Westpac Customer Engagement Approach to address financial

Westpac Customer Engagement Approach to address financial
WBC.300.004.4547




WestpacCustomer
Engagement
         Approach
                to
address
      financial
           difficulty
following
       bank-initiated
                credit
limit
   increases
Final Advisory Report


August 2017
Westpac Customer Engagement Approach to address financial
WBC.300.004.4548




             Disclaimer
             This report is delivered subject to the agreed written terms of KPMG’s
             engagement.
             This report provides our observations of the implementation of the Customer
             Engagement Program and detailed findings of KPMG’s assurance engagement
             work for Westpac under the terms of the Statement of Work dated 24
             February 2016. The contents of this report do not represent our conclusion,
             which will only be contained in our limited assurance report.
             This report is provided solely for the benefit of the parties identified in the
             Statement of Work and is not to be copied, quoted or referred to in whole or in
             part without KPMG’s prior written consent. KPMG accepts no responsibility to
             anyone other than the parties identified in the Statement of Work for the
             information contained in this report.
             To the extent permissible by law, KPMG and its associated entities shall not
             be liable for any errors, omissions, defects or misrepresentations in the
             information or for any loss or damage suffered by persons who use or rely on
             such information including for reasons of negligence, negligent misstatement
             or otherwise.




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Contents
Contents                                                                                                                                         ii
Glossary                                                                                                                                         iii
1     Executive Summary                                                                                                                          5
      1.1 Introduction                                                                                                                          5
      1.2 Scope and Approach                                                                                                                    6
      1.3 Limitations                                                                                                                           6
      1.4 Commentary on Westpac’s progress                                                                                                      7
      1.5 Testing in scope for this report                                                                                                      8

2     Testing completed for this report                                                                                                         10
      2.1 Timeline of this review                                                                                                             10
      2.2 Testing methodology                                                                                                                 10
3     Detailed Findings                                                                                                                       14
      3.1 The Banks response to Interim recommendations                                                                                       14
      3.2 Final Report observations                                                                                                           20

Appendix A : Westpac Letter to ASIC                                                                                                            24
Appendix B : ASIC Letter to Westpac                                                                                                            30
Appendix C : Information used to underpin this report                                                                                           31




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Glossary
Key
  terms                                      Definition
Customer Engagement                          Section 1 of the Schedule in Westpac’s letter to ASIC, also
Approach                                     referred to as “the Program”. Section 1 forms the basis of the
                                             scope for KPMG reports and the Limited Assurance report.

Steering Committee                           Members from Credit Risk, Collections, Compliance, Product,
                                             Regulatory and Legal providing oversight and direction for the
                                             Program.

Proprietary Tracking                         Excel database of all 6,613 customers which have been
Spreadsheet                                  extracted using the methodology outlined in the Schedule
                                             under 1.1. Contains the record of conversation held as account
                                             notes and data elements for determining a remediation
                                             amount.

Call Script                                  The scripting used by a dedicated member of the Assist team
                                             to advise the customer of the call purpose, establishing the
                                             customers circumstances at the time of increasing the limit
                                             and, if appropriate, determination of the refund amount.

Online banking message                       A message lasting 60 days which was posted to online
                                             banking for customers that could not be contacted and had not
                                             responded to the 3-2-1 Contact Strategy. The message for
                                             Westpac customers was, “ We would like to speak with you
                                             about information relating to your credit card. Please contact
                                             us on 1300 363 503 as soon as you can. Thank you. Your team
                                             at Westpac.”

Internal system message                      A system note that remains on Westpac internal systems for
                                             customers that have not been in contact in regards to the
                                             Program. The note states, “ Customer is eligible for CLI
                                             Remediation assessment. Please contact [Assist Operator
                                             Names] from the Collections Team to assist the customer
                                             further. ”

Credit default listing                       A credit default listing relates to default information recorded
                                             at a Credit reporting Bureau Preconditions to the disclosure of
                                             default information include – the consumer credit payment
                                             must be overdue by at least 60 days, the overdue amount
                                             must not be less than $150 (or if a higher amount is prescribed
                                             by the Regulations, that amount).


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Total Waived                                 The total remediation refund processed.

Financial Impact                             The total waived excluding written off accounts (internal). The
                                             amount paid by the Bank to vendors (sold).




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1 Exe
    cutive Summary
1.1Introduction
Westpac (“the Bank”) has entered into an arrangement with the Australian Securities and
Investments Commission (ASIC) whereby the Bank will undertake a program to assess potential
financial hardship from bank-initiated credit limit increases (CLI) of Consumer Credit Card customers
for the period between 12 September 2012 and 17 December 2014 (the “Program”) . The Bank have
committed to KPMG providing independent assurance over the Program’s implementation.
The Bank in their letter to the Australian Securities and Investments Commission, dated 13
November 2015 addressed the Program as follows :
         “ We have set out in the attached Schedule the elements of the proposed negotiated
         outcome with ASIC relating to our previous Credit Limit Increase (CLI) arrangements for
         consumer credit cards.
         These elements comprise:

              a customer engagement approach consisting of a way to identify recipients of CLI
               for whom the Bank did not make direct enquiries about their employment and income
               status, who subsequently faced financial difficulty ;

              a regulatory outcome approach to reflect the seriousness in which we regard
               regulatory feedback and involving a contribution to the Salvation Army’s MoneyCare
               program; and
              confirmation about changes to our systems and processes to ensure we meet
               ASIC’s earlier feedback when we recommence bank-initiated CLIs anticipated to begin
               during December 2015”.
In our Statement of Work dated 24 February 2016, KPMG agreed to report on the results of the
Program’s procedures and assess the risks of any material deficiencies at the end of the following
stages:

    First report (“the First Report”) at the completion of the Pilot (approximately 600 customer
     assessments);
    Interim report (“the Interim Report”) following substantial rollout of the customer engagement
     program (approximately 3,000 customer assessments); and

    Limited Assurance report (negative assurance opinion) and final report (“th is Report”) at the
     conclusion of the customer engagement program (approximately 6,000 customer assessments) as
     defined by the Bank.




