Dishonest & fraudulent behavior-.
Westpac Banking Corporation is one of the four largest banking corporations in Australia with revenue of $22 billion. Established in the year 1817 it is headquartered in Sydney, Australia serve customers worldwide (WBC, 2020). Currently the bank is facing a lot of criticism over breaches in anti- money laundering and counters terrorism laws and is being sued in court (Reuters, 2020). The firm was also alleged in illegal payments through its bank to child sex offenders. This assignment deals to provide code of ethics for Westpac Australia.
The code of Ethics for Westpac have been formulated on the following factors-
Banking sectors have discrimination in multiple ways. According to Lu et al, (2012) non-state firms hold significant ownership in commercial banks than state-owned firms. This is because most non-state firms believe that they will be discriminated against due to political reasons, hence they try to build strong economic bonding with the banks. Hence by owning a significant stake in the bank gives them an advantage of low-interest expenses and can obtain small loans from the banks when the government's financial policy will be tight. Private firms holding ownership in banks have better operating performance. But this does not mean that they will utilize this opportunity for wrongdoings. They must remain transparent about the flow of money in the eyes of the stakeholders.
Discrimination by lenders based on color, race, religion, income, age, and educational qualification should not be done (Debt.org, 2020). Creditor’s discrimination can be challenged when
Thus Westpac should build trust among the customer about the promises they make and deliver it without any concern. Even if the client is reliable and trustworthy it is through credit risk score and the transaction module should be always checked to determine the need for the credit and its utility purpose.
The banking sectors have come into modern-day slavery, human trafficking, forced prostitution, and child labor in many ways. Every illicit business needs to transfer money for confirmation to run business, which eventually leads the frontline industry staff such as money service clerk and bank tellers to come in direct contact with the perpetrators and the victim for facilitating the transaction (Delta 8.7, 2020). Westpac bank too came into such allegation from AUSTRAC with 19.5 million international funds transfer transaction breaches worth $11 billion. They were subjugated to not monitoring accounts and transfers regularly used by child sex offenders based in the Philippines (RiskScreen, 2019).
Hence ideally every financial institution must ensure proper due diligence in the course of the transaction of money. Banks must ensure that their institution is not being used as a hub for illegal human rights abuse. The financial transaction must be monitored by the firm and by the third party who will give a clearer image of the pattern of the transaction and the stakeholders involved in the business which uses the services of the bank. The due diligence process should be robust and should follow the FATF (Financial Action Task Force) and AML (Anti-Money Laundering) protocols (Delta 8.7, 2020). Due diligence process to counter crime in the following ways
According to Park (2012), corruption increases the chance of bad loans which results in lowering the pace of growth. As the allocation of funds from normal projects to bad projects leads to reductions in the quality of private investment indirectly affecting the growth rate. Any country with a risky loan portfolio will lead to a weak banking system. Official dealing with financial transaction especially inter-continental should visualize the way money moves as bribing them and extracting key data is also a matter of great concern.
Corrupt ways of functioning have led to bankruptcy and fall of great business like Lehman Brothers, Bear Stearns, and Washington mutual ( Bahoo, 2020). The funding of almost all illegal businesses involving arms trade, human trafficking, drug smuggling, and wildlife trade takes place with the hawala transactions. Such transaction forges documents to provide a false identity to bankers which must be checked. Almost all financial transaction for terrorist attacks takes place due to such hawala system which is eventually working with the help of employees of the banking corporation.
Possible ways to curb corruption in Westpac
People working in banking sectors force them for dishonest behavior for the occupational norms they carry with them (Cohn, 2015). Trust plays a crucial role in any financial institution to grow. If people involved in it are not trustworthy for the customer’s money it will have a negative impact in the long run. Dishonesty in the banking sector is generally seen when the firm is involved in large transactions and is unable to repay the amount leading to its collapse. Hence small borrowers are affected the most.
To stop dishonest and fraudulent behavior Westpac must initiate the following-
Every banking company must have a whistleblower protection policy. In Westpac Ms. Amanda Woods a senior compliance official was demoted for exposing the breach (Financial Review, 2019). Every banking company should have a strong network to protect the whistleblower against any type of irregularities faced by the firms. With Australia having Corporation acts, 2001 its new amendments provide more protection to whistleblowers. Unfortunately, in this act, there are specific disclosure terms in which whistleblowers must ensure that.
