Case Study Westpac CEO Pushed Out amidst Child Exploitation Scandal Westpac Chief Executive Officer, Brian Hartzer has become the first casualty of the money laundering and child exploitation...

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Case Study



Westpac CEO Pushed Out amidst Child Exploitation Scandal


Westpac Chief Executive Officer, Brian Hartzer has become the first casualty of the money laundering and child exploitation scandal that has engulfed the major bank. He has been pushed out as Westpac, a major lender, battles an investigation by Australia’s financial intelligence agency over a money laundering and child exploitation scandal.


The bank’s leader stepped down on December 2, 2019 with a hefty golden handshake of 12 months’ pay, which amounts to $2.7 million. Westpac Chairman, Lindsay Maxsted said that the board had accepted the “gravity” of the issues raised by AUSTRAC.


“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,” he said in a statement released to the Australian Securities Exchange.


Mr Hartzer said that he was ultimately accountable for everything that happens at the bank. “It is clear that we have fallen well short of what the community expects of us, and we expect of ourselves,” he said in a statement issued by Westpac.


It comes after a report in The Australian revealed Mr Hartzer attempted to lobby support from Westpac’s senior leaders by saying the scandal was not playing out as a high street issue. He added that reading the newspapers like the Fin (The Australian Financial Review) and The Australian, makes everyone believe that the world is ending, but people in mainstream Australia go about their daily lives, “this is not a major issue, so we don’t need to overcook this.’’


Mr Maxsted will also bring forward his retirement to early 2020, while Director Ewen Crouch — who was in charge of risk and compliance — did not stand for re-election at the Westpac Annual General Meeting on December 12, 2019.


AUSTRAC Chief Executive, Nicole Rose told reporters that the major lender failed to report more than $19.5 million international funds transfers over five years. The transfers amounted to $11 billion, which resulted in a “significant loss of intelligence” for the financial crimes agency. “Westpac failed to pass on information about the origin of international funds transfers and keep records as required,” she said.


The most staggering indictment in AUSTRAC’s bid to investigate Westpac was less than $500,000 that a dozen of its customers allegedly paid to the Philippines and South East Asia. The agency explained these types of payments are consistent with transfers made to those who are involved with child exploitation.


“Westpac failed to introduce appropriate detection scenarios to detect known child exploitation typologies, consistent with AUSTRAC guidance and their own risk assessments,” Ms Rose said.


Existing Chief Financial Officer, Peter King served as Acting Chief executive from December 2 until a new boss was to be appointed. Mr Maxsted said that the interim chief had been tasked with implementing the Westpac Response Plan in the face of the child exploitation scandal.


Talking about Peter King, Mr Maxsted stated that he had a long and distinguished career at Westpac and had been the CFO since 2014and was the right choice to provide stability and direction to the bank and its people. He added “Peter is an executive of exceptional integrity who is deeply respected by the market and the entire Westpac team.”




Facilitating ‘Horrendous Types’ of Crimes


Attorney-General Christian Porter said that the enormous number of alleged money laundering breaches by Westpac had the potential to facilitate the most horrendous crimes.


“Anyone who breaches money laundering laws and therefore allows money to be laundered, has — just as a matter of fact and common sense — contributed to the facilitating of international and domestic crimes of a variety of types,” he explained.


“The reason people launder money is to hide the profits of crime and criminality, and to fund further crime and criminality, which is why we have such strong laws, such strong penalties and why the government takes such an incredibly robust approach to money laundering.”


Investment bank Citi noted in a report aimed at predicting the ensuing bloodbath at Westpac how similar scandals had resulted in mass changes to executive teams. NAB’s Chief Executive and Chairman followed most of its management team out the door after a foreign exchange trading furore in 2004 cost the bank $360 million. CBA chief executive Ian Narev stepped down amid significant management and board changes at the major lender after its AUSTRAC settlement related to anti-money laundering and terror-financing charges.


The microscope had been fixed on Mr Hartzer who admitted that the issue of personal accountability is absolutely necessary, and he would personally lead Westpac’s response to all the issues highlighted.


He stated, “With respect to the specific customer matters that are in the detailed statement of claim, it’s the first time that I saw them was this morning.” “I was … utterly horrified at what I read, and am absolutely determined to get to the bottom of why on earth this was allowed to persist.”


