SYDNEY (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.

FILE PHOTO: Australia's Westpac Banking Corp's Chief Executive Officer (CEO) Brian Hartzer speaks during a media conference in Sydney, Australia, November 6, 2017. REUTERS/David Gray/File Photo

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 behavior,” 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 Center 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”.

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“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 center 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 here 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 capitalization 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 organization 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.