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1.2Scope and
          pproach
             A
The objective of the independent assurance is to independently assess the implementation of the
Program articulated in the Schedule. This Schedule was accepted by ASIC in writing in its letter to
the Bank dated 17 December 2015.
As per the scope of work, KPMG’s role has been to monitor, review and report on the
implementation progress, at the pilot, interim and final stages, and, where appropriate make
recommendations to address features of the implementation that required further consideration by
the Bank.
The scope of our work, including the preparation for the Limited Assurance report, encompasses the
elements of the Customer Engagement Approach “the Program”, focussed on the Program design
described under Section 1 of the Schedule. Where appropriate, we have further considered the
extent to which the Bank has responded and resolved any identified areas of ASIC concerns in its
correspondence with the Bank during the period of the Program.
In conducting the review, KPMG’s procedures have included:
     management interviews and inquiries;
     review of the information provided as evidence for the implementation, including the data
      sources used to support identifying the relevant customer population, establishing the
      customer ’s circumstances, CLI specific treatmen ts and possible outcomes;
     review of the processes employed to ensure outcomes are fair and consistent to support the
      Program’s guiding principle “to ensure that credit card customers have not been disadvantaged
      by receiving a bank-initiated CLI”; and
     analysis of the level of program governance, oversight and direction underpinning refinements to
      the Program.
The approach to testing remained the same throughout the course of the review with additional
Design Effectiveness and Operational Effectiveness testin g conducted on the implementation of Pilot
and Interim report recommendations.
This third and final report provides an update on the Program since 6 December 2016, as well as the
most recent findings from items received up to and including 28 June 2017, and delivers our final
observations on the Program.




1.3Limitations
This report has been prepared as outlined in the Scope and Approach Section and is subject to a
number of limitations which should be considered when reading this report. These limitations
include:
     As of the date of this Report, there remain customer s that could not be contacted and had not
      therefore participated in the Program. While the Bank considers all possible cases have been
      assessed and, where appropriate, remediation has been made, a number of customers cannot
      be finalised because all means of contacting these customers have been exhausted.




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      While all of the customer calls w ere made available by the Bank as part of the review, KPMG has
       not reviewed all calls and has applied professional judgment to draw conclusions about the
       population from which the samples have been selected.
      KPMG have not been provided the final customer outcomes that will be reported to ASIC. While
       we believe all commitments by the Bank have been implemented, there is the potential for
       customer engagement activity to continue after the release of this report. Our review does not
       extend to include oversight of the Bank’s subsequent activity.
      The broader reform process by the Bank is not within the scope of our review. These reforms
       include voluntary contributions to the Salvation Army to support their Moneycare program, along
       with system and process changes and the additional measures to support future decision making
       for bank-initiated credit limit increases.
KPMG have indicated within this report the sources of the information provided. We have not sought
to independently verify those sources unless otherwise noted within the report. KPMG is under no
obligation in any circumstance to update this report, in either oral or written form, for events
occurring after the report has been issued in final form. The Limited Assurance Report and findings in
this Final report have been formed on the above basis.




1.4Commentary
        onWestpac’s
               progress
This section provides a summary of the progress of the Bank’s activities undertaken to prepare for
the conclusion of the Program.
KPMG presented its Interim report to the Steering Committee on 8 December 2016 and noted
management’s ongoing commitment to adopt the recommendations in preparation for the conclusion
of the Program.

1.4.1 Interim phase
Following the Pilot, a full rollout of the Program commenced on 22 June 2016. The Bank’s
development of tools and processes during the rollout demonstrated management’s appetite for
continuous improvement and a positive response to our recommendations from the Pilot stage
review and associated report, in support of the Program’s aim to deliver fair and consistent
outcomes.
In addition to the enhanced call script, Assist Operators were provided with an embedded
remediation calculator in the Proprietary Tracking Spreadsheet, revised process maps and an
increased volume of Quality Assurance over call outcomes to enhance consistent application of the
process.
During the rollout phase, the Bank had self-identified the customer contact rate to be lower than
expected. The Steering Committee subsequently approved the use of the “3 -2-1” Contact
Strategy 1 in an attempt to increase the customer contact rate from 25 August 2016 onwards. This
process consisted of:
           Three outbound calls made. If no Right Party Contact (RPC),leave Voice Message;
           Send Two SMS’s to customer requesting them to contact the Support Team; and
           Send One final - Please Contact us within 21 days letter .



1
    Project CLI Remediation Steering Committee 2016-08-25 Meeting-Final

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The Bank advised if no contact had been made with the customer following the completion of this
revised contact strategy, an additional period of 150 days would be allowed for customers to contact
the Bank.

