Federal police are investigating payments made by Westpac customers that may be linked to child exploitation in the Philippines.

Details of the alleged payments form part of a lawsuit lodged by financial intelligence agency Austrac on Wednesday in which the regulator accused Westpac of 23m breaches of anti-money laundering and counter-terrorist finance laws involving $11bn in transactions.

As part of the case, Austrac accused Westpac of systematically failing to detect and stop transactions with people in the Philippines that fit a pattern of child exploitation.

In documents filed with the Federal Court, Austrac identified 12 Westpac customers it said transferred money to the Philippines in a way consistent with child exploitation, including one who had a conviction for child exploitation and another who transferred money to a person in the Philippines who was later arrested “for child trafficking and child exploitation involving live streaming of child sex shows and offering children for sex”.

“The Australian Federal Police can confirm it has been working with Austrac and is aware of the individuals identified suspected of suspicious transactions which may relate to child sex offences,” an AFP spokesman said.

“The AFP is currently assessing the matter, and as such it would not be appropriate to comment further at this stage.”

Westpac’s chief executive, Brian Hartzer, is under increased pressure to resign after the prime minister, Scott Morrison, said he and the bank’s board should be reflecting on the issue “very deeply”.

On Thursday morning Westpac’s share price fell by more than 2.5%, following a 3.3% fall the previous day, as investors began to digest implications for the bank that will include a fine likely to run into the billions of dollars.

During an appearance on ABC radio’s AM program on Thursday, Morrison declined to say whether Hartzer was the right person to continue leading the bank.

“Well, these are things that the board and the management need to determine themselves,” Morrison said.

“It’s not for the government to say who should be in those jobs or not, but 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 as you have highlighted in your report – these are some very disturbing transactions involving despicable behaviour.”

The scandal also puts pressure on the Westpac chairman, Lindsay Maxsted, who has been on the board since 2009.

His tenure has been marked by scandals including charging customers for services they did not receive and overcharging home loan borrowers, which together have resulted in it setting aside $1.9bn in remediation costs over the past two years, and attempting to rig an important interest rate benchmark.

Austrac took direct aim at Westpac’s top brass in its lawsuit, saying the alleged 23m contraventions were “the result of systemic failures in its control environment, indifference by senior management and inadequate oversight by the board”.

It is believed the board held an emergency meeting by telephone on Wednesday afternoon to deal with the Austrac lawsuit.

Directors asked management about the legal issues raised by the case and the potential reputational damage it might cause the bank.

However, it is believed Hartzer’s tenure was not discussed.

Westpac has declined to estimate how much it will have to pay Austrac to settle the case.

However, at the same time as announcing a 15% slump in profit earlier this month, the bank raised $2.5bn from investors in a move that it told the market gave it “additional capacity to respond to potential litigation or regulatory actions”, among other things.

It highlighted failure to obey anti-money laundering and counter-terrorism laws as a key risk in fundraising documents.

“Noncompliance with financial crime obligations could also lead to litigation commenced by third parties (including class action proceedings) and cause reputational damage,” it told the market at the time.

“These actions could, either individually or in aggregate, adversely affect Westpac’s business, prospects, reputation, financial performance or financial condition.”

The theoretical maximum fine that could be levied on Westpac runs into the hundreds of trillions of dollars, but this is a largely meaningless figure because courts never impose the maximum and Hartzer has indicated he wants to settle with Austrac, meaning the bank can negotiate a figure.

Leading bank analyst Brett Le Mesurier, of Shaw and Partners, said the theoretical minimum fine if every category of contravention alleged by Austrac was treated as a single offence was about $300m.

“It’ll be somewhere between many, many times their market cap and $300m,” he told the Guardian.

Westpac’s market capitalisation is about $90bn.

“You’d have to think that seeing Westpac raised $2.5bn they don’t think it would be more than that,” Le Mesurier said.

However, a fine in the billions would put a significant dent in Westpac’s profit, which came in at $6.85bn last year.

Le Mesurier said the market knew the Austrac action would be big, but the mammoth scale of the lawsuit was unexpected.

“If you look at their profit announcement they said it would be significant, but there was nothing to indicate it would relate to 23m contraventions,” he said.

A payment in the billions would eclipse the record for a civil penalty of $700m set last year by the Commonwealth Bank over 53,000 violations of money-laundering and counter-terrorism provisions.