Later, Mr Maxsted said the board was devastated by the issues raised by AUSTRAC. He added, “The notion that any child has been hurt as a result of any failings by Westpac is deeply distressing and we are truly sorry, the board unreservedly apologises.”


He assured that Westpac had already made significant improvements, including reviewing and taking action on all of the individual customers mentioned by AUSTRAC and establishing a multi-layered review. They also commenced discussions with relevant community groups about any further steps they could take to fight child exploitation.





















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Answered 8 days AfterMar 14, 2021University of Tasmania

Answer To: Case Study Westpac CEO Pushed Out amidst Child Exploitation Scandal Westpac Chief Executive...

Moumita answered on Mar 22 2021
132 Votes
MANAGEMENT ETHICS
Table of contents
Introduction.    3
Critical analysis    3
Key ethical issues    3
Ethical theories    4
Deontology    4
Virtue ethics    4
Utilitarian ethics    5
Strategies    5
Justification of Strategies    5
Recommendations    6
Conclusion    7
Introduction
Brian Hartzer, the chief executive of Westpac had to resign following the scandal of money laundering which involved allegations that the bank could not stop transactions with the Philippines invo
lving the issue of child exploitation. He will be receiving a payment of 2.69 million dollars for just serving his notice period. The most devastating allegations included Westoac’s failure in managing customers who send money to the Philippines and other Southeast Asian locations in consistency with child exploitation. Hartzer accepted his accountability for everything that happens at the bank. He also admitted that he has failed to meet the expectations of the community.
Critical analysis
The behaviour of Westpac under the leadership of Mr. Hartzer was not as disgraceful as it was projected but was a result of leadership failure (Buchanan & Shen, 2020). He was left with no option but to resign after the exposure of extremely grave and scary revelations of the business situation of Westpac over the period of some years. People are needed to be accountable for the way companies behave under a particular leadership. This decision will be highly appreciated by the Australian people who expect a high standard of their corporate leaders. It all does not end here. Westpac needs to take a series of steps to clear up their actions. The natures of the allegations are quite serious. The incident has called forth difficult days not just for the bank but also to the thousands of its employees (Compton & Hart, 2019).
Mr. Hartzer explained that there was no need to overcook the matter. Feedback was sought from stakeholders who made it clear that board as well as management changes were all in the best interest of the bank. The allegations of AUSTRAC about the bank’s money laundering for more than half decade will need investigation and cleaning up. Having a discussion with institutional shareholders will only be a feasible solution to tackle the situation of shares of the bank (AUSTRAC, 2021). Most importantly, many of the allegations pointed at child exploitation. The digital payments service of the bank Litepay allows the customers of the bank to make minor payments to users residing outside Australia. The claim of officials that Westpac was aware of the money laundering and child exploitation since the year 2013 needs to be investigated (Fargher, 2019). Litepay could also be at risk for such abuse in 2016.
Key ethical issues
The most serious ethical issue was that of child exploitation which was revealed by the Australian transaction reports saying that Westpac had failed to carry out appropriate investigation of twelve customers involved in low transfers of money to South east Asian countries even after having the knowledge that the patterns of transfer indicated child exploitation risks. In October and November of 2014, a customer transferred money to an individual in the Philippines and it was revealed that the person was later arrested (Hill, 2020). This involved child exploitation and offering minors for sex. It also involved live streaming of minor sex.
Ethical theories
Ethical theories can be classified into deontology, virtues and utilitarianism.
Deontology
Deontology is derived from the word ‘deon’ meaning necessity. Deontological theories generally explain about the moral duties of a person. When a person is told, what his or her moral duties then those are set of duties become moral rules. The moral value in an action lies in the conforming of duties and rules. The deontological theories also consider the factor of rights. The deontologists dwell in a world surrounded by moral rules. They claim that acts are either right or wrong (Hoskin-Murray, 2020). They emphasise the importance of motive and intention.
This theory can lead people acting in a way that can bring about negative consequences. For instance, if it is a duty not to lie then it may happen that not lying leads to the murder of a person. This can question the value of the rule of not lying. In this ethics, people have a duty of respecting each other and treat each other accordingly. When people face an ethical situation then the objective is to identify the duties and apply those taking proper decisions. Conflicts can arise if there is zero agreement among the principles involved...
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