1.4.2 Final phase progress
During this Final review period KPMG observed the implementation of all remaining processes,
including the implementation of Interim report recommendations (Section 3), third party vendor
activities for sold accounts and the establishment of online banking messages as a final contact
attempt .
Specifically, the remaining Program processes included within our final review were:
 Executing sold account activities in accordance with the appropriate process maps.
 Continuing to implement processes relating to the treatment of exception cases.
 Completion of all activities to address credit default listings that resulted for the relevant
   customer.
 Updating the “3- 2-1” Contact Strategy with the inclusion of online banking messages as a final
   contact attempt to increase participation.
 Implementation of a process to direct future inbound calls to experienced Assist Operators after
   the Program is closed.
 Continuation of program reporting throughout the period.
The Bank has indicated it is preparing the Program for closure and it expects this Final report and our
Limited Assurance report to inform the decision. Once this Final report has been presented to the
Steering Committee, the Bank will engage with ASIC and finalise any outstanding matters.




1.5Testing
        inscope
             forthis
                   report
KPMG have adopted a consistent test design through the Pilot, Interim and into this Final stage,
based on the ‘Schedule’ which sets out the elements of the negotiated outcome that was accepted
by ASIC.
Table 1 summarises the testing that has been conducted in the completion of this report.
Table 1: KPMG testing scope for this report

 The Bank’s                            Testing                                Comment                                    Reference for
 commitment to ASIC                    methodology                                                                       observations

 Identifying the relevant              Design and                             Completed in the Interim                   N/A
 customer population                   Operational                            review. No further
                                       Effectiveness testing                  testing required.

 Establishing the                      Design and                             Testing completed in                       Section 3 –
 customer ’s                           Operational                            this reporting stage. No                   KPMG Ref 8, 9
 circumstances                         Effectiveness testing                  material findings.

 CLI Specific Treatment                Design and                             Completed in this report.                  Section 3 –
                                       Operational                            No material findings.                      KPMG Ref 10,
                                       Effectiveness testing                                                             11



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The Bank’s                            Testing                                Comment                                    Reference for
commitment to ASIC                    methodology                                                                       observations

Possible outcomes                     Design and                             Completed in this report.                  Section 3 -
                                      Operational                            No material findings.                      KPMG Ref 12
                                      Effectiveness testing

Expected timeframes                   Design and                             Completed in this report.                  Section 3 -
and piloting exercise                 Operational                            No material findings.                      KPMG Ref 13
                                      Effectiveness testing

In the event the                      Review management                      Completed in this report.                  Section 3 -
external firm identifies              response and                           No material findings.                      KPMG Ref 14
any matters, we will                  subsequent actions
respond and resolve                   following Interim
any issues.                           recommendations
                                      and ASIC areas of
                                      concern




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2 Testing completed
                report
                    for
2.1Timeline
        ofthis
             review
KPMG were re-engaged to complete this third and final report and undertake testing on
implementation activities up to 28 June 2017. The timing of the report has been based at a point in
the Program when all possible cases have been assessed (6,613) and, where appropriate,
remediation has been made, including for all sold vendor accounts.
KPMG has maintained contact with the Program on an ongoing basis since the delivery of the Interim
report, with an information request formally submitt ed to the project manager on 28 March 2017,
followed by subsequent information requests through the course of this review.




2.2Testing
       methodology
As per previous review stages, our objective of this stage has been to test the implementation of the
Program in accordance with the Schedule. The methodology was based on the following key
requirements:
    Schedule provided to ASIC in the Bank’s letter dated 13 November 2015;
    Program design as documented in the Bank’s Group Memo – “Collections ASIC CLI Issue
     Remediation” dated 24 January 2016 (the Memo) ; and
    Program operationalisation and execution according to intended objectives.
In addition to the requirements in place at the time of our Pilot and Interim reports, two further areas
for testing have arisen. The testing methodology for these two additional areas are as follows:

2.2.1 Additional customer contact attempt s
The Bank advised there were 967 customers (14.6% of the Program population) who could not be
contacted or did not respond to the “3- 2-1” Contact Strategy during the Program. A final attempt was
made to contact these customers through the posting to their account of an online banking message.
Batch loading was evidenced as being completed by 28 November 2016, with an expiry date for
messages of 31 January 2017.
To ensure that any customer s can be appropriately assessed and actioned after the conclusion of the
Program, an internal message has been posted to the relevant accounts on Bank system s to re-direct
the customer to a member of the CLI team should they make contact with the Bank on this matter .




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2.2.2 Third party vendors and credit default listings
The Bank had sold delinquent Credit Card customer accounts to seven third party vendors. A
percentage of the Program population were included in the accounts sold to these third party
vendors.
The Bank advised that the Steering Committee endorsed a recommendation 2 that no remediation
action was to be taken on bankrupt customers. This resulted in no customer communication letters
for Credit Corp Part IX, Balbec and Insolve as these vendors only purchased Part IX accounts.
In order to test the remediation Program for the remaining third party vendors KPMG randomly
sampled 12 accounts from a total of 1,428 accounts which represents 0.8% of the total in scope sold
account population.
Of the sample selected, all vendors had executed instructions in accordance with the Sold Account
process maps 3 and supporting information provided to them by the Bank, including providing
correspondence emails and key data elements from the “Internal Sold Account Tracker”
spreadsheet. The following vendors were in scope for this review:
     Credit Corp
     Lion
     NCML
     Baycorp
As a part of the Program a number of key activities were implemented by the Bank, the third party
vendors and three Credit Reporting Bodies (CRB). These activities included:
     The Bank established an account level breakdown of remediation totals for each of its vendors;
     Individual communication letters were prepared by each vendor and delivered advising customers
      of their remediation amount;
     The Bank calculated the income loss incurred (“Debt Recourse Cost”) for compensating each
      vendor;
     Vendor invoices were provided to the Bank in order to compensate for the Debt Recourse Cost.
     Account level credit default listing adjustment actions were performed by the three CRB’s.
The accounts requiring credit default listing adjustments have been provided to the CRB’s. KPMG
sampled 30 accounts and noted the following outcomes:
     17 cases where a credit default listing was evidenced on all three CRB’s (57%);
     5 cases where a credit default listing was evidenced on two CRB’s (16%);
     8 cases where a credit default listing was not recorded on any of the three CRB’s (27%).
     In all cases the correct remediation action had occurred.

