By Scott Murdoch
(Reuters) - Westpac Banking Corp (AX:WBC) will be required to hold an extra A$500 million in capital after Australia's banking regulator announced an investigation into the bank's alleged money laundering breaches.
In a statement, the Australian Prudential (LON:PRU) Regulation Authority (APRA) said the bank would now need the extra capital to "reflect the heightened operational risk profile of the bank".
Westpac in June was ordered by APRA to hold an extra A$500 million ($339 million) following a self-assessment program which found the bank needed to toughen its oversight of "non financial risk".
Westpac, which is Australia's second largest bank by market capitalisation, was accused by AUSTRAC, the financial crimes agency, last month of breaching anti-money laundering laws up to 23 million times between 2013 and 2019.
APRA said on Tuesday its new investigation would question whether Westpac, its directors and senior managers breached the newly introduced Banking Executive Accountability Regime (BEAR) legislation.
The investigation could take up to two years, a source with direct knowledge of the matter said.
"AUSTRAC's statement of claim in relation to Westpac contains serious allegations that question the prudential standing of Australia's second largest bank," APRA's Deputy Chairman John Lonsdale said in the statement.
"While Westpac is financially sound, there are potentially substantial gaps in risk governance that need to be closed."
A Westpac spokesman said the bank would deliver a stock exchange statement later Tuesday.