Treasurer Josh Frydenberg has warned Westpac executives could face significant fines and possible disqualification, after the bank was accused of breaching Australia's anti-money laundering and counter terrorism finance laws 23 million times.

Westpac is facing growing calls to sack its CEO over allegations it failed to act on customers using its services to purchase child abuse material — but there’s one thing keeping him in place.

Brian Hartzer is being given the benefit of the doubt by the board, The Australian Financial Review reports, because it currently has no information that shows he knew his bank took 18 months to act on millions of suspicious transactions.

The financial crimes watchdog AUSTRAC is taking the nation’s second largest bank to court over 23 million breaches of money laundering laws, some of which are alleged to be linked to child exploitation in South-East Asia.

The scandal erupted last week and has led to calls for the Westpac’s chief executive and chairman Lindsay Maxsted to go, with Treasurer Josh Frydenberg noting these issues “build a momentum of their own”.

On Wednesday, Mr Hartzer said “the issue of personal accountability is absolutely on the table” but said the first time he saw the “specific customer matters that are in the detailed statement of claim” was that morning.

“I was utterly horrified at what I read, and am absolutely determined to get to the bottom of why on earth this was allowed to persist,” he said. “I will be personally leading our response to all of these issues.”

The payments are alleged to have been made through Westpac’s LitePay system, which was launched in 2016, the same year AUSTRAC issued new guidance.

In separate interviews on Sunday, Mr Maxsted stood by his CEO but flagged he could be shown the door “if there isn’t investor support”.

“All of us are here to act in the best interests of the company … we haven’t seen anything that is case for (Mr Hartzer’s) dismissal,” he told The Australian.

BONUSES CUT

On Sunday, Westpac announced it would scrap or trim the bonuses of its executive team in response to the allegations.

It came after Treasurer Josh Frydenberg rebuked the lender and flagged potential disqualification of its board members and executives under new laws introduced in the wake of the banking royal commission.

Asked on ABC’s Insiders program whether he would be happy if the CEO and chair of Westpac are still in place in six months time, Mr Frydenberg said: “History shows you that these issues build a momentum of their own and where boards start is not necessarily where boards finish.”

He noted the previous CEO of the Commonwealth Bank eventually left after the bank was also found to have breached money-laundering laws.

He said the Australian Prudential Regulation Authority had the ability to disqualify boards and executives under the Banking Executive Accountability Regime introduced by his government.

However, that came into force in 2018 and is not retrospective, while some of the alleged breaches date back to 2013.

Asked what action he would like to see, Mr Frydenberg said, “As I said, these issues develop a momentum of their own. They’ve got an AGM on December 12 and, no doubt, there’ll be some very hard discussions between now and then.”

He said he had spoken to the CEO and chair of Westpac and made it clear the seriousness of these issues.

Asked again whether these people should keep their jobs, the Treasurer said, “Again, our position has consistently been, decisions about who are on boards are matters for shareholders and who are on executive teams are matters for boards. That being said, these are very serious issues. There must be accountability.”

Westpac on Sunday released a statement outlining its response plan to AUSTRAC’s legal action, with Mr Maxsted saying the bank was “determined to urgently fix (the) issues”.

“We accept that we have fallen short of both our own and regulators’ standards and are determined to get all the facts and assess accountability,” Mr Maxsted said in a statement.

“In the interim, the board has determined that either all or part of the grant of the 2019 Short Term Variable Reward will be withheld for the full Executive team and several members of the general management team subject to the assessment of accountability.”

In outlining the plan, Mr Maxsted and Mr Hartzer said the bank’s response would focus on three areas.

Those include the bank closing LitePay, lifting standards through priority screening and improving cross-industry data sharing and protecting people by investing in reducing the human impact of financial crime.

‘COMPLETELY INADEQUATE’

Opposition Leader Anthony Albanese has described Westpac’s response to the “shocking revelations” as “completely inadequate”

“The buck does stop with the CEO and with the board and up to now frankly the response has been completely inadequate,” he told reporters in Geelong on Saturday.

“I frankly can’t comprehend the whole concept of people wanting to access material that I just find abominable and most Australians would find just disgusting. The government needs to get on top of this issue because it has no place in any civilised society.”

Labor has used the scandal to fight a government bill toughening union regulations due to be voted on when parliament sits this week, saying it highlights a double standard.

Industrial relations spokesman Tony Burke said under the legislation a union can be deregistered for submitting its paperwork late but Prime Minister Scott Morrison’s response to Westpac’s 23 million money laundering breaches was “well that’s a matter for the (bank’s) board”.

“If you are a union, three breaches of paperwork and the entire organisation can be brought down,” Mr Burke told Sky News on Sunday. “The reason this bill is in front of the parliament is they want to bash unions.”