2.2.3 Continuation of program reporting
Table 2 provides a summary of the total number of cases that have been reported on the Program
between the last Steering Committee on 8 December 2016 and a snapshot of the daily reporting that
is being maintained by the project during the period of this review.



2
    CLI Decision Required 160404 FINALRe-Issue 8th April
3
    End-to-End Workflow – CLI Remediation – Sold Accounts

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Table 2: Assessment outcomes reported by the Bank

    Program statistic (number of                       As at 8/12/2016                 As at 21/3/2017
    cases)

    Assessment outcomes (number of accounts):

    Resolved – In-house                                                    3,119                           3,695

    Resolved – Sold Accounts                                               1,634                           2,177

    Total customers contacted                                              4,753                           5,872

    Remediated                                                             2,583                           3,363

    Customers unaffected by CLI                                            2,170                           2,509

    Customers yet to be                                                    1,860                              741
    contacted / un-contactable

    Total                                                                  6,613                           6,613

    Remediation ($):

    Total Waived                                                $10,222,690                      $11,162,375

    Financial Impact                                              $3,250,407                      $3,296,219




2.3Final
      observations
The Customer Engagement Approach program was designed to address concerns that customers
may have suffered financial hardship from bank-initiated CLI’s in the period between 12 September
2012 and 17 December 2014. The Program was designed to ensure that credit card customers have
not been disadvantaged and, where disadvantage was identified, remediate customers back to the
position they would have been had they not received the bank-initiated CLI.
Based on our review, it is our view that the Program has been implemented in accordance with the
Schedule and its objectives. The steps the Bank has taken to achieve the Program’s objectives
include:
     a dedicated project team and management commitment on the continuous improvement of its
      processes, particularly in the Pilot phase;
     the development of the Program’s assessment processes, which were subject to appropriate
      testing in a Pilot phase prior to their full implementation and enhanced over time to support fair
      and consistent outcomes;
     the implementation of a Quality Assurance process, including call monitoring and information
      recording;




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    Sample reviews of calls conducted by KPMG, which found that the Bank had materially adhered
     to the Program’s documented processes and objectives when assessing customers’
     circumstances and, where exceptions were observed, the Bank responded appropriately by
     undertaking further assessments and notifying customers of any changes to assessment
     outcomes; and
    Periodic reporting by KPMG to provide findings and recommendations in relation to the
     Program’s progress and outcomes.

Since the Program commenced, oversight and direction of the Program’s implementation has been
provided by the monthly Steering Committee and weekly Decision Council Sub-committee .
As the Program has evolved and matured, KPMG noted further refinements were made to its
implementation processes. In considering the relatively low rate of improvement findings identified in
our testing and the Bank’s responses to these findings, and the level of Quality Assurance offered
through the Program, it is our view that the Program has been implemented in line with the
documented Schedule and implementation has operated as intended.




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       3 Detailed Findings
       3.1The
            Bank
              ’sresponse
                     toInterim
                            recommendations
       In our Interim report dated 6 December 2016, we presented a number of observations and recommendations.
       We have set out below a high level summary of those Interim recommendations, the Bank’s management response and KPMG’s subsequent review. The Bank
       acknowledged the observations at the time of the Interim report, and, have addressed each of the recommendations as summarised in the table below.



KPMG    Test plan description                 Interim Recommendation(s)                                                  WBC Management Response                                             KPMG Conclusion
Ref

        “Identifying the relevant             N/A                                                                        Noted                                                               The Bank noted the KPMG finding
1
        customer population.                                                                                                                                                                 of a duplicated account in the in-
                                                                                                                                                                                             house and sold account databases.
        We will begin with all
                                                                                                                                                                                             KPMG were satisfied with the
        customers who received a
                                                                                                                                                                                             treatment of this account with no
        bank-initiated CLI in the period
                                                                                                                                                                                             further testing or remediation
        from 12 September 2012
                                                                                                                                                                                             action required.
        (being the date of ASIC’s letter
        to industry) up until 17


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KPMG       Test plan description                   Interim Recommendation(s)                                                  WBC Management Response                                             KPMG Conclusion
Ref
           December 2014 (which was
           the date we paused issuing
           bank-initiated CLI invitations);
           Of this population, we will
           identify those customers who
           we had classified as requiring
           No Further Credit Assessment
           (‘Non-FCA’) (i.e. due to
           particular eligibility criteria we
           did not expressly ask the
           customer about employment or
           income status);”

