UPDATE 3-Australian financial crime watchdog may broaden Westpac child exploitation lawsuit

(Adds AUSTRAC comment in paragraph 6)

SYDNEY, June 12 (Reuters) - Australia’s financial crime watchdog may add additional breaches of anti-money laundering laws related to suspected child exploitation transactions to its lawsuit against Westpac Banking Corp, the bank said on Friday.

In a bombshell lawsuit in November, AUSTRAC sued the country’s second-largest bank for 23 million alleged breaches of anti-money laundering laws, including payments between known child exploiters.

After the lawsuit, the bank upgraded its systems and found additional issues including suspicious matters related to potential child exploitation and issues involving 272 customers, the bank said in a statement.

Westpac said in the statement that after it reported those matters to AUSTRAC, which in its original lawsuit accused the bank of failing to monitor a dozen customers who could have been child exploiters, the watchdog was now looking into the new matters.

“Westpac has now been informed by AUSTRAC that it is further investigating these matters and has notified Westpac it may amend its statement of claim to include allegations arising from these investigations,” the statement said.

AUSTRAC declined to comment, saying it would be inappropriate to do so because the case is before the court.

Earlier this month, Westpac said an internal investigation had concluded that child exploitation payments made through its system were the result of “faults of omission” and not intentional wrongdoing.

In its defence, filed with the courts last month, the lender admitted to record keeping failures and inadequate customer due diligence, as well as breaches of certain correspondent banking obligations.

A further hearing on the case is scheduled to take place on June 17.

Shares in Westpac, which has accounted for a possible A$900 million ($615 million) fine from the case, fell 3.3% on Friday, underperforming a broader market that was 1.9% lower. ($1 = 1.4643 Australian dollars)

Reporting by Paulina Duran in Sydney and Shriya Ramakrishnan in Bengaluru; Editing by Muralikumar Anantharaman and Christopher Cushing