* Westpac down up to 1.2% as AGM in spotlight
* Oil and gas explorer FAR plunges 28% on $99 mln placement
* Lynas jumps 9.3% as U.S. army plans to fund rare earths plant
By Niyati Shetty
Dec 12 (Reuters) - Australian shares fell on Thursday, led by financial stocks, with Westpac Banking Corp WBC.AX falling more than 1% as its board faced intense scrutiny over a money-laundering scandal at the annual shareholder meeting.
The S&P/ASX 200 index .AXJO was down 0.6%, or 39.70 points, at 6,712.90, as of 0104 GMT. The benchmark closed 0.7% firmer on Wednesday.
Westpac, the country's oldest and second-largest bank, said it would implement additional transaction monitoring as it seeks to hold back an avalanche of outrage over a scandal that includes accusations of enabling child exploitation payments. bombshell lawsuit, as the country was still digesting a damaging financial misconduct inquiry, has sent Westpac's shares down 9% in the three weeks since it was announced, wiping about A$8.6 billion ($5.84 billion) off its market value.
The financial sub-index .AXFJ declined 0.8%, with the rest of the "Big Four" banks down between 0.7% and 1.2%.
"They (investors) don't like to be reminded of the headwinds that banks face," said Henry Jennings, senior analyst and portfolio manager, Marcustoday.
"It just reminds people that banking is not what it used to be in terms of the compliance and regulatory framework which now needs to be adhered to, as it is more expensive and does weigh on profits."
Investors were cautious despite the U.S. Federal Reserve signalling that borrowing costs will not change anytime soon, as the economic outlook of the world's top economy remains "favourable". units .AXEJ retreated 0.6% as a surprise climb in U.S. crude inventories hit oil prices and raised concerns over global demand outlook. O/R
Sector heavyweight Woodside Petroleum Ltd WPL.AX fell 0.3%, while peer Oil Search Ltd OSH.AX dropped 0.8%.
Oil and gas explorer FAR Ltd FAR.AX plunged up to 28% to its lowest in more than five years as it announced the completion of a A$146 million placement to fund development of a Senegal oil field project. stocks .AXIJ declined 1.5%, with software developers Xero Ltd XRO.AX and WiseTech Global Ltd WTC.AX falling 1.9% and 3.1%, respectively.
Lynas Corp LYC.AX , the world's only major rare earths producer outside China, jumped 9.3% and was the top gainer in the ASX benchmark after Reuters reported that the U.S. Army plans to fund construction of rare earths processing facilities in the United States. the Tasman Sea, New Zealand's benchmark S&P/NZX 50 index .NZ50 added 0.1%, or 8.91 points, to 11,300.87.
Sky Network Television Ltd SKT.NZ , the best performer on the bourse, gained 4.1%.
($1 = 1.4736 Australian dollars)