Westpac's A$1.3bn Fine for Trade Misreporting - What it Means to You !

Another fascinating, detailed analysis of a large regulatory fine by RiskScreen is here, following their previous eye-popping report on Danske Bank and organized crime.

This time its about Westpac bank’s misreporting of cross-border transactions under Anti Money Laundering/Counter-Terrorism Funding rules.

The key points are over a period of years, Westpac either didn’t report transactions or misreported many of those that it did.

In this post, unsurprisingly, we’ll be examining the findings of the report from a data perspective.

Looking at this from a data perspective, the key points that we would draw attention to are ;

• Improperly tested core system changes.

• People who understood legacy systems were not replaced due to budget constraints (how sensible does that look now ?)

• No automated reporting and reconciliation process.

• No data quality processes in place on source and XML report data.

• Late or non-existent reporting.

We think that people in most banks, or indeed any organization with legacy systems, would recognize many of those observations.
The low-interest rate environment since 2008 has put pressure on headcount such that proactive change functions tend to have been replaced by reactive regulatory upgrades.

Some recent remediation projects that we have performed for clients that illustrate similar issues;

• Taking trade supervision reports from R code to Alteryx - the hardest part of the project was reaching sign-off when many of the trades that required commentary had been missed previously due to a lack of understanding of how the reports actually worked.

• Performing CRS/FATCA resubmissions for a client where their core and XML data had data inconsistencies.
  Previous submissions had been done using Excel to manually collate data and then using a 3rd party tool that was poorly understood and unreconciled.

• Verifying that an Anti Money Laundering platform was screening all relevant companies and customers.
  Similar to the WestPac case, the data feed from core systems to screening had been written several years previously, the developers had left, and there was concern that some customers were being excluded.
  Our project showed that all clients were being screened, but also highlighted key data fields either missing or badly formatted, and this turned into a weekly data quality report for remediation within the business.

CONCLUSION

Unless you understand your data and what’s being done with it, you are running increased risks of being picked up by regulators who are combining and analyzing data submissions to find anomalies.

In our experience, using Alteryx enabled by our Financial Services experts is by far the simplest way to check data submissions in a repeatable manner - it’s quick, and most importantly can be done by your own teams rather than as a manual exercise, or hiring expensive external teams.