SYDNEY (Reuters) - Australia's Westpac Banking Corp WBC.AX offered to refund people who bought new shares weeks before a lawsuit accusing it of millions of breaches of money laundering laws, a move some investors said was to fend off criticism about its transparency.

FILE PHOTO: A pedestrian looks at his phone as he walks past a logo for Australia's Westpac Banking Corp located outside a branch in central Sydney, Australia, November 5, 2018. REUTERS/David Gray/File Photo

The country’s oldest and second-largest bank has been in crisis since the financial crime watchdog, AUSTRAC, last week accused it of enabling 23 million payments in violation of anti-money laundering laws, including between known child exploiters.

The scandal has already seen out the bank’s CEO, chairman and head of its compliance committee, and large investors and their proxies have called for more heads to roll at Westpac’s annual general meeting on Dec. 12.

On Thursday, the lender said it would pay back retail shareholders who bought A$500 million ($340 million) of new stock two weeks earlier, giving no reason for the move other than to say it came after talks with corporate regulator the Australian Securities and Investments Commission (ASIC).

“Following discussions with ASIC, Westpac will provide a withdrawal option for (investors) who applied for shares under the Share Purchase Plan prior to the AUSTRAC announcement on 20 November 2019,” the bank said in a statement.

A Westpac spokesman did not return a Reuters call seeking further detail.

Investors said the move suggested an effort by the bank to tamp down complaints about its disclosures in the lead-up to the money laundering announcement, including when it asked investors to buy more shares in early November. It also raised A$2 billion from institutional investors, who were excluded from the refund.

“It seems to me like they might be trying to get ahead of a class action,” said Rod Bristow, CEO of Clime Asset Management, which holds Westpac shares and participated in the capital raising.

ASIC has said it is investigating Westpac, while a law firm has said it is preparing to file a class action lawsuit against the bank accusing it of falling short of its continuous disclosure obligations.

An ASIC spokesman declined to comment further.

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White Funds Management Managing Director Angus Gluskie said Westpac had made disclosures about AUSTRAC’s investigations in its past two annual reports and the refund appeared to be designed to acknowledge that retail investors might have missed the mention in Westpac’s most recent 312-page annual report.

“I don’t think any of us like the situation but I can see here that they have made quite a disclosure within their reporting,” said Gluskie, whose company also bought new Westpac shares in the raising.

“I would only be concerned if they had additional information that they were aware of that they should have disclosed to us that they hadn’t, or if they had tried to dress it down or paint it in a light that misrepresents the situation,” he added.

Westpac said it hired IBM's IBM.N financial consulting unit, Promontory, to run an external review of its financial crime prevention processes. Promontory's local boss, Jeff Carmichael, is a former chairman of banking regulator, the Australian Prudential Regulation Authority.

“Governments and financial institutions all around the world are grappling with the complexities associated with both monitoring and managing the reporting of suspicious activity given the huge volumes of transactions taking place every day,” Carmichael said in a statement issued by Westpac.

Westpac shares closed down 0.4% on Thursday, having lost a total of 7% of their value since the AUSTRAC announcement, or A$6.6 billion in market value.