* CommBank shares fall 3.9 pct to near 2-month lows
* Biggest intra-day share fall since Feb. 2016
* CommBank could face hefty fines, if found guilty
* "Too serious a breach" - former AUSTRAC exec (Rewrites and updates throughout with analyst comment, context, quote from former AUSTRAC exec)
SYDNEY, Aug 4 (Reuters) - Rattled investors on Friday wiped A$5.6 billion ($4.46 billion) from the market value of Australia's No.1 lender Commonwealth Bank after it was accused of "serious and systemic" breaches of money-laundering rules in a landmark legal case.
CommBank could face fines of hundreds of millions of dollars if convicted. The maximum penalty for contravening the anti-money laundering and counter terrorism financing law is A$18 million per breach.
The bank said it was reviewing the allegations made in the Federal Court by financial intelligence agency AUSTRAC and would defend itself, however it has not commented directly on the claims which cast a shadow over the entire banking sector.
In the biggest such case of its kind in Australia and the first against a major lender, AUSTRAC on Thursday accused CommBank of 53,700 breaches of laws against money laundering and terrorist financing.
In response, CommBank shares tumbled 3.9 percent to A$80.70, the lowest since June 13 and the largest intraday drop in 1-1/2 years, against a 0.3 percent on the broader market.
The case is the latest in a series of banking scandals which have damaged the sector's reputation in Australia and fueled calls for a sweeping judicial inquiry, known as a Royal Commission, with the power to recommend criminal charges and haul executives in for public questioning.
"The bank management will be distracted because of this issue and people will start pushing again for a Royal Commission. It's a downside risk for the sector," said TS Lim, banking analyst at Bell Potter Securities.
"It's hard to put aside money for these type of things. It's not like credit risk. I don't think shares would go anywhere from here because there is so much uncertainty and people don't know how the management would respond."
Ratings agency Standard & Poor's said it would assess whether the case would have any impact on CommBank's credit profile, citing possible financial penalties, reputational damage and weaknesses in governance.
S&P put Australian banks on 'negative watch' last October due to risks in the country's red-hot property market.
The regulator said the breaches were "systemic" and accused CommBank of failing to adequately report suspicious transactions totalling over A$77 million.
Six related to five customers who had been assessed by the bank as posing a potential risk of terrorism or terrorism financing. Others involved money-laundering syndicates subject to police investigations.
A drug importation and distribution syndicate deposited over A$21 million in cash into 11 CommBank accounts between February 2015 and May 2016, according to the court filing.
The bank allowed several of these accounts to operate even after being warned by federal police that they were connected with an investigation into serious offenses, it said.
"It's too serious a breach given the crime syndicates allegedly involved and the money involved," Gavin Durbin, a former AUSTRAC executive, told the Australian Broadcasting Corp (ABC).
"The reputational damage is what this is all about."
Historically, conduct fines in Australia have been negligible compared to Europe and the United States, where banks paid billions of dollars in fines following the global financial crisis.
CommBank is due to report full-year results on Aug. 9. ($1 = 1.2566 Australian dollars) (Reporting by Swati Pandey and Tom Westbrook; Editing by Stephen Coates)