Australian banking major Westpac has agreed to a court enforceable undertaking with Australian Prudential Regulation Authority (APRA) to improve its risk controls.

The move stems from APRA’s concerns with the bank’s progress in addressing loopholes regarding risk governance. These include “immature and reactive risk culture, unclear accountabilities, capability shortfalls, and inadequate oversight”.

The concerns arose from AUSTRAC’s allegations of anti-money laundering (AML) violation against Westpac last year.

The undertaking requires the bank to develop an integrated remediation plan covering key risk remediation activities.

Highlighting a clear timeline for implementation and the one accountable for delivery, the bank needs to submit the plan within 90 days.

An independent reviewer should evaluate  the plan and offer an update to the APRA within 15 business days from the end of each quarter.

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Acknowledging the findings, Westpac Group CEO Peter King said: “While we have made progress in improving our standards, we have much more work to do, and this must be done at pace.”

APRA deputy chair John Lonsdale said: “As one of the country’s largest and most important financial institutions, Westpac should be a leader in risk management. Although the bank has made progress in some areas over the past year, it is not good enough. We continue to observe new prudential issues arising while long-standing weaknesses persist, and we believe Westpac’s governance, culture and accountability frameworks and practices are still in need of a substantial uplift.

“APRA’s concerns have been communicated directly to the Board and senior management with the clear message that the magnitude of improvements that Westpac needs to deliver requires a deep commitment to change at all levels across the organisation.”

Recently, Westpac agreed to pay an AML fine of A$1.3bn ($916m), the largest ever penalty in Australian corporate history.

The fine relates to Westpac breaching anti-money laundering laws and failing to stop child exploitation payments.