2          “Establishing the customer’s            To ensure consistency across all Assist                                    Between June 2016 and November                                      KPMG have reviewed the evidence
           circumstances.                          Operators the call must align to the design of                             2016 WBC have monitored calls at the                                provided and are of the view the
                                                   the enhanced script.                                                       rate of 10 per Operator per month. This                             recommendation has been
           Having identified the relevant
                                                                                                                              being an increase in call monitoring                                implemented effectively.
           customers, a dedicated                  KPMG recommend WBC increase their QA
                                                                                                                              during the Pilot phase of 2 calls per
           member of our Assist team will          on a retrospective basis and satisfy itself that
                                                                                                                              Operator per month. Where necessary,                                       While outbound calls had been
           make an outbound call (the              “ambiguity” did not manifest in calls                                                                                                                  completed the Bank continued
                                                                                                                              action was taken to correct any faults.
           dedicated Assist team member            throughout the rollout                                                                                                                                 its Quality assurance on a go-
           will also act on any inbound call                                                                                  Therefore WBC is confident with the                                         forward random sampling basis
           received by the Assist areas                                                                                       quality of the calls conducted and that
                                                                                                                                                                                                          and provided evidence of 47
           relevant to this matter).                                                                                          the application of the enhanced script
                                                                                                                                                                                                          additional calls that were
                                                                                                                              has been consistent during rollout. In
           They will inquire about the                                                                                                                                                                    assessed across November
                                                                                                                              reviewing the calls highlighted as
           customer’s current financial
                                                                                                                              ambiguous by KPMG, WBC considered                                           2016 and March 2017 4.
           circumstances, including


       4
           Call Monitoring -20-04-2017

                                                                                                                     KPMG | 15

                                                © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
                                                    (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                                                                      Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4563




KPMG   Test plan description                 Interim Recommendation(s)                                                  WBC Management Response                                             KPMG Conclusion
Ref
       whether or not they are or have                                                                                  that the call outcome was consistent                                       Evidence of monthly Quality
       faced financial difficulty, and,                                                                                 with the sentiment of the remediation                                       assurance summary log on
       using a guided scripted                                                                                          Program. WBC believes this opinion to                                       Assist team members showed
       process.”                                                                                                        be supported by the outcome of our                                          original assessment decisions
                                                                                                                        conversation with customer
                                                                                                                                                                                                    were not overridden.
                                                                                                                        SCRA5437931001331444as detailed
                                                                                                                        below.                                                                     The Bank advised account
                                                                                                                        However, with acknowledgement of                                            SCRA4564577780088370 had
                                                                                                                        KPMG’s observations we have:                                                an online banking message
                                                                                                                                                                                                    posted following unsuccessful
                                                                                                                             Contacted customer                                                    contact as per management
                                                                                                                              SCRA5437931001331444 and                                              response at the Interim report
                                                                                                                              repeated the call; the outcome was                                    stage.
                                                                                                                              consistent with our previous
                                                                                                                              conversation.                                                        KPMG observed an online
                                                                                                                                                                                                    banking message was not
                                                                                                                             CC4564712503290298 moved into                                         posted to account
                                                                                                                              bankruptcy on 21 October 2016 and                                     CC4564712032930141 as the
                                                                                                                              will be processed in line with BAU,                                   account had moved into
                                                                                                                              as a result WBC are of the view that                                  bankruptcy and the Bank
                                                                                                                              recontacting the customer for the                                     advised it will be actioned in
                                                                                                                              purposes of the CLI Program was no                                    line with BAU processes.
                                                                                                                              longer appropriate.
                                                                                                                             We have made reasonable attempts
                                                                                                                              to contact customers
                                                                                                                              CC4564712032930141 &
                                                                                                                              SCRA4564577780088370in line
                                                                                                                              with the 3-2-1 Contact Strategy. To
                                                                                                                              date we have been unsuccessful in


                                                                                                               KPMG | 16

                                          © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
                                              (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
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WBC.300.004.4564




KPMG   Test plan description                Interim Recommendation(s)                                                  WBC Management Response                                             KPMG Conclusion
Ref
                                                                                                                             contacting these customers. In
                                                                                                                             addition to following the 3-2-1
                                                                                                                             Contact Strategy we have sent the
                                                                                                                             customers an additional ‘Please
                                                                                                                             contact us’ letter and will be posting
                                                                                                                             an online banking message.

3      “Establishing the customer’s         KPMG recommend WBC rectify the incorrect                                   The Assist Operators follow the written                             KPMG noted the Bank’s response
       circumstances – A short              process map for audit trail purposes.                                      Script rather than the Process Map                                  to ASIC, in an email from Joshua
       decision tree process wil l                                                                                     when contacting customers. Please                                   Moyes to Anthony Thompson,
       then be applied to establish:                                                                                   note, the process maps service as                                   dated 16 February 2017.
                                                                                                                       supplementary material.
       If the customer was                                                                                                                                                                 We note the correct action was
       unemployed or had reduced                                                                                       The Script questions whether the                                    applied and this case did not relate
       income at the time of the bank-                                                                                 customer had a reduction in income.                                 to a situation where the customer
       initiated CLI.                                                                                                                                                                      was identified as being in
                                                                                                                       This Customer did not experience a
                                                                                                                                                                                           collections at the time of the CLI.
       If so they will receive the CLI                                                                                 reduction in income and did not qualify
       Specific Treatment;”                                                                                            for remediation.
                                                                                                                       Process map named Current Account
                                                                                                                       and Accounts in Collection has been
                                                                                                                       updated and sent to KPMG as well as
                                                                                                                       evidence of sign off at Working Group.

