Saving NAB, shredding Westpac

Banking Day staff
Ross McEwan, NAB's new CEO, is in a hurry.

NAB has admitted to a litany of breakdowns in systems and governance relating to money laundering and terrorism financing.

Reported by The Australian newspaper on Saturday, the leak looks like an effort to preview what may well be an imminent statement of claim from Austrac over AML breaches.

According to internal NAB logs, system failures affected almost 150,000 customer records that were not properly screened and rated for money-laundering and terrorism-financing risk because the records were not readily available in its compliance monitoring system, the newspaper reports.

NAB also told Austrac it had incorrectly risk-rated 5000 customer profiles, resulting in lower than required due diligence being completed on 1690 customer profiles.

The Australian also revealed that according to NAB's internal breach registers, "for a month in 2013 NAB failed to update its lists that it uses to screen transactions sent through SWIFT to countries subjected to sanctions.

"In 2016, the bank also found it had failed to conduct due diligence 'within prescribed time frames' for 33 international partner lenders 'due to missing information or non-responsiveness' from the correspondent banks."

Two weeks ago Banking Day reported on advice from the bank's former chief risk officer David Gall to directors in October last year that the company's anti-money laundering procedures remained "weak" even after at least A$300 million was spent upgrading the systems.

Gall told the board: "The control environment remains weak due to heavy reliance on manual and detective controls across complex processes."

Positioning NAB for any barrage over allegations around wayward AML compliance is supremely sensitive as the bank approaches its AGM on Wednesday next week.

For now the aggravation of the investor class and the public is focused on the Westpac annual meeting the day after NAB's.

Columnist Terry McCrann in The Australian at the weekend called for support for a board spill at Westpac, which is conditional on shareholders voting down the remuneration report for a second time, as seems likely.

McCrann is also vocal supporting the idea of recruiting Peter Costello, the Future Fund chair, as the new chair of Westpac's board.