A contest of two competing shareholder class actions against Westpac over millions of alleged anti-money laundering breaches has ended with one law firm and its funder bowing out.
Class action specialists Phi Finney McDonald, backed by Woodsford Litigation Funding, will lead the sole Australian class action against the bank after rival firm Johnson Winter Slattery and funder Burford Capital dropped out of the contest on Tuesday.
The decision by JWS to discontinue its action came a month after the Federal Court ordered the competing applicants to exchange the terms of litigation funding for each case and the number of shareholders the law firms had signed up.
“We are pleased that multiplicity has been resolved in the Westpac shareholder class action, without the cost and delay of a formal carriage motion,” said PFM managing director Ben Phi.
“We have been retained by a record number of institutional and retail investors from around the world, who were outraged by Westpac’s alleged conduct. AUSTRAC’s allegations raised serious concerns about Westpac’s corporate governance and risk management frameworks. We look forward to holding Westpac to account, and intend to recover substantial losses for group members.”
Woodsford chief investment officer Charlie Morris attributed the swift resolution of the competing class action contest in part to its “market-leading funding terms”. The funder’s commission remains confidential.
PFM launched its class action in December, soon after AUSTRAC brought proceedings against Westpac that alleged 23 million breaches of anti-money laundering and counter-terrorism finance laws. The case claims Westpac breached its continuous disclosure obligations to shareholders and engaged in misleading and deceptive conduct. Westpac has said it will defend the claims.
The case was brought on behalf of shareholders who held Westpac shares traded on the New York Stock Exchange, as well as shareholders who purchased the bank’s shares on the ASX and the New Zealand Stock Exchange. The action will now add claims for damages on behalf of holders of equity swaps, the group represented by JWS in its competing action, brought in March.
JWS made separate allegations against former Westpac CEO Brian Hartzer, who resigned in the wake of the AUSTRAC scandal in November. Those claims will not be pursued, PFM said.
Westpac is also facing at least eight class actions in various US courts seeking $200 million from the bank for allegedly failing to alert shareholders there to violations of anti-money laundering laws.
NY-based Rosen Law Firm lodged the first class action in January. The case names both Hartzer and chief financial officer Peter King as co-respondents.
AUSTRAC’s statement of claim alleges Westpac failed in its oversight of the AML/CTF risks associated with money moving in and out of Australia through correspondent banking relationships and failed to report over 19.5 million International Funds Transfer Instructions worth over $11 billion between November 2013 and September 2018.
The regulator claims Westpac failed to pass on information about the source of funds to other banks in the transfer chain and did not keep records about the origins of some of the fund transfers.
Westpac also fell short in carrying out appropriate due diligence on transactions to the Philippines and South East Asia that have “known financial indicators” of possible child exploitation risks, AUSTRAC claims.
Westpac told the Federal Court late last year that it was largely in agreement with AUSTRAC on liability. The bank was locked in settlement talks with AUSTRAC in late March but no agreement has emerged.
The bank is also facing investigations by the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority over the alleged breaches.
APRA’s probe will focus on whether the bank’s executives ran afoul of the Banking Executive Accountability Regime, which took effect in July and imposed heightened compliance obligations and tougher penalties on authorised deposit-taking institutions and their executives.
PFM’s class action is represented by Elizabeth Collins SC and Dion Fahey. Westpac is represented by Matthew Darke SC, instructed by Gilbert + Tobin.
The class action is Edmund How Fen Yong v Westpac Banking Corporation.