4      “Establishing the customer’s         KPMG recommend that WBC identify which                                     In completing a review of Pilot volumes,                            KPMG noted the Bank’s response
       circumstances – A short              accounts did not have a call record available                              WBC is confident that the 14 Pilot                                  to ASIC, in an email from Joshua
       decision tree process will           from the Pilot, and satisfy itself that the lack                           accounts where calls were not identified                            Moyes to Anthony Thompson,
       then be applied to establish:        of a call record did not affect the review                                 during review, were not affected by the                             dated 16 February 2017.
                                            outcome                                                                    lack of a call recording and the approach
                                                                                                                                                                                           KPMG have reviewed the
                                                                                                                                                                                           management response and have


                                                                                                              KPMG | 17

                                         © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
                                             (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                                                               Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4565




KPMG   Test plan description                 Interim Recommendation(s)                                                  WBC Management Response                                             KPMG Conclusion
Ref
       We will conduct regular                                                                                          to each call was consistent with the                                confirmed the record of
       reporting in relation to these                                                                                   sentiment of this remediation Program.                              conversation provided in the
       activities.”                                                                                                                                                                         proprietary tracking spreadsheet is
                                                                                                                        WBC has previously provided evidence
                                                                                                                                                                                            sufficient to determine that the
                                                                                                                        of the Pilot review to KPMG,
                                                                                                                                                                                            assessment outcome remains.
                                                                                                                        highlighting accounts with revised
                                                                                                                        outcomes.



5      “CLI Specific Treatment – We           N/A                                                                       Noted                                                               The Bank noted the KPMG
       Will:                                                                                                                                                                                observation relating to dynamic
                                                                                                                                                                                            versions of the proprietary tracking
       On a case by case basis, apply
                                                                                                                                                                                            spreadsheet with no further testing
       partial debt waivers and / or
                                                                                                                                                                                            required.
       card limit decreases for
       amounts down to and including
       the pre-CLI limit, including any
       fee reversals;”

6      “CLI Specific Treatment – We          To ensure consistency for reporting purposes                               WBC will conduct a sample review of                                 The Bank advised KPMG that
       Will:                                 we recommend WBC sample check the                                          the information captured in the                                     Quality assurance on the
                                             remediation field columns in their proprietary                             proprietary tracking spreadsheet as part                            proprietary tracking spreadsheet for
       On a case by case basis, apply
                                             tracking spreadsheet to mitigate against                                   of our Program close down activities to                             accuracy has been completed with
       partial debt waivers and / or
                                             incorrect reporting.                                                       ensure fields have been accurately                                  no further discrepancies identified.
       card limit decreases for
                                                                                                                        completed.
       amounts down to and including                                                                                                                                                        We have no evidence that this has
       the pre-CLI limit, including any                                                                                                                                                     not been applied correctly.
       fee reversals;”




                                                                                                               KPMG | 18

                                          © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
                                              (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                                                                Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4566




KPMG   Test plan description             Interim Recommendation(s)                                                  WBC Management Response                                             KPMG Conclusion
Ref

7      “CLI Specific Treatment – We      While KPMG did not observe any issues with                                 WBC will conduct a sample review of                                 The Bank advised KPMG that
       will:                             the manual input for the current balance, we                               the information captured in the                                     Quality assurance on the
                                         recommend WBC satisfies itself that the                                    proprietary tracking spreadsheet as part                            proprietary tracking spreadsheet for
       The method of providing the
                                         manual input field has been accurately                                     of our Program close down activities to                             accuracy has been completed with
       refund to the customer will
                                         completed.                                                                 ensure fields have been accurately                                  no further discrepancies identified.
       vary depending on the
                                                                                                                    completed.
       Customer’s current limit and                                                                                                                                                     We have no evidence that this has
       balance of the account:”                                                                                                                                                         not been applied correctly.




                                                                                                           KPMG | 19

                                      © 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
                                          (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                                                            Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4567




       3.2Final
             Report
                observations
       The observations and recommendations included are made as an outcome of the Final phase and build upon observations from the Pilot and Interim. Only those
       areas of testing where we have identified observations or improvement opportunities have been included in this report.



KPMG       Test plan description                                                                                          Observation(s)
Ref

8          “Establishing the customer’s circumstances:                                                                    We observed that 967 accounts were determined to require an online banking
                                                                                                                          message, valid for 60 days until 31 January 2017 and based on the status of
           Having identified the relevant customers, a dedicated member of our Assist
                                                                                                                          customer contact in the proprietary tracking spreadsheet. A report highlighted
           team will make an outbound call (the dedicated Assist team member will also
                                                                                                                          71 5 were rejected following the batch upload, due to the customer not being
           act on any inbound call received by the Assist areas relevant to this matter).
                                                                                                                          registered for online banking (63) and the card being blocked for bankruptcy 6
           They will inquire about the customer’s current financial circumstances,                                        reasons (8).
           including whether or not they are or have faced financial difficulty, and, using a
                                                                                                                          To ensure rejected online messages did not materially disadvantage customer
           guided scripted process.”
                                                                                                                          contact, KPMG tested 8 rejections and it was noted all had the “3- 2-1”
                                                                                                                          Contact Strategy applied.
                                                                                                                          The following 1300 numbers contained in the online messages were dialled for
                                                                                                                          testing and in all instances flowed through to a dedicated CLI Assist Operator.
                                                                                                                               1300 363 503 – Westpac


       5
           Email dated 23/11/2017 from M. Lam RE: additional exclusions
       6
           Email dated 25/11/2017 from M. Lam RE: CLI Remediation - Online Message reports and 2 additional accounts to be added

                                                                                                                 KPMG | 20

                                            © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
                                                (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                                                                  Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4568




KPMG   Test plan description                                                                                          Observation(s)
Ref

                                                                                                                           1300 369 877 – St George
                                                                                                                           1300 365 502 – Bank of SA
                                                                                                                           1300 656 698 – Bank of Melbourne

                                                                                                                      The Bank advised these numbers will be used for other purposes after the
                                                                                                                      Program concludes.

