Australia’s financial crime watchdog AUSTRAC has ordered the appointment of an external auditor to examine Afterpay’s compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the AML/CTF Act).
In response to the news Afterpay’s shares plummeted 13 per cent to $22.19 a share. The buy now, pay later scheme received a notice from AUSTRAC on June 12.
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AUSTRAC said in its application it has reasonable grounds to suspect that Afterpay is a reporting entity that has contravened and/or is contravening sections 32 and 81 of the AML/CTF Act.
The AUSTRAC external auditor will examine Afterpay’s governance and oversight of decisions related to its AML/CTF framework, identification and verification of customers, suspicious matter reporting obligations and AML/CTF program, including the development of its money laundering and terrorism financing risk assessment.
It will investigate if there was any compliance issues between the period of January 19, 2015 to present day.
Nicole Rose, CEO at AUSTRAC said the buy now, pay later sector has experienced rapid growth in recent years and this appointment reminds new financial services businesses that they have obligations under the AML/CTF Act and they must take these seriously.
“The audit will help identify if Afterpay has developed and implemented the systems and controls it needs to ensure it complies with its obligations. These laws are in place to protect businesses, the financial system and the Australian community from criminal threats.
“AUSTRAC will continue to work with Afterpay to assist the company to mature and strengthen its compliance processes, staff training and suspicious matter reporting. But we will not hesitate to take action where an organisation is failing to appropriately protect itself and Australia’s financial system from criminal activity.”
Afterpay said it is committed to meeting the high expectations of its customers and retail partners.
The buy now, pay later company said it has proactively engaged with AUSTRAC on its AML/CTF compliance over a number of months, including recent engagement about its intention to conduct an independent review as part of its AML/CTF program.
“We recognise that buy now, pay later is a new and maturing sector not only for our customers, but also for regulators, and we will continue to work closely with AUSTRAC to develop a leading compliance regime specific to our business in a transparent and cooperative manner,” it said in a statement.
Afterpay said it was not aware of AUSTRAC’s decision to serve the notice until it was received.
According to Roy Morgan, 1.59 million Australians are using platforms like Afterpay and Zip Pay.
Earlier this year, Afterpay avoided tighter restrictions after the Senate handed down a report saying it shouldn’t be treated as a creditor, despite a number of experts saying it should be.