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Costs continue to spiral at Westpac over money laundering scandal

Business

Westpac’s money laundering debacle continues to haunt the company, which today announced another $1.2 billion hit to its profits.

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The costs relate to the $568 million writedown of goodwill and intangibles from its Westpac Life Insurance Services and the auto finance business and its capitalised software.

There will also be an increased provision for the costs associated with the Austrac money laundering scandal of $415 million. It follows an agreement in September with Austrac for the bank to pay the largest fine in Australian corporate history — a $1.3 billion civil penalty for more than 23 million breaches of anti-money laundering laws.

In April, Westpac said it expected a  $1.4 billion hit to profits because of provisioning for the fines and asset writedowns.

At the time it expected the money laundering to cost $1.03 billion, including a $900 million provision for a potential penalty related to the AUSTRAC proceedings and an approximately $130 million cash earnings impact of costs linked to the AUSTRAC response plan.

Westpac said its second-half earnings would also be hit with a $182 provision for customer refunds, repayments, associated costs and litigation provisions.

There would also be a $55 million hit from asset sales and revaluations, but the company made a profit of $212 million from a revaluation of its Zip shares.

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