9      “Establishing the customer’s circumstances:                                                                    To support the conclusion of the Program, customers who had not responded
                                                                                                                      had an internal system note loaded to Tallyman/TCSand VisionPLUS systems ,
       Having identified the relevant customers, a dedicated member of our Assist
                                                                                                                      intended to direct an operator to an Assist team member who had worked on
       team will make an outbound call (the dedicated Assist team member will also
                                                                                                                      the CLI remediation program. This was completed for all brands by 2 February
       act on any inbound call received by the Assist areas relevant to this matter).
                                                                                                                      2017.
       They will inquire about the customer’s current financial circumstances,
                                                                                                                      We observed:
       including whether or not they are or have faced financial difficulty, and, using a
       guided scripted process.”                                                                                           Notes of “customer is eligible for CLI Remediation Assessment. Please
                                                                                                                            Contact [Assist Operator names] from the collections team to assist the
                                                                                                                            customer further”
                                                                                                                           A communication memo provided to the Collections team to inform them
                                                                                                                            of the system note and instructions to redirect inbound calls.

                                                                                                                      The Bank advised notes will move down on accounts over time as more notes
                                                                                                                      are added, however, there have been instances of this process being followe d
                                                                                                                      prior to the Program conclusion. We believe this additional step is a positive
                                                                                                                      move to address the remaining customers and feel the process has been
                                                                                                                      applied faithfully.




                                                                                                             KPMG | 21

                                        © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
                                            (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                                                              Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4569




KPMG       Test plan description                                                                                         Observation(s)
Ref

10         “CLI Specific Treatment – We will:                                                                            The Bank advised all sold accounts would be eligible for remediation. We
                                                                                                                         sampled 12 accounts to test the implementation of the vendor processes (3
           On a case by case basis, apply partial debt waivers and / or card limit decreases
                                                                                                                         accounts per in scope vendor 7).
           for amounts down to and including the pre-CLI limit, including any fee
           reversals.”                                                                                                   We noted all information contained in the individual customer letters for the
                                                                                                                         vendors sampled reconciled against the Sold Account Tracker for balance
                                                                                                                         reduction and interest & fees.
                                                                                                                         Recoveries Corp are a vendor collecting on behalf of the Bank and were
                                                                                                                         excluded from the Sold Account process maps, impacting 4 accounts. We
                                                                                                                         observed the CLI treatment and instructions for the adjusted recovery
                                                                                                                         amounts for each account being consistently applied.8

11         “CLI Specific Treatment – We w ill:                                                                           The accounts requiring credit default listing adjustments have been provided to
                                                                                                                         the CRB’s. Of the 30 accounts sampled we noted:
           As a result of our customer engagements and have regard to credit reporting,
           address any listing that resulted for the relevant customers. ”                                                    17 cases where a credit default listing was evidenced on all three CRB’s
                                                                                                                               (57%);
                                                                                                                              5 cases w here a credit default listing was evidenced on two CRB’s (16%);
                                                                                                                              8 cases where a credit default listing was not recorded on any of the three
                                                                                                                               CRB’s (27%).

                                                                                                                         While all CRB’s actioned the listing according to the Bank’s instructions, we
                                                                                                                         noted CRB differences in how they applied the reduction adjustment in certain
                                                                                                                         instances.



       7
         This excludes Vendors processing Part IX Bankruptcies and Recoveries Corp. Panthera and Pioneer were also excluded in the Final Report as they were covered
       during Pilot and Interim phases
       8
         KPMG Questions-WBC Responses-04052017

                                                                                                                KPMG | 22

                                           © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
                                               (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                                                                 Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4570




KPMG        Test plan description                                                                                       Observation(s)
Ref

12          “Possible outcomes”                                                                                         We observed evidence of regular monitoring and reporting of the remediation
                                                                                                                        amounts through the course of the review 9.
                                                                                                                        While we did not access the Bank’s financial systems to evidence payments,
                                                                                                                        we were advised of the adjustment process and transferring refunds from
                                                                                                                        interest to bad debts 10.

13          ”Expected timeframes and piloting exercise.”                                                                We observed the completion of the remaining processes in preparation for
                                                                                                                        Program closure.

14          “In the event the external firm identifies any matters, we will respond and                                 Throughout the review period we observed management being receptive to
            resolve any issues.”                                                                                        feedback and implementing change. We note in this Report, all Interim report
                                                                                                                        recommendations were adopted and implemented effectively.




       9
           Regular updates of file named: CLI Remediation - Daily Operational Tracking YYYY-MM -DD
       10
           Email from K. Huang dated 06/04/17 - RE: CLI Remediation: KPMG Final Report - Proof of impact to GL

                                                                                                               KPMG | 23

                                          © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
                                              (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                                                                Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4571




Appendix
     :Westpac
         A LetterASIC
                  to




                                                                     KPMG | 24

© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
    (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                      Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4572




                                                                     KPMG | 25

© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
    (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                      Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4573




                                                                     KPMG | 26

© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
    (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                      Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4574




                                                                     KPMG | 27

© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
    (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                      Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4575




                                                                     KPMG | 28

© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
    (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                      Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4576




                                                                     KPMG | 29

© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
    (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                      Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4577




Appendix
     : ASIC
         Letter
         B Westpac
                to




                                                                     KPMG | 30

© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
    (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                      Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4578




Appendix
     :Information
          C       used t
underpin
       report
         this
Table A-1: Documentation received from Westpac for this report


 Document                                                              Description                                         Receipt
                                                                                                                              date
 Westpac, ‘Letter to ASIC’ (13 November                                Letter sent to ASIC containing                      1 March 2016
 2015).                                                                Westpac’s Schedule of
                                                                       elements of the proposed
                                                                       negotiated outcome.
 ASIC, ‘Letter to Westpac’ (17 December                                Letter sent to Westpac                              29 February 2016
 2015).                                                                accepting the proposal to
                                                                       resolving the matter.

