ASIC has launched an investigation into Westpac following the legal action brought against the bank by financial crimes regulator, Austrac. An ASIC spokesman confirmed the move on Monday afternoon, saying that the regulator commenced its investigation last Thursday. "ASIC can confirm that it commenced an investigation on Thursday, 21 November 2019 concerning possible breaches of legislation it administers arising from Austrac's actions in relation to Westpac," the spokesman said. While ASIC did not reveal the specific matters it was investigating, the adequacy of Westpac's disclosure of its AML compliance issues in the offer documents for its A$2.5 billion equity raising looms as an area of interest. Banking Day also confirmed last night that the Australian Prudential Regulation Authority was also assessing whether Austrac's allegations would require it to take action under the Banking Executive Accountability Regime. Westpac yesterday met with some of its institutional shareholders as concern intensified that its disclosure of AML compliance issues had been inadequate in its annual report and the offer documents for the capital raising. According to Austrac's statement of claim, the bank confirmed to the regulator in June that some of its customers had used accounts to pay for services that involved exploitation of children. In its annual report published earlier this month, Westpac told shareholders that it had not received an indication from Austrac about the nature of "any enforcement action". The disclosure in the offer documents was more or less the same. Westpac's directors and auditors are likely to be grilled by institutions on why the likelihood of AML-related penalties was not made clearer to investors in the disclosure documents published by the bank this month. A key signal as to the immediate future of chief executive Brian Hartzer could emanate this morning from the New York Stock Exchange where Westpac's American Depositary Receipts are traded. A sharp decline in the ADRs might prompt the bank's directors to review their support for Hartzer and chairman Lindsay Maxsted. While most US mutual funds have been reducing their exposures to Westpac this year, a string of offshore institutions retain large investments in the bank through the NYSE. They include the Lord Abbett International Equity Fund. The emerging controversy over the adequacy of Westpac's disclosure leading up to the Austrac court action has raised a wider concern for investors in the Australian banking sector. Many other banks including National Australia Bank and Bank of Queensland could potentially face fines for historical non-compliance with local AML laws. In the case of NAB, there is a large gap between what it disclosed as its AML issues to the Hayne Royal Commission last year and what it was prepared to tell investors in its latest financial reports. NAB board documents supplied to the royal commission describe the bank's AML compliance issues as "pervasive" and management oversight as "weak", but disclosures in the annual report appear to understate the ineffectiveness of the group's