Sergio Albert/Ray-Ban via Getty Images
- Payments platform Afterpay is in dialogue with AUSTRAC, Australia’s financial intelligence agency, over issues relating to compliance with anti-money laundering and counter-terrorism financing laws.
- The "buy now, pay later" service pioneer says it hasn’t identified any money laundering or terrorism financing activity on its platform, but confirmed that AUSTRAC has raised concerns.
- The revelation comes just one day after announcing its latest US retail footprint figures, including partnership deals with iconic fashion brands Levi’s, Ray-Ban, O’Neill and Tarte Cosmetics.
Things were going so well for Afterpay.
The Australian-born "buy now, pay later" service pioneer announced on Wednesday that it has inked new partnership deals with US brands including Levi’s, Ray-Ban, O’Neill and Tarte Cosmetics, taking the total number of American consumers that have used the product to 1.5 million across 3,300 retailers.
The announcement saw its stock price surge on the Australian Securities Exchange, closing up 7.079% at $23.90 — the best performer on the country’s bourse on Wednesday.
But come Thursday, it’s a very different story for the fintech platform.
In a statement to the ASX, Afterpay revealed has attracted the attention of Australia’s financial intelligence agency, AUSTRAC.
"Although Afterpay has not identified any money laundering or terrorism financing activity via our systems to date, Afterpay is currently in dialogue with AUSTRAC regarding issues that AUSTRAC has raised regarding our AML/CTF compliance, the outcome of which is yet to be determined," the statement said.
"As a scheduled part of our existing program, we are in the process of appointing a leading professional service firm to conduct an independent review of the design and operation of our [compliance] framework."
Afterpay said it made changes to its identity verification processes in July 2018 as part of a move to more fully comply with Australia’s anti-money laundering and counter-terrorism financing laws.
The statement also confirmed Afterpay’s intention to launch in the UK under the Clearpay brand, following a "soft test" — an announcement that has been overshadowed by the AUSTRAC revelation.
An AUSTRAC spokesperson confirmed to Business Insider Australia that it is currently investigating Afterpay.
"AUSTRAC can confirm it has been working closely, over some time, with Afterpay in relation to anti-money laundering and counter-terrorism finance compliance issues," the spokersperson said. "Stopping the movement of money to criminals and terrorists is a vital part of our national security defences."
The spokesperson declined to answer further questions from Business Insider Australia about the specifics of AUSTRAC’s concerns.
At the time of writing, Afterpay’s share price had tumbled 1.67% to $23.50 on the ASX.
A parliamentary inquiry, which commenced in October 2018, was tasked with looking into the providers of "credit and financial services targeted at Australians at risk of financial hardship" after the Australian Securities and Investments Commission singled out Afterpay as one of a number of ‘buy now, pay later’ services under its microscope.
When grilled by politicians during the inquiry, Afterpay argued it was not a credit provider at all but a "budgeting tool" that levies late fees rather than charging interest or account-keeping fees. Consumer advocacy group Choice told the inquiry that "a quarter of Afterpay’s income" comes from these late fees.
Although the parliamentary inquiry ultimately stopped short of introducing tough new rules for Afterpay and its rivals, it also expressed some cynicism about the "budgeting tool" line, especially as it relates to more vulnerable consumers.
"It seems likely that, as providers have suggested, many people use their products as a budgeting tool," the final report concluded.
"It is less likely, however, that the 23% of people paying their buy-now-pay-later account with a credit card are using the service for budgeting.
"It is almost certainly not the case that individuals with multiple payday loans are using buy-now-pay-later products to budget."
But Harvard Business School is reportedly enamoured of the business model.
Afterpay’s co-founder Nick Molnar was invited to give a guest lecture to MBA students in April, according to The Australian newspaper.
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Source: Business Insider –