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The Westpac group boss (pictured) quit yesterday after the bank was sued by Australian regulators for breaching money laundering laws, with possible links to child exploitation.
The offence would be one of the biggest money laundering violations in history, and concerns 23 million alleged breaches of counter-terrorism financing and money-laundering laws.
Many of the offences concern late reporting of overseas transactions.
Amid pressure from institutional shareholders and politicians, the bank announced Hartzer would step down, effective from next Monday.
The scandal has provoked a warning from ratings agency S&P that compliance scandals would hit big four banking profits over the next two years. S&P believes the Westpac scandal will hurt the banking sector's chances of reducing new regulation and controls.
Westpac NZ has moved to play down fears of similar compliance issues in its New Zealand business.
A spokesman said the bank has "reviewed AUSTRAC’s statement of claim to make absolutely certain our Westpac New Zealand systems and processes are robust and secure".
The spokesman added: "The AUSTRAC proceedings relate to Westpac Banking Corporation and Australian AML/CFT laws. The proceedings do not relate to Westpac New Zealand which is subject to independent oversight by the Reserve Bank of New Zealand under New Zealand AML/CFT laws. We have a range of controls in place to identify and prevent financial crime.
The spokesman said the bank received regular oversight from the Reserve Bank, and was confident it met all standards and requirements.
"We do not offer the LitePay or Australasian Cash Management Direct Entry products in New Zealand. The RBNZ supervision in New Zealand includes onsite visits and monitoring. We regularly engage with the RBNZ on these issues and will continue to do so. We are confident we are complying with relevant New Zealand laws and regulation."
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When Commonwealth Bank was fined a record $700M back in 2017 for 53,000 breaches of the AML laws this had an obvious impact on their subsidiary ASB and their operations here. Some would argue that based on how ASB are conducting themselves now as a lender the impact of this fine is still been felt.
Westpac in Australia now been found guilty of 23 million breaches of the AML laws could potentially see the bank liable of a new record fine of $1 Billion+ This is a massive amount of money which will almost certainly impact Westpac operations both in Australia and across the ditch here.
The new capital holding requirements for New Zealand banks are due to be unveiled next Thursday 5th December. It will be very interesting to see how the various banks all cope and meet their new capital obligations going forward whilst continuing to lend to their customers at current levels. Some are clearly up against the wall already with loans been called in at one bank and another dissuading its customers from having large undrawn revolving credit facilities.
Westpac in Australia been forced to pay a massive fine for failing to meet their regulatory requirements isn’t going to make things any easier for their subsidiary here. Capital (or for some banks a lack of it) will obviously be a key driver dictating how they run their businesses going forward.