Discuss about the Westpac Bank Issue In Australia.
Westpac is one of the largest banks of Australia with its headquarters at Westpac Place, Sydney. As per 2015 statistics the bank had developed the largest number of branches i.e. 1429 and had a customer base of 13.1 million. Asset wise the said bank is the second largest in Australia and is 35 years old. The bank’s main business is divided into five main divisions namely consumer banking, commercial and business banking, Westpac Institutional Bank, BT Financial group and Westpac New Zealand. Thus as the name suggests of the various divisions, it is very evident that the bank serves many purposes such as fulfilling banking needs of the various retail segment customers, serves the industrial segment by providing them financial assistance, providing products such as superannuation and retirement benefit plans, acting as a broking firm, margin lending and investment banking and last but not the least it also serves people in New Zealand so much that it is the second largest bank there.
Every bank is under regulatory norms which it is to follow depending upon the country in which it is situated. Westpac is headquartered in Australia and hence is to follow the laws applicable strictly. Non-adherence to the same may put the bank in a very sorry position. Five principle agencies rule over all the banks situated in Australia. They are :
- The Australian Prudential Regulation Authority (APRA) : This regulation is basically applicable for banks and financial institutions who take deposits from the public, insurance companies and superannuation companies. The authority issues capital adequacy norms to the banks and these institutions on a timely basis which are in ine to the Basel II guidelines spelt out. Thus they are to obtain licenses based on the kind of business activity they undergo in Australia from the Corporation or Commonwealth or State legislations.
- The Reserve Bank of Australia (RBA) : This institute basically acts as a banker to the government of Australia, issues currencies in the market and spells out monetary policies time to time upon the banks which ensures that stability and safety is assured. This also acts as a tool to safeguard the money of the general public.
- The Australian Securities and Investment Commission (ASIC) : This is the only regulatory firm which is responsible for the applicability of the various laws related to the finances thus enabling to spell out rules which would safeguard the rights of the customers . It ensures that all work is being performed legally and fairly.
- The Australian Securities Exchange (ASX): This is basically for companies which are lastly in the stock exchange which also includes banks which are listed.
- The Australian Competition and Consumer Commission (ACCC): This corporation was formed basically to ensure that the competition is not wiped off totally from the market by hauling over activities which are unfair and would lead to undue monopoly. Thus it ensures fair trade practices (Info.westpac.com. 2008).
Another very important law under which Australian Banks are bound by is the Anti Money Laundering and Counter Terrorism Financing Act 2006 due to the increase in the terrorism. It is the duty of all banks to monitor the transactions of customers who seem to be suspicious and report periodically to AUSTRAC of any such transactions so as to keep a check on terrorist activities and help the world to fight the same.
Westpac is also governed by all these acts, regulations and laws and is to adhere to all these strictly without deviations. However in the year 2012 Westpac had accidently attached a Malaysian Teenager’s account to an unlimited overdraft account of 4.6 million Australian Dollars (Sydney Morning Herald 2016). The girl ended up spending more than $3.3 million in less than a year. However the arrest was made after four long years of such a grave mistake when the said overdraft was used by her in a span of just 11 months. Thus even though the lady was at fault of using the money which did not belong to her and that as soon as she was made aware of such a transaction she should have intimated the bank, yet the banking authorities are also at fault. This mistake had occurred in 2012 and the said overdraft was utilized by her in 2014 i.e. after 2 years from the date of mistake (Koulouris, 2016).
Also the said account was opened in 2012 but due to some fraud which led to mis-utilization of her account the bank put her account in PCO Status and Manager321 Status which meant that her transactions were frozen and her account was not monitored by the opening branch. However the same PCO status was removed after investigations were over but the branch tagging was missed out mistakenly because of which her account was not being monitored frequently by the branch. Thus she ended up using the money for her luxuries (Complex Australia. 2016).
However the bank had not conducted its duty in a diligent manner and a mistake like this ended up losing money of others. The only resort that the bank has the terms and conditions which it got signed by her which mentions she is not to overdraw her account and if any error is noticed by her from the bank’s side, the same is to be informed immediately. Unfortunately the teenager did not do so and ended up spending the money for her luxuries which has led to her arrest (News.com.au. 2016).
The bank should charge the employee for negligence but at the same time it should be more careful so as to ensure non-occurrence of such a mistake again in future as the amount is huge. Also the customers should not use money that do not belong to them and notify about any mistake immediately so as to safeguard oneself from such legal claims. This also covers the bank under the anti money laundering act (Olding, 2016).
Complex Australia. (2016). Dollar and Sense : Crunching the Numbers on Christine Lee’s Couture Crime Spree. Retrieved from https://au.complex.com/style/2016/05/dollars-sense-the-numbers-on-christine-jia-xin-lee-couture-crime-spree/
Info.westpac.com.,( 2008). Introduction on Westpac. Retrieved from https://info.westpac.com.au/annualreport2008/default.aspx?PID=150
Koulouris, C. (2016). The deceit of Christine Jia Xin Lee: How she played Westpac. Retrieved from https://scallywagandvagabond.com/2016/05/christine-jia-xin-lee-4-6-milion-westpac-overdraft/
News.com.au. (2016). Christine Lee allegedly moved $5000 a day into secret accounts to take advantage of a Westpac Glitch. Retrieved from https://www.news.com.au/national/nsw-act/crime/christine-lee-allegedly-moved-5000-a-day-into-secret-accounts-to-take-advantage-of-a-westpac-glitch/news-story/2a4f3be1d30396efc28a32efd55b9509
Olding, R. (2016). The simple Westpac banking error that gave Christine Jia Xin Lee $4.6 Million. Retrieved from https://www.smh.com.au/nsw/the-simple-westpac-banking-error-that-gave-christine-jia-xin-lee-46-million-20160520-gozv5q.html
Sydney Morning Herald. (2016). Westpac admits simple mistake gave Christine Jia Xin Lee a $5 m overdraft. Retrieved from https://www.stuff.co.nz/business/world/80263909/Westpac-admits-simple-mistake-gave-Christine-Jia-Xin-Lee-a-5m-overdraft