The Westpac Banking Corp (ASX: WBC) share price has come under pressure again on Friday.
In afternoon trade the banking giant's shares are down a further 2% to $24.68. This means that its shares are now down 7% in the space of just three days.
Why is the Westpac share price sinking lower?
Investors have been hitting the sell button in a panic this week after AUSTRAC commenced civil proceedings against it.
The civil penalty orders relate to systemic non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act. AUSTRAC alleges Westpac contravened the act on over 23 million occasions.
AUSTRAC Chief Executive Officer, Nicole Rose, explained: "These AML/CTF laws are in place to protect Australia's financial system, businesses and the community from criminal exploitation. Serious and systemic non-compliance leaves our financial system open to being exploited by criminals."
"The failure to pass on information about IFTIs to AUSTRAC undermines the integrity of Australia's financial system and hinders AUSTRAC's ability to track down the origins of financial transactions, when required to support police investigations," she added.
Given that Commonwealth Bank of Australia (ASX: CBA) copped a $700 million fine for 53,750 alleged breaches, the market is clearly concerned about the penalty Westpac will be dealt for its 23 million+ breaches.
Is this a buying opportunity?
Whilst its shares do look good value at this level, it might be best to wait and see how things unfold. Especially given how the quantum of this penalty is still very much unknown.
One broker that isn't in a rush to make an investment is Goldman Sachs. Its analysts have held firm with their neutral rating and cut the price target on its shares by 10% to $25.58.
The broker notes that banks have tended to underperform their peers significantly in the 12 months following a major incident.
It said: "Generally, underperformance in the first 3-4 months has been driven by multiple contraction, and thereafter EPS downgrades drive stock underperformance."
It also notes that "share price volatility continues for at least 60 trading days after the announcement of the event." So any hopes of a swift rebound may prove to be wishful thinking.
