Afterpay in hot water with Australia's terrorism financing watchdog — just one day after trumpeting its US retail success

Mark Kolbe/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 (AML/CTF) 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. It is not the first Australian regulator to take issue with Afterpay, with ASIC previously raising concerns with the business model.

Afterpay’s stock price tumbled 1.76% to $23.48 on Thursday as Australian investors reacted to the revelation.

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.

“In terms of the UK pipeline, the company is well progressed in further leveraging its strong existing partnerships with major international retailers across Australia, New Zealand and the US that have a significant UK presence,” it said.

“We are pleased with the profess and expect to make further announcements in the near term.”

Given the Australian AML/CTF laws are based on internationally-recognised standards, Afterpay will be hoping AUSTRAC’s UK counterpart isn’t paying attention.

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