Westpac’s very bad day adds up to $287 million
Westpac’s woes cost it $287 million today after it revealed an expensive fraud on top of another round of banking controversy that will cost it $87 million.
Westpac has halted the closure of several rural branches while a Senate inquiry goes ahead. (Image: Westpac)
The bank said it had started a case in the Federal Court against Forum Finance relating to equipment leases with its customers and what it claimed was a potential sophisticated fraud.
It said no Westpac customer had suffered any known loss but the bank could face costs of $200 million after tax, a figure that could change depending on recovery actions and further investigations.
It has managed to get a freeze on some assets and search orders to preserve available assets and it was still investigating how it occurred.
Chief executive Peter King said it took fraud very seriously and would take all actions to protect the bank and its customers.
“This is a complex issue and we are working at pace to address it, including engaging the the police and regulators,” King said.
“At this preliminary stage, the potential fraud is sophisticated and appears to have been perpetrated externally.”
The revelation followed an announcement by the Australian Securities and Investments Commission that Westpac had committed to remediating customers whose financial advisers may have failed to notify them of corporate actions between 2005 and 2019.
About $87 million would be paid in compensation to affected customers who are former clients of Westpac’s advice businesses and held ASX-listed securities through platforms.
“Corporate actions cover a range of activities by publicly listed companies, including buy backs, renounceable and non-renounceable rights issues, share purchase plans and takeovers,” ASIC said.
“Westpac’s failure to notify customers of corporate actions means customers may have missed out on various opportunities.
“These include purchasing additional shares often at a discount to the market price, the creation of temporary rights or options that can be sold for a profit, and the ability to sell shares and receive a benefit that can be tax advantageous depending on the shareholder’s circumstances.
“Westpac’s remediation covers an estimated 328,000 potential missed corporate action notifications impacting approximately 32,000 customer accounts. This is a complex remediation due to the various types of corporate actions involved.
Westpac aims to compensate most of the affected customers by the end of 2021. Customers will also be informed of missed corporate action notifications where Westpac has determined that no compensation is payable.”
