Westpac chief executive Brian Hartzer has stepped down in the wake of AUSTRAC's investigation.
Westpac today announced Hartzer will exit, with current chief financial officer Peter King taking over as acting chief executive from December 2.
Hartzer said: "As chief executive I accept that I am ultimately accountable for everything that happens at the bank. And it is clear that we have fallen well short of what the community expects of us, and we expect of ourselves."
Hartzer has been given 12 months' notice and will be paid his fixed remuneration of $2.686 million over that period.
While King steps up, chief operating officer Gary Thursby will act as chief financial officer. As acting chief executive, King will be paid a fixed remuneration of $2.1 million.
Westpac Group chair Lindsay Maxsted said King has had a "long and distinguished career at Westpac."
"The board has asked [King] to focus on two immediate priorities: to implement the Westpac Response Plan and to continue to execute the group's broader strategy," Maxstead said.
"We are determined to urgently fix these issues and lift our standards to ensure our anti-money laundering and other financial crime prevention processes are industry leading."
At the same time, Maxsted announced longstanding director Ewen Crouch will not seek re-election.
Maxstead is also bringing forward his retirement as chair to the first half of 2020.
"The board accepts the gravity of the issues raised by AUSTRAC," Maxstead said.
"As was appropriate, we sought feedback from all our stakeholders including shareholders and having done so it became clear that board and management changes were in the best interest of the bank."
A global search for a new chief executive will commence, he added.
Westpac is currently working through its response to the AUSTRAC Statement of Claim.
The claim means the bank is facing 23 million alleged breaches of anti-money laundering laws and counter terrorism laws.
AUSTRAC last week applied to the Federal Court seeking civil penalty orders against Westpac relating to "systematic" non-compliance with the Anti Money Laundering and Counter Terrorism Act 2006 on over 23 million occasions.