Lessons from the Westpac crisis
What can brands learn from the banking industry’s latest scandal? Tony Jaques explores what’s gone wrong for Australia’s oldest brand, and how the failings of Westpac hold key lessons for other executives facing a reputational crisis.
Looking back over 2019 there is an increasing expectation that CEOs should personally take the blame for a corporate crisis and resign. But the Westpac money-laundering crisis last month showed a distinct reluctance to accept that the buck stops in the executive suite.
Australia’s second largest bank was accused by regulators of failing to report more than 23m transactions alleged to have breached anti money-laundering laws, and some allegedly linked to child sex exploitation. It was unquestionably a massive reputational crisis, with the Westpac share value taking a $6bn hit and the company facing a potential $1bn fine.
After an emergency board meeting, Westpac chairman Lindsay Maxsted issued what News.com called a grovelling apology, saying the board were deeply distressed and truly sorry. However CEO Brian Hartzer survived. He took issue with the suggestion that the whole fiasco reflected a systemic failure by senior management; claimed he had heard “high-level” reports about the child exploitation matters only about a month earlier; and said he knew nothing of the detail until the regulator lodged its allegation.
Yet the bank CEO insisted he was the right person to “fix the problem” and attempted to push responsibility down the line.
It’s not Australia’s oldest “brand”. Westpac as a “brand” came into place in the early 80s (in fact there was a Westpac before that – a fruiit and vegetable wholesaler at the Perth Markets who effectively got put out of business due to this).
Prior it was Bank of NSW.
Nothing a few more ads about the rescue helicopter won’t fix.
Your lessons learnt seems to be as high level as what typical Board of Directors want to hear about AML/CTF. Board of Directors need to hear ‘the issues’ without these being filtered by the CEO or some commitee or legal department or some Board member. The organisation structure should be such the Group Head of Compliance Department has ‘direct’ reporting (even if this means having dual reporting lines) to the CEO and the Board. The Board needs to hear the issues directly and without being filtered or downplayed. Organisation strutures commonly have Compliance Dept reporting to Legal Department or Risk Management Department, and in doing so, the CEO/Boards have in effect buried ‘the details’ and the potential impact (reputational) of a regulatory breach and what Compliance resources are needed. The concept of Compliance V2.0 does not appear to be taken up by Australian banks.