 Various emails titled, ‘CLI Remediation –                             Emails between Westpac                              28 June 2017
 Online Banking Notation’                                              stakeholders providing their
                                                                       approval of the online banking
                                                                       messages and screenshots of
                                                                       actual messages for each
                                                                       brand.

 Various emails titled, ‘CLI Remediation –                             Emails between Westpac                              16 March 2017
 Updated Notation’                                                     stakeholders providing their
                                                                       approval of the wording for
                                                                       the notation on customers’
                                                                       accounts within Tallyman/TCS
                                                                       and VisionPLUS.

 Westpac, ‘CLI_Dropped WBC’, (25                                       Spreadsheet containing a                            16 March 2017
 November 2016)                                                        breakdown of the online
                                                                       messages that had failed to be
                                                                       posted during the batch
                                                                       upload to customers’ accounts
 Experian,                                                             Experian’s spreadsheet, sent                        27 June 2017
 ‘Westpac_CLI_Remediation_Response’,                                   via Westpac, which provides
 (26 June 2017)                                                        an account level breakdown of
                                                                       the credit listing adjustments
                                                                       for 4 vendors

 Experian,                             Second Experian spreadsheet,                                                        27 June 2017
 ‘Westpac_CLI_Remediation_Response#2’, sent via Westpac, which
 (27 June 2017)                        provides an account level
                                       breakdown of the credit listing
                                       adjustments for the remaining
                                       4 vendors




                                                                        KPMG | 31

   © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
       (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                         Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4579




 D&B, various spreadsheets titled,                                    Various D&B spreadsheets,                           26 June 2017
 ‘Response_[Vendor] _June2017’, (June                                 sent via Westpac which
 2017)                                                                provide an account level
                                                                      breakdown of the credit listing
                                                                      adjustments for each vendor
 Veda, various spreadsheets title, CLI                                Various Veda spreadsheets,                          26 June 2017
 Listing Remediation Final [Vendor] +                                 sent via Westpac which
 Equifax Status’, (June 2017)                                         provide an account level
                                                                      breakdown of the credit listing
                                                                      adjustments for each vendor

 Westpac, ‘CLI Remediation – Daily                                    Regular powerpoint reports of                       16 March 2017
 Operational Tracking’ (2016 – 2017)                                  Weekly Remediation Volumes
                                                                      covering the period 11
                                                                      November 2016 to 24 March
                                                                      2017. These packs tracked the
                                                                      number of accounts that had
                                                                      been remediated as well as
                                                                      the gross Financial Impact ($)
                                                                      as at that point in time

 Westpac, ‘CLI Remediation - Daily Overall                            Spreadsheets containing the                         16 March 2017
 Summary’ (2016-2017)                                                 raw data used in the ‘CLI
                                                                      Remediation – Daily
                                                                      Operational Tracking’
                                                                      powerpoint documents.

 Westpac, ‘CLI Remediation - Steering                                 Word documents containing                           16 March 2017
 Committee Minutes of Meeting’ (2016)                                 the minutes from each
                                                                      Westpac CLI Remediation
                                                                      Steering Committee between
                                                                      March 2016 and December
                                                                      2016

 Westpac ‘Project CLI Remediation                                     CLI Remediation Steering                            16 March 2017
 Steering Committee M eeting’ (2016)                                  Committee Reporting
                                                                      powerpoint packs for the
                                                                      period 17 March 2016 to 8
                                                                      December 2016.
 Westpac, ‘CLI Remedaition (sic) KPMG 1                               Email including details on the                      19 April 2017
 4 6’ (6 April 2017)                                                  adjustment to the General
                                                                      Ledger from which refunds
                                                                      have been debited

 Westpac, ‘CLI Remediation - Define a                                 Email evidencing a meeting                          27 April 2017
 strategy to re-enter Non-Resolved                                    between Westpac
 accounts to Collections’ (27 March 2017).                            stakeholders to define the
                                                                      strategy for re-integrating non-
                                                                      resolved accounts back into
                                                                      BAU collections



Source: KPMG




                                                                       KPMG | 32

  © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
      (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
                                        Liability limited by a scheme approved under Professional Standards Legislation.
WBC.300.004.4580




The information contained in this document is of a general nature and is not intended to address the objectives,
financial situation or needs of any particular individual or entity. It is provided for information purposes only and does
not constitute, nor should it be regarded in any manner whatsoever, as advice and is not intended to influence a
person in making a decision, including, if applicable, in relation to any financial product or an interest in a financial
product. Although we endeavour to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should
act on such information without appropriate professional advice after a thorough examination of the particular
situation.

To the extent permissible by law, KPMG and its associated entities shall not be liable for any errors, omissions,
defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on
such information (including for reasons of negligence, negligent misstatement or otherwise).

© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation.
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