BOQ hit with $50m capital penalty for anti-money laundering failings

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Bank of Queensland has breached prudential standards and fallen short in its compliance with anti-money laundering laws, prompting regulators to force it to hold an extra $50 million in capital and sign court-enforceable undertakings.

The regional lender on Wednesday morning said it had entered into separate enforceable undertakings with the financial crimes watchdog, AUSTRAC, and the Australian Prudential Regulation Authority (APRA).

BoQ will carry an extra $50 million in capital until it has addressed the concerns of regulators.Credit: Will Willitts

AUSTRAC said it held concerns about the adequacy of BOQ’s systems for complying with anti-money laundering and counter-terrorism financing (AML/CTF) laws, and the agreement would require BOQ to improve its AML/CTF program.

APRA, meanwhile, said it had uncovered weaknesses in the bank’s past approach to risk management and culture, and BOQ had made several breaches of the prudential standards in 2022 and 2023.

APRA said BOQ would be required to hold an extra $50 million in capital for operational risk until the bank implemented a plan setting out how it would improve the weaknesses in its approach to risk and risk culture.

The regulatory action comes after BOQ repeatedly emphasised the need to strengthen the bank and its handling of risk since last year’s abrupt departure of former chief executive George Frazis, who was replaced by former chairman and current CEO Patrick Allaway.

APRA chair John Lonsdale said the enforceable undertakings and the capital add-on would give the bank clear incentives to lift its game.

“Although BOQ is financially sound and comfortably above its core capital and liquidity requirements, there are significant gaps in its risk management framework that must be addressed as a priority, particularly in the non-financial risk, anti-money laundering and counter-terrorism financing spaces,” Lonsdale said.

APRA said the breaches of the prudential standards related to liquidity, outsourcing and business continuity management.

AUSTRAC chief executive Nicole Rose said the two regulators kept each other informed about their investigations into BOQ, and that the bank had co-operated with AUSTRAC over the past six months.

“The actions undertaken by AUSTRAC and APRA in relation to BOQ highlight whole of government efforts to maintain the integrity of Australia’s financial systems,” Rose said.

“Businesses which do not have a strong AML/CTF program in place are vulnerable to exploitation by criminals, which is why AUSTRAC has been working with BOQ to harden their processes.”

BOQ chairman Warwick Negus said the moves to improve its compliance would complement a technology overhaul at the bank, which would decommission “complex legacy systems” and reduce its reliance on manual processes.

“BOQ remains committed to its multi-year Integrated Risk Program to build a stronger and simpler bank with an uplift in risk culture, frameworks, processes and controls,” Negus said.

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