Westpac Bank was allied for the breach of anti-money laundering laws for around 23 million and had planned the bank in the crisis for a long period. The financial intelligence agency Austrac had lost to complain in the Federal Court against the money laundering by the Westpac. The bank was fined for 700 million dollars. Apart from this, the bank was also accused of facilitating child abuse in the Philippines and the same had been condemned by prime minister Scott Morrison (Mason, 2007). It was an excuse from the bank that a large number of transactions were escaped from the bank's notice and there was no way that the law can say that the bank had kept a record for every transaction it had ever made.
When the breach was made into the notice of the Western Bank it had contended that it was not aware of the number of reports that were lodged. However, Austrac contended that even the senior management of the Westpac bank was aware of the noncompliance of the obligations and regulations on the part of the bank and they failed to resolve the problem on the priority basis and had kept silent by avoiding the entire misrepresentation and fraud (Rhodes, 2016). Even after the severe allegations of anti-money laundering laws made by Austrac, Westpac had still filed to report a large number of international fund transfer instructions to the intelligence department and had contravened the obligations under the anti-money laundering and counter-terrorism financing Act 2006.
Whereby the CEO of the financial institution Mr Brian Hartzer had committed to taking urgent steps to fix the policies of the company in which he had miserably failed (Rhodes, 2016). There were severe misconduct and conflicts between the advocate corporate governance procedures which had triggered the entire scandal. Apart from this the ethical issues were also not taken care of by the directors and senior management of the financial institution as they had again contravened the Banking Act of 1959 (Stevens, 2008).
Illegal laundering of money from one country to another and child exploitation are the major unethical practices into which the Westpac bank was engaged during the entire scandal. the customers of Westpac had alleged that someone from the Philippines had paid a larger amount of money to the bank who was later charged for streaming the live videos and shows off child sex and had offered children for sex (Munger, 2018). It is not a single incident but after some time and another customer was also convicted for the child exploitation which was added by the Westpac bank according to the reports.
According to Austrac, several payments were made and had been detected by the intelligence agency which was consistent with the transaction made by the people who were charged under the offences related to child exploitation. the reports clearly state that there was serious noncompliance with certain ethical standards on the part of the Westpac bank as the financial institution had failed in reporting the transaction of over 19.5 million International funds that had been transferred to the bank within 5 years.
The allegations were made against the financial institution and Westpac was charged with a sign of 2.2 million dollars for its horrendous crime (Sandhu, 2010). The financial institution contended that it will tackle and resolve the problem of data sharing across the industry, whereby it will make sure that all the transactions are transparent and will also investigate the child exploitation issue. It was contended by the Australian Child Protection group Bravehearts, that the standards and exploitation of child sexual assault usually happen in the darkest corner of the room and the Westpac had all the opportunity to shine a light upon search tenders crime but it is very sad that the financial institution had shown an in human disinterest over the entire incident.
Therefore, there are enough grounds to show that there was a high level of poor corporate governance on the part of Westpac where they had failed to abide by the moral qualities of code of conduct and virtues at the workplace. the absence of these factors had contributed to the fraud and management to a greater interest. It is suggested to the financial institution to follow the UK principle-based approach and not the rule-based approach to properly implement the corporate governance procedures into their institutions. It must be noted that the UK principles focus upon strictly imposing the duties and responsibilities to all the shareholders and directors of the organization by keeping every transaction very transparent with every department of the industry
According to section 84 of the Trade Practices Act of 1974, it is mentioned that any person who is associated with any corporation must not engage in any unethical activities which are present in the scandal of Westpac. Mr Hartzer, who had step down from the Westpac bank was severely alleged of the crimes subject under the money laundering and child exploitation. It can be seen from the conduct an entire money transaction conducted by the financial institution that it had solely focused upon maximizing their profit while jeopardizing the entire repetition of the financial industry. Therefore, it can easily be seen that the bank had intentionally engaged itself in the activities which are against the code of ethics under various theories.
Money laundering and sexual exploitation of children is completely against deontological ethics. As per the principle of justice, developed by a scholarly researcher known as Kohlberg, he contended that certain universal guidelines must be incorporated under the operations of any institution where impartial treatment must be provided to all (Munger, 2018). However, it can be seen that there was no hint of morality for fairness in the Westpac bank as the financial institution had tried their best in misrepresenting the actual transactions and details of the sent and received money from the Philippines. As per Carol Gilligan, the theory of ethics of care which is the compliance of harmony and the public good is completely from the conduct of the financial institution (Munger, 2018). Child sexual exploitation cannot be categorized under the ethics of care.
The fact is undeniable that there was a sheer lack of adequate corporate governance which triggered the entire scandal in the Westpac Bank. There is certain regulatory and political compliance that must be strictly followed by the financial institutions, which was not followed by the Westpac. The entire money transfer scandal by the Westpac banking corporation had reflected upon the need for proper corporate governance in every institution. It is the necessity that all the financial institutions must operate under their system of compliance to a standard that is similar to any aviation industry associated with its safety. This means that there has to be no room for error discrepancy of any nature.
Francis, who is the CEO of the bank of Queensland had also referred to who this statement that the managers of the retail bank must operate under a zero-tolerance policy which is absent in most of the financial institutions. According to the UK principal best model, there has to be a separation between the chairman and CEO of the organization which will work in developing a transparent environment in the corporation. the board of directors of the west Pak must consider that safety is the golden standard and benchmark for the financial industry which must not be diminished at any point.
