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Brian Hartzer has resigned as Westpac Banking Corp. chief executive officer, succumbing to investor pressure after the lender was engulfed by allegations it committed the biggest violation of money-laundering laws in Australian history.

After a drumbeat of criticism from shareholders and government ministers, Chairman Lindsay Maxsted bowed to the inevitable and announced Tuesday that Hartzer, 52, would step down Dec. 2. Chief Financial Officer Peter King will be acting CEO, while the bank undertakes a global search for a successor.

Brian Hartzer Photographer: Mark Graham/Bloomberg

“We sought feedback from all our stakeholders including shareholders and having done so it became clear that board and management changes were in the best interest of the bank,” Maxsted said in a statement, adding he will bring forward his own retirement to early 2020.

The announcement comes six days after the nation’s financial crimes agency accused Australia’s second-largest lender of more than 23 million breaches of money-laundering laws, including failing to detect payments to child pornographers in the Philippines. Hartzer is the third of Australia’s big-four bank CEOs to be forced out in the past two years as the industry reels from one scandal to another.

Maxsted had initially stood behind his CEO and commenced a string of meetings with institutional investors in an effort to stave off a shareholder backlash against the board at the bank’s annual general meeting on Dec. 12.

“Some of the heat has been taken out of the situation after the heads have been mounted on pikes out the front of the Westpac offices,” said Hugh Dive, the chief investment officer at Atlas Funds Management Ltd.

Peter King Photographer: Brendon Thorne/Bloomberg

Westpac shares rose 1.7% in Sydney trading Tuesday, snapping a decline that had wiped more than A$7.5 billion ($5.1 billion) off Westpac’s market value since it was slapped with the civil lawsuit on Nov. 20.

While Hartzer’s resignation may vent some immediate pressure on the bank, it now faces a difficult search for a permanent replacement.

“As CEO I accept that I am ultimately accountable for everything that happens at the bank,” Hartzer said in the statement. “And it is clear that we have fallen well short of what the community expects of us, and we expect of ourselves.”

Hartzer will be given 12 months’ notice and paid out A$2.7 million in salary, but will forfeit all bonuses.

The suit against Westpac alleges that between 2013 and 2019, the bank failed to report more than A$11 billion in payments into and out of Australia, mostly using a bank-to-bank system originally designed to help facilitate pensions transfers.

The Australian Transaction Reports and Analysis Centre says Westpac didn’t keep proper records or have sufficient knowledge of where the money was flowing. The breaches were systemic and the result of “indifference by senior management and inadequate oversight by the board,” Austrac says.

Child Abuse

The most serious allegations relate to a separate consumer product known as LitePay. The agency says Westpac failed to carry out proper due diligence on 12 customers whose accounts showed repeated low-value payments to countries in Southeast Asia including the Philippines, even though it knew such transactions were a red flag for possible child exploitation.

In one case, a customer transferred money to a person in the Philippines who was later arrested for child trafficking and exploitation involving the live streaming of child sex.

It’s the lack of oversight of customer payments linked to child trafficking and child pornography that triggered a furor. Prime Minister Scott Morrison last week insisted the board should consider Hartzer’s future, while Treasurer Josh Frydenberg at the weekend said he’d spoken to both the chairman and CEO and “made very clear” the seriousness of the allegations.

Hartzer is the latest CEO of an Australian bank to step down after a turbulent and scandal-ridden two years for the industry. A national inquiry earlier this year lambasted banks for a runaway culture of greed and poor behavior.

In August 2017, Ian Narev resigned as Commonwealth Bank of Australia CEO less than two weeks after the lender was sued for more than 53,000 breaches of money-laundering rules. That case was eventually settled with the bank paying a record A$700 million fine.

In February this year, National Australia Bank Ltd. CEO Andrew Thorburn quit after being the target of withering criticism in a report into financial industry misconduct.

Hartzer joined Westpac as head of its Australian financial services unit in 2012, before being named CEO in early 2015. Prior to joining Westpac, he spent three years in the U.K. as CEO of Royal Bank of Scotland Group Plc’s retail and wealth units; 10 years at Australia & New Zealand Banking Group Ltd.; and 10 years as a financial services consultant in the U.S. and Australia.

— With assistance by Angus Whitley, and Sybilla Gross

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