Fake documents, ghost trucks: Westpac’s secret fraud probe revealed

Westpac launched an internal investigation to probe concerns millions of dollars of unchecked fraud was financing non-existent, or “ghost”, trucks in suburban Melbourne and a money-laundering ring in Western Australia.

The banking giant has stood down at least four employees over the allegations and two formal complaints were made last week to the Australian Securities and Investments Commission and Crime Stoppers by an employee detailing widespread fraud claims.

The complaints, submitted to the authorities anonymously and obtained by this masthead, say a toxic and high-pressure sales culture within Westpac’s prized small- to medium-business banking division has driven widespread fraud.

Westpac confirmed it had recently undertaken an internal review that identified a small number of customer loans for further investigation, which had resulted in new policies being introduced.

“We’re proactively engaging with regulators and we’ve acted to improve our controls and processes,” a spokesperson said. “We’re frequently updating our policies and processes, and when we find wrongdoing we take action to put things right.”

The intervention comes five years after Westpac was given the largest fine in Australian corporate history ($1.3 billion) for breaching anti-money-laundering laws 23 million times by failing to vet customers properly, which allowed payments for child exploitation material in South-East Asia.

Westpac confirmed that its latest investigation spanned fraudulent loans approved by the Simple+, start-up and equipment financing teams.

‘When we find wrongdoing we take action to put things right.’

Westpac spokesperson

Two staff working at the bank, speaking on the condition of anonymity to discuss confidential matters, alleged customers used fake documents to obtain the money through fast approval processes without adequate checks. These staff allege Westpac has placed volume over compliance, and the lack of thorough checks or responding to staff concerns has allowed crime rings to wash cash through the bank.

“All they have to do is provide cash flow forecast for the next two years and some kind of business plan,” said one source about Westpac’s start-up loan scheme.

The two staff said Westpac’s business bank, particularly in Victoria, had a cut-throat culture that was driving the problems.

They described a “don’t care how you do it, just get it done” attitude towards approving new loans to meet “unsustainable” sales targets.

“It’s ‘sit down, shut up, get your job done’. Any speak-up is just not a thing at Westpac,” said one source. “They’re always on the back foot. They’re not proactive enough with anything.

“I fear that that’s exactly how we’ve approached this era of ‘I’m not even going to check the fraud; I’m just going to shove it through to get my leader off my back.’”

In response, Westpac defended its lending standards and said sales targets were in line with industry competitors.

“We reject the allegations made in relation to workplace culture,” the spokesperson said. “Westpac has zero tolerance for inappropriate behaviour and we encourage our people to speak up when things don’t seem right.”

The suspected fraud was detected as loans defaulted across several Westpac business banking loan schemes, including the Simple+ campaign that offers new customers up to $5 million in loans through a “fast-track” approvals process.

Loans under Westpac’s start-up loan scheme are also under the microscope, according to multiple sources. Under these, new customers can access up to $500,000 of unsecured loans over five years after providing basic information about business projections.

“Customers were coming to Australia, registering a business, taking $50,000, going back offshore and having no plan to repay those loans,” said one of the staff members.

“It was [suspected] in Western Australia that this became a money-laundering ring. It was a ring of different businesses registering, getting money, going offshore.”

The same source said investigations were probing a cluster of potentially fraudulent loans approved through the bank’s equipment financing team, citing customers in Melbourne’s Tarneit and Point Cook that are believed to have used fake documents to obtain cash for vehicles that never existed.

“Our policy at Westpac allowed customers to purchase vehicles up to $500,000 per vehicle, up to $1.5 million in total, without actually going out and inspecting the vehicle,” the source said.

“So they would give us invoices for vehicles of $400,000, these big prime movers, then all of a sudden, they’d stop repaying and we went to do site inspections of the vehicles after the fact and they didn’t exist.”

The term “ghost truck” is used to describe a non-existent vehicle for which a loan is obtained.

