Westpac has agreed to a $1.3 billion settlement after breaching anti-money laundering rules more than 23 million times.

Financial crime watchdog AUSTRAC says the bank admitted to the breaches, in which it facilitated a range of suspicious transactions associated with possible child exploitation. A review of Westpac's historical transaction records has found 262 suspected paedophiles who were likely to be using its funds transfers for child exploitation.

It also failed millions of times to assess risks of money laundering and terrorism financing.

Westpac did not properly report more than 19.5 million international funds transfer instructions (IFTI) amounting to more than $11 billion.

“Our role is to harden the financial system against serious crime and terrorism financing and this penalty reflects the serious and systemic nature of Westpac's non-compliance,” AUSTRAC chief executive Nicole Rose said in a statement.

“Westpac's failure to implement effective transaction monitoring programs, and its failure to submit IFTI reports to AUSTRAC and apply enhanced customer due diligence in relation to suspicious transactions, meant AUSTRAC and law enforcement were missing critical intelligence to support police investigations.”

The penalty is almost double the previous record $700 million fine paid by the Commonwealth Bank for almost 54,000 money laundering breaches.

The scandal forced the resignation of then Westpac chief executive Brian Hartzer and the retirement of chairman Lindsay Maxsted, along with several other board and executive changes in 2019.

But there have been no legal sanctions against Westpac's senior management and board directors.

Westpac chief executive Peter King has apologised in a stock exchange statement.

“We are committed to fixing the issues to ensure that these mistakes do not happen again. This has been my number one priority,” he said.

“We have also closed down relevant products and reported all relevant historical transactions.”