Westpac has been linked to an international paedophilia case following the arrest of a notorious Australian sex offender who is suspected of using the bank’s transfer system to pay for live-streamed child abuse videos in south-east Asia.

It is the first instance where an attempt to procure abuse of a child has been tied to Westpac’s failure to heed warnings since 2016 from money laundering watchdog AUSTRAC that lax standards for its LitePay and other money transfer systems could be used to facilitate the international child sex trade.

The Victorian man allegedly attempted to arrange for a child to be exploited in a south-east Asian country recently. It is not known whether the alleged abuse went ahead.

The criminal charges against the man come after Westpac had been privately suggesting to the market since the scandal broke in late November that there was no evidence any act of child exploitation had occurred despite more than 3000 suspicious payments being identified.