Whenever any individuals get some information that seems not feasible with the ethics of the company but might be facing problems if he/she expresses it to concern authorities then the person can take the help of the Corporation act. In this act, the person can disclose the information to a particular set of people outside the company in which he/she works. The whistleblower must be protected with job stability and life protection. When there is a big scam involved, whistleblower lives are at stake. Thus Westpac can implement the following to bring change in the existing whistleblower protections.
According to ASIC (Australian Securities and Investment Commission) after the Royal commission in 2019, implementing enforcement required establishing offices within ASIC premises, strengthened penalties, and accelerating the enforcement outcome. Every enforcement agency must acknowledge and report the following to ASIC
Following enforcement in banking requires proper research about the segments in which concerned authorities such as APRA, ASIC, RBA, FIRB, and AUSTRAC deals with. Every organization has different specialties of work and its enforcement is also different. Hence after the Westpac crisis, AUSTRAC monitored all the transaction and they held Westpac accountable for breaches which ultimately led the firm on the verge of bankruptcy. Enforcement should be from both sides. Westpac must implement the following for better enforcement within its organization.
Westpac must initiate all possible measures to rebuild and rebrand its image they lost due to the recent money laundering issues. Every stakeholder must go through the guidelines specified in the Code of Ethics. The bank should train its employee about customer value and long term goals of trust and relationship. The governance in the compliance department along with all frontline staff who deals in lending should be clear that any such activities would be dealt with harshly and would lead to imprisonment. Monitoring and protection of whistleblowers would be done by the top management.
To reduce pressure on surveillance of illicit transactions bringing in modern technologies which helps to recognize patterns and frequency of the user will help the bank to a large extent. Ethics plays a vital role in any working mechanism of an organization, especially when doing business on someone else’s money which requires bond and trust. Every ethically liable company must be accountable for the work they perform. Westpac must accept the mistake and formulate strategies to bring the firm once again in the top 4 banking corporation in Australia.
(2020), Australia's Westpac admits to breaches of money-laundering laws , Retrieved from https://www.reuters.com/article/us-westpac-regulator/australias-westpac-admits-to-breaches-of-money-laundering-laws-idUSKBN22R0IC
org. (2020), Discrimination in banks. Retrieved from https://www.debt.org/advice/discrimination/
Lua, F.Z. & Zhub, J., (2012),Bank discrimination, holding bank ownership, and economic consequences: evidence from China , Journal of Finance and Banking, 36(2) , pp 341-354
Delta 8.7.(2020) Understanding the financial sector’s role in financing and fighting modern slavery, human trafficking, forced labour and child labour. Retrieve from https://delta87.org/resources/thematic-overviews/financial-sector/
(2019), Westpac hit with child exploitation, money laundering claims Retrieve from https://www.riskscreen.com/kyc360/news/westpac-hit-with-child-exploitation-money-laundering-claims/
Park, J., (2012), Corruption, soundness of the banking sector, and economic growth: A cross country study, Journal of International Money and Finance. https://www.researchgate.net/publication/251540653
Bahoo, S.,(2020), Corruption in banks: a bibliometric review and agenda finance research Letters Journals, DOI : elsevier.com/locate/fr.
Cohn, A., Fehr, E., & Andre, M., (2014), Business culture and dishonesty in the banking Industry, NATURES, DOI: 10.1038/nature13977
Financial review. (2019), APRA to look into Westpac’s treatment of ‘whistle blower’- Retrieved from https://www.afr.com/politics/federal/apra-to-probe-westpac-whistleblower-removal-20191202-p53fwh
(2019), ASIC’s approach to enforcement after the Royal Commission. Retrieved from https://asic.gov.au/about-asic/news-centre/speeches/asic-s-approach-to-enforcement-after-the-royal-commission/
(2015), Enforcement actions in the banking industry trends and lessons learned, Retrieved from http://files.acams.org/pdfs/2015/cephl12292015-presentation-2.pdf
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