State Street has been hit with a $1.2 million penalty for not reporting the money movements, which left it exposed to exploitation by organised criminals.

The fine is small compared to a $700 million money laundering penalty recently paid by the Commonwealth Bank, but is still likely to put a dent in the US-owned asset manager's reputation.

State Street failed to report 99 foreign fund transfers, copping $12,000 per breach.

By comparison, Westpac was last year found to have committed 23 million money laundering breaches, and Commonwealth recorded almost 54 million breaches in 2017.

Westpac is still negotiating its penalty.

AUSTRAC chief executive Nicole Rose said transparency around funds transfers was important to stamp out crimes such as terrorism, child exploitation, drug trafficking and tax evasion.

"Because the most sophisticated criminal syndicates operate across national borders, information about international funds transfers can provide a key piece of the puzzle for our law enforcement partners," she said.

"Businesses are the first line of defence in protecting the community and our financial system from criminal abuse."

State Street said it was working with the Australian regulator to address weaknesses in its reporting of international fund transfers.

A spokesman said the lender was also working with an independent consultant after self-reporting the lapse.

He said the integrity of the transactions was not in question, and there was no financial impact on State Street clients.

"There is no suggestion that the transactions in question were suspicious nor that there were deficiencies in State Street's customer due diligence," the spokesman told AAP on Wednesday.

Australian Associated Press