Westpac equipment finance manager Ming-Jin Liaw held a meeting this year with all divisions around Victoria raising awareness of elevated fraud through vehicle financing and introducing new checks to limit the fraud, according to two sources. Liaw did not respond to requests for comment.

A former Westpac broker processed loans through the Simple+ scheme, but it was discovered that many of the broker’s customers used the same templates to provide fake documentation, resulting in a web of fraud. The broker resigned before the bank took regulatory action, one source said.

“All the documents were fraudulent,” the source said. “We are supposed to put that [broker] on a register to tell every organisation they have acted without integrity so they shouldn’t be able to register as a broker. They neglected to act in a way that prevented causing harm. That lack of action when it’s really required is the issue with Westpac.”

Westpac has stood down a number of managers over the alleged fraud. They have either been placed on leave while investigations are undertaken or forced out of the company. All were contacted for comment but did not respond.

Two banking sources said these employees had “taken the fall” for senior management, and there was no accountability for executives responsible for marketing Simple+ as a fast way for new customers to access loans.

The Westpac spokesperson said: “We’re unable to comment on individual employees or on actions taken. The small-business lending leaders identified have recorded very high levels of engagement and leadership in recent employee surveys.”

The two banking sources also described alleged bullying within Westpac’s business banking division, including yelling and name-calling.

The sources said business development managers were known internally as “hunters” and have targets to bring in loans worth $65 million a year, regardless of economic conditions or whether customers can afford repayments. They described reports of suicidal thoughts, alcoholism and severe mental and physical illness linked to meeting these targets.

“One man went and got a diagnosis of PTSD from behaviours coming from leadership at Westpac,” said one source. “His colleague was an alcoholic who came to work drunk with erratic behaviour two days in a row.”

Westpac business banking managers are paid a base salary of $105,000 to $130,000 and annual bonuses of up to $20,000, with targets including dollar-figure and balance sheet growth targets. Business development managers are paid about $140,000, with annual bonuses of $30,000.

“Why are shortcuts being taken? The unreasonable targets … it’s Wolf of Wall Street stuff,” one source said.

These allegations are repeated in the anonymous complaints submitted to authorities last week.

The ASIC complaint, obtained by this masthead, alleges “systematic loan fraud via inadequate scrutiny of third-party-referred business plans via brokers to business bankers”.

The complaint alleged “failure to properly assess debt to income serviceability” and “aggressive sales and performance management tactics”.

‘Why are shortcuts being taken? The unreasonable targets … It’s Wolf of Wall Street stuff.’

Source

The complaint also points to a “culture of aggressive leadership behaviour, leading to high turnover of bankers and leadership staff” and “unruly consolidation of business banking portfolios with inadequate sales support to sustain workload and/or balance compliance/risk metrics”.

The complaint called on ASIC to review all Simple+ loans in Victoria “to investigate alleged widespread fraud” and review the disciplinary action taken against staff.

The Crime Stoppers complaint made similar allegations about “accepting fraudulent loan referrals from mortgage brokers” and “aggressive behaviour” from staff.

It is a crime to provide false information to ASIC or the police. Penalties include large fines or jail. ASIC and Victoria Police declined to comment and it is not known whether any criminal investigation is under way.

Westpac has been on a long journey to rebuild trust after it was given the largest fine in Australian corporate history in 2020 over the money laundering and child exploitation scandal that resulted in the departure of former chief executive Brian Hartzer and chair Lindsay Maxsted.

The scandal involved 23 million breaches of anti-money-laundering laws after the bank failed to properly vet thousands of international transactions, including customers who paid for child exploitation in the Philippines and other parts of South-East Asia.

Westpac released the findings of its own investigation into the compliance breaches at the time, with two major investigations blaming technology failures, leadership misjudgments and poor systems for the breaches.

It posted financial results in November that showed its business lending jumped 15 per cent as banks fiercely compete to lend to small and medium enterprises.

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