Australian banking giant Westpac said Tuesday its beleaguered CEO Brian Hartzer was stepping down after regulators accused the bank of major breaches of money laundering laws involving more than US$7 billion.

The bank is facing a potentially massive fine over claims that it failed to report millions of international fund transfers, including “high-risk transactions” to Southeast Asian nations potentially linked to child exploitation.

Chairman Lindsay Maxsted will bring forward his retirement to “the first half of 2020” and long-standing director Ewen Crouch will not seek re-election next month, the bank said, as it seeks to address the scandal with new leadership.

Hartzer’s replacement as acting CEO, current chief financial officer Peter King, will take over on December 2 and will remain in place until a “global search process” for a permanent replacement is completed.

“As CEO, I accept that I am ultimately accountable for everything that happens at the bank,” Hartzer said in a statement announcing the changes.

“And it is clear that we have fallen well short of what the community expects of us, and we expect of ourselves.”

The personnel moves come just days after Maxsted apologised “unreservedly” on behalf of the board, saying management was “fully committed to fixing these issues.”

Australia’s financial intelligence agency, AUSTRAC – which levelled the accusations against Westpac – has said any potential penalty is a matter for the courts.

But in its submission to the Federal Court, AUSTRAC noted that each of the 23 million breaches it said Westpac had committed can carry a civil penalty of Aus$17-21 million.

That would theoretically put the bank on the hook for up to Aus$483 trillion (US$330 trillion) in fines.

“The Board accepts the gravity of the issues raised by AUSTRAC,” Maxsted said in the statement.

“As was appropriate, we sought feedback from all our stakeholders including shareholders and having done so it became clear that board and management changes were in the best interest of the bank.”

Big Four troubles

Australia’s largest lender, the Commonwealth Bank (CBA), last year faced a theoretical maximum fine of Aus$1 trillion after AUSTRAC found it had failed to report on 53,500 transactions – a fraction of the alleged breaches by Westpac.

The CBA ended up negotiating an Aus$700 million settlement.

Among the most damaging allegations against Westpac, the regulator accused bank executives of “indifference” to clear evidence that some international transfers were used to fund child exploitation.

AUSTRAC said the bank had been aware of heightened risks associated with frequent small payments destined for Southeast Asia since 2013 and had been “specifically briefed” on the risks with respect to one of its money transfer channels in June 2016.

Hartzer expressed disgust over some of the allegations, but also insisted many of the questionable transfers cited by AUSTRAC were “recurring, low-value payments” from foreign government pension funds to people living in Australia.

The Australian Securities and Investments Commission launched an investigation into Westpac into “possible breaches of legislation it administers” following the AUSTRAC report.

Australia’s banking industry, one of the world’s most profitable, is facing an array of challenges.

The country’s four biggest banks – CBA, Westpac, National Australia Bank (NAB) and ANZ – were the target of a royal commission that earlier this year exposed rampant malpractice across the sector.

It found banks had charged fees to dead people and to others for no services at all, used aggressive sales tactics and provided poor advice that led to significant financial upheaval for clients.

All the banks have reported significant hits to profits as they reimburse hundreds of millions of dollars to wronged customers.

– AFP