The basic elements of corporate governance were missing in the scandal of Westpac bank as the basic provisions of record-keeping, customer identification, as well as reporting which is the heart of the basic compliance obligations of the bank, are completely absent. These are enough to show that there was poor corporate governance in the operations of debate Pak Bank. It is the responsibility of the Westpac bank that it must lodge reports into the international funds' transfer instruction report for every money transaction that comes in and goes out of the country, which was not reported and had elated the entire scandal to a larger gravity. The reports issued by the Westpac bank did not have any details about the transaction of money sent and received and no identification quotes or information about the payment was mentioned
Various other factors had contributed to the misrepresentation and fraud committed by the financial institution. Mr Peter king who was the chief executive of Westpac had stated that the major problem was the economic issues that had contributed to the mismanagement of the financial institution (L'huillier, 2014). The CEO of the Westpac had contended that the lender of a large amount of money was conscious regarding its role of supporting and sustaining the economy. The economic conditions and the societal pressure are so immense which is inclusive of the competitive spirits among various banks in the financial industry that Westpac had engaged in the illicit and illegal practices to acquire a large amount of share in the global market (Ouedraogo, 2015).
According to the acting chief executive of the Westpac bank, the financial institution had to manage regarding its rise in the late payments while also focusing upon opening some new lending’s. The year of the scandal was that year when the bank was engaging itself into building a higher rate of capital along with conducting liquidity with their buffers. The crisis into the credit markets and the risk of undergoing bad debts had triggered the financial institution to create more capital and market share by going down under unethical practices (L'huillier, 2014).
Therefore, it can easily be concluded that the local culture within the same industry creates a major impact upon the conduct and activities committed by the competition in the market. The same can be sensed under the scandal committed by the Westpac financial institution which was also influenced due to the social, economic as well as the political environment. Certain political and pressurized groups in the society target the financial sector to provide them with enough money to aid their illicit unethical practices.
The ever-growing complexities, especially in the large financial institution, had identified the larger number of reporting of anti-money laundering and the counter-terrorism financial transactions done by various financial institutions. The royal commission had conducted and intense public scrutiny and the findings of the commission upon the culture and accountability of the expectations of the community had reflected that the trust of the public upon the financial institution has seriously shaken to a larger extent, whereby it can be contended that a larger amount of people are not in favour of saving their money into any financial institution (Ouedraogo, 2015).
The annual general meeting conducted by the Westpac bank reflected that they had not focused upon the nonfinancial risk and had elevated the financial crime. Three major problems were identified which are inclusive of the cultivating complexity with various frameworks and regulatory policies which had become a common issue in the institution. The safety for both the company and employee was at risk due to the non-accountability of the identified risk during the entire scandal.
The entire scandal of the Westpac bank had white of the share price of the financial institution by more than 6 billion dollars. This had severely impacted the shareholder's trust in the financial institution (Gilligan, 2011). This made the CEO resigns from his position where he had accepted the accountability of the entire scam that had occurred in the bank. The fact is undeniable that the Westpac bank is one of the largest financial institution services that is listed under the Australian stock exchange and is one of the most promising profitable financial Services across the world.
According to the international perspective of corporate governance which was first recorded in the year 1622 where the performance issues that arise due to the separation of power between the executive and the various shareholders are identified (Gunthorpe, 1997). The major issue of fraud and misrepresentation did by the Westpac bank can be supported by the failure of accurate corporate governance. it can be seen that the bank was negligent in recognizing default on the part of senior management who were engaged in the illegal transaction of money from outside countries and had supported various persons who were convicted for the offences like child exploitation. There is a thin line between the principal-agent problems and corporate governance and it is apparent that there is a need to raise capital from the public (Bolte, 2007).
This somehow creates a tendency of working for their self-interest at the expense of the corporation which is the evident case with the scandal of Westpac. The role of shareholders and the local community is immense in this present case. There was no separation between the powers of shareholders and different departments in the financial institution which had created a significant gap in identifying the problems and loopholes in the management of the financial institution. There is the various corporate collapse in Australia which can be identified as Arthur Andersen, Pyramid, Worldcom, and much more that had collapsed due to the result of poor regulatory practices and management (Carroll, 2001).
The incident of the Westpac scandal had created a major impact upon the indigenous people of Australia as according to the corporate responsibility report, the financial institutions put their profits ahead of the customer's profit outcomes. The royal commissioner of Banking Mr Kenneth stated that there is a serious disconnect between the banks and the customers. According to their annual reports, the public documents showed by the financial institutions are completely different from their conduct (Bolton, 2012). The indigenous people of the society are that particular section which majorly relies upon keeping their hard-earned money into the financial institutions to keep them secure.
However, this is an awful state of affairs that the financial institutions are not coming up as rescue for the customers but working otherwise. According to Richard Dennis who is the economist in Australia had contended that the major bulk of money arising from the New South Wales is channelled through the taxpayers and not by the sponsors for donors (Arnold, 2012). The loyalty between the financial institutions and the customers are lacking to a major aspect which is a sad state of affairs
The fact is undeniable and it can be concluded by referring to all the facts and circumstances under which the standard of Westpac was involved that there is various non-compliance by Westpac associated with the ethical issues under the code of conduct of corporate governance. It is the need of an hour that the financial institutions must engage themselves in the theories and principles of ethics. Westpac bank must incorporate the theories of ethics to improve its goodwill and reputation in the market to regain the trust of the local communities as well as from different societies. Mere framing of policies is not sufficient but proper and adequate corporate governance must be implemented. the approach of the UK principle-based model will be helpful for a financial institution like Westpac where the organization will focus more on promoting the transparency of the records with different departs departments of the organization. This will not only benefit the organization internally but externally also
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