Australia’s Westpac to refund new retail shareholders to avoid lawsuit

FILE PHOTO: Pedestrians hold umbrellas as they walk past a branch of the Westpac Banking Corp in central Sydney, Australia, March 30, 2017. REUTERS/David Gray/File Photo

Australia’s Westpac Banking Corp offered to refund investors who bought new shares weeks before a bombshell lawsuit accusing it of millions of breaches of money laundering laws, a rare step to fend off criticism about its transparency.

The country’s oldest and second-largest bank has been in crisis since the financial crime watchdog, AUSTRAC, last week accused it of enabling 23 million payments in violation of anti-money laundering laws, including between known child exploiters.

The scandal has already seen out the bank’s CEO, chairman and head of its compliance committee, and large investors and their proxies have called for more heads to roll at Westpac‘s annual general meeting on Dec. 12.

On Thursday, the lender said it would pay back retail shareholders who bought A$500 million ($340 million) of new stock two weeks earlier, giving no reason for the move other than to say it came after talks with corporate regulator the Australian Securities and Investments Commission (ASIC).

“Following discussions with ASIC, Westpac will provide a withdrawal option for (investors) who applied for shares under the Share Purchase Plan prior to the AUSTRAC announcement on 20 November 2019,” the bank said in a statement.

A Westpac spokesman did not return a Reuters call seeking further comment.

Investors said the move suggested an effort by the bank to tamp down complaints about its disclosures in the lead-up to the money laundering announcement, including when it asked investors to buy more shares in early November. It also raised A$2 billion from institutional investors, who were excluded from the refund.

“It seems to me like they might be trying to get ahead of a class action,” said Rod Bristow, CEO of Clime Asset Management, which holds Westpac shares and participated in the capital raising.

ASIC has said it is investigating Westpac, while a law firm has said it is preparing to file a class action lawsuit against the bank accusing it of falling short of its continuous disclosure obligations.

An ASIC spokesman declined to comment further.

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White Funds Management Managing Director Angus Gluskie said Westpac had made disclosures about AUSTRAC’s investigations in its past two annual reports and the refund appeared to be designed to acknowledge that retail investors might have missed the mention in Westpac‘s most recent 312-page annual report.

“I don’t think any of us like the situation but I can see here that they have made quite a disclosure within their reporting,” said Gluskie, whose company also bought new Westpac shares in the raising.

“I would only be concerned if they had additional information that they were aware of that they should have disclosed to us that they hadn’t, or if they had tried to dress it down or paint it in a light that misrepresents the situation,” he added.

Westpac said it hired IBM’s financial consulting unit, Promontory, to run an external review of its financial crime prevention processes.

“If and where procedural, escalation or accountability failings are confirmed through Promontory’s review, there will be immediate action taken,”Westpac‘s outgoing chairman Lindsay Maxsted said in a statement.

Reuters

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.