investigative process and a more coordinated regulatory outcome. It will avoid significant duplication in the investigative process, including compulsory examinations of the same individuals in respect of the same matters, and will avoid the potential for two sets of court proceedings for the same conduct. It is therefore likely to achieve a swifter and more effective regulatory response as a result.
The proposed approach is also aligned to the Australian Government’s proposal for joint administration of the proposed Financial Accountability Regime by APRA and ASIC.
The delegation will also operate alongside APRA’s comprehensive supervisory review program focused on reviewing in detail Westpac’s risk governance, which APRA announced in December. The scope of the extensive review includes risk management, governance, accountability, remuneration and culture.
The additional $500 million capital requirement that APRA imposed on Westpac in December 2019 remains in place, while APRA completes its risk governance review. This brings the total capital add-on that Westpac is holding to $1 billion, following APRA’s earlier announcement in July 2019.
1 Section 15 (2) of the Australian Prudential Regulation Authority Act 1998 gives APRA the express power to delegate its functions and powers to ASIC where it deems it appropriate.