I think it is fair to say that the Westpac Banking Corp (ASX: WBC) share price was out of form last month.
During November the banking giant's shares were amongst the worst performers on the ASX 200 with a decline of 14.1%.
Why did the Westpac share price crash lower last month?
Investors were selling the bank's shares last month after AUSTRAC alleged that it breached the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act on 23 million occasions.
This included failing to carry out appropriate customer due diligence on transactions to the Philippines and South East Asia that have known financial indicators relating to potential child exploitation risks.
AUSTRAC said: "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," the regulator added.
This has sparked fears that Westpac may be dealt a major penalty by AUSTRAC in 2020. Especially after Commonwealth Bank of Australia (ASX: CBA) copped a $700 million fine in 2018 for 53,750 alleged breaches.
Which would be especially bad news given how Westpac has just completed a $2 billion institutional placement. These funds were raised to provide an increased buffer above APRA's unquestionably strong CET1 capital ratio benchmark of 10.5%.
An AUSTRAC penalty has the potential to wipe out these funds and lead to Westpac requiring another capital raising to get its balance sheet back in order.
Where next for Westpac shares?
I think where Westpac's shares go next will depend on the severity of the AUSTRAC penalty. Opinion is divided in the market, with some expecting a penalty similar to CBA's and others speculating that it could be upwards of $2 billion.
Because of this, I suspect that its shares may remain under pressure until all the details are known. As a result, it may be prudent to wait and see how the story unfolds before buying shares.