The Australian Prudential Regulation Authority (APRA), the banking regulator of the country, has officially commenced an investigation to probe alleged money laundering breaches by Westpac.

The move comes nearly a month after another Australian watchdog AUSTRAC filed a lawsuit against Westpac over purported misconduct.

Westpac, one of the Big Four banks in Australia, is said to have violated anti-money laundering laws 23 million times.

In the investigation, APRA will look into the issues that led to alleged breaches. It will also investigate steps taken by Westpac, after the deficiencies were identified.

The regulator will also investigate if Westpac, its directors, and senior managers violated any established legislation or standards.

Concurrently, APRA asked Westpac to set aside an additional A$500m due to increased operational risks.

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The step increased total operational risk capital that Westpac is required to hold to A$1bn.

APRA will also carry out an extensive review of Westpac’s governance of risk. The review will assess the bank’s risk management, accountability, remuneration, and culture.

APRA deputy chair John Lonsdale said: “AUSTRAC’s statement of claim in relation to Westpac contains serious allegations that question the prudential standing of Australia’s second-largest bank.

“While Westpac is financially sound, there are potentially substantial gaps in risk governance that need to be closed.

“Given the nature of the matters raised by AUSTRAC, the number of alleged breaches and the period of time over which they occurred, this will necessarily be an extensive and potentially lengthy investigation.”