* PM calls on Westpac board to review position of CEO
* CEO Brian Hartzer "disgusted and appalled" by allegations
* Westpac board faces "two strikes" risk at Dec. 12 AGM
* Shares extend decline, A$5 bln in market cap losses since
suit
(Updates fund manager quote in 3rd and 4th last pars)
By Byron Kaye and Paulina Duran
SYDNEY, Nov 21 (Reuters) - Pressure mounted on the chief
executive of Westpac Banking Corp WBC.AX on Thursday over the
handling of Australia's biggest money laundering scandal, with
the prime minister saying the bank's board should reflect deeply
on Brian Hartzer's position.
Australian regulator AUSTRAC is suing the country's No.2
bank for 23 million breaches of anti-money laundering laws
including a failure to monitor and report payments between known
child exploiters. "These are some very disturbing, very disturbing
transactions involving despicable behaviour," Prime Minister
Scott Morrison told Australian Broadcasting Corp on Thursday.
Westpac's board "need to determine themselves" whether
Hartzer should resign, he added.
"They should be taking this very seriously, reflecting on it
very deeply and taking the appropriate decisions for the
protection of people's interests in Australia - their safety,"
Morrison said.
The prime minister's voice added weight to a chorus of
financial market participants demanding the Westpac board do
more to contain a crisis at the top of one of the country's
largest companies ahead of a Dec. 12 shareholder meeting.
If owners of more than a quarter of the company's shares
vote against its executive pay plans at the meeting, it will be
the second year in a row.
Under Australia's "two strike" law, if investors vote down
executive pay two years running, they can call for the entire
board to be removed.
"We will vote against the directors," said Dan Gocher, a
director of shareholder activist the Australasian Centre for
Corporate Responsibility, which holds Westpac shares. Financial
advisers were being "inundated with clients who are considering
(exiting Westpac) unless there's a substantial change", he
added.
Australia's big banks have been scrambling to rebuild
community trust since a public inquiry in February found limited
regulatory oversight had allowed the sector to engage in rampant
profiteering.
The Australian Council of Superannuation Investors (ACSI)
said the allegations from AUSTRAC were "incredibly concerning
(and) doing nothing to rebuild public trust".
"Investors take these matters seriously and will be engaging
with the board ahead of the AGM," said ACSI CEO Louise Davidson.
A Westpac representative did not respond to a request for
comment.
Hartzer said the previous day he accepted most of the
regulator's assertions but "at a senior executive level, for the
board, for me personally, in no way have we been indifferent on
this".
He said he had been "disgusted and appalled" by the
allegations and vowed to "get to the bottom of why this was able
to persist".
Westpac had self-reported the breaches to the regulator and
had since shut down the service at the centre of the complaint
which let customers and affiliate overseas banks process
payments from Australia, he said.
SHARE LOSSES MOUNT
The scandal comes a year and a half since larger
Commonwealth Bank of Australia CBA.AX paid a record A$700
million penalty https://www.reuters.com/article/us-australia-cba-moneylaundering/australias-cba-seeks-redemption-with-record-settlement-idUSKCN1IZ0YZ
for similar breaches.
CBA brought forward its CEO's retirement in light of its
AUSTRAC lawsuit, with his successor leading a broader overhaul
of the company's executive level.
Westpac shares were down about 2% by the afternoon, taking
the total losses to about A$5 billion of market capitalisation
in the two days since the lawsuit was announced. The broader
market .AXJO was down 0.8%.
"Brian Hartzer has been at Westpac for a while and in terms
of accountability it will probably lead to an earlier change
than expected at the top of the company," said Anton
Tagliaferro, investment director at Investors Mutual Ltd, which
owns Westpac shares.
"Somebody has to be accountable at the end of the day, and
Westpac as an organisation has to show they are implementing
some changes."
Investor lobby group The Australian Shareholders'
Association said in a statement it was "horrified" by the
alleged reporting breaches and wanted to know the board's
response "as a matter of urgency".
The ASA would raise the issue at a meeting with Westpac
Chairman Lindsay Maxsted scheduled for the next week.