The Motley Fool

Why the Westpac share price fell 14% in November

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.

Instead of Westpac, these highly rated ASX dividend shares might be better options for income investors.

Top 3 Dividend Shares To Buy For 2020

When Edward Vesely -- our resident dividend expert -- has a stock tip, it can pay to listen. With huge winners like Dicker Data (up 147%) and Collins Food (up 105%) under his belt, Edward is building an enviable following amongst investors that are planning for retirement.

In a brand new report, Edward has just revealed what he believes are the 3 best dividend stocks for income-hungry investors to buy now. All 3 stocks are paying growing fully franked dividends giving you the opportunity to combine capital appreciation with attractive dividend yields.

Best of all, Edward’s “Top 3 Dividend Shares To Buy For 2020” report is totally free to all Motley Fool readers.

Click here now to access this free report.

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!