A spokesman for the bank said no Westpac customers had lost any money at this stage,but an external review has been set up to investigate what went wrong. The spokesman said the bank had issued freeze and search orders and was liaising with the NSW Police and financial regulators,the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority.
One source inside the bank said Westpac held crisis meetings late last week to determine the scale of the fraud after allegedly discovering Forum Finance had created fake invoices to obtain Westpac loans. “People were running around terrified,” the source said.
The source,who couldn’t be identified because they were not authorised to speak to the media,alleged that Westpac loaned money to Forum Finance under the impression the money would then be loaned onto to its own customers.
However,when Westpac contacted Forum’s customers to inquire about the business relationship,it allegedly discovered these customers had not heard of Forum and the invoices related to the deal had allegedly been falsified.
Westpac’s chief executive Peter King described the potential fraud as “sophisticated” and disclosed the bank could lose around $200 million after tax. The source said it was unclear what portion of Forum’s customers were allegedly fraudulent,and the bank’s exposure could be higher.
Another source within Westpac’s financial crime department,who could not be named because they were discussing sensitive information,said the problem was caused by the bank’s poor controls around invoice verification.