Afterpay escapes further AUSTRAC action but regulatory clouds linger
15 Oct 2020

Afterpay has received an all-clear from the Australian financial crimes watchdog AUSTRAC over its breaches of anti-money laundering laws, but the buy now, pay later (BNPL) heavyweight isn’t entirely out of the woods when it comes to regulatory scrutiny.

The $27 billion listed fintech said on Wednesday that AUSTRAC would take no further action against it after completing an audit into the company’s compliance with anti-money laundering and counter-terrorism (AML/CTF) regulation. The news helped Afterpay shares hit a new high of $98.68 before closing the session at $96.09.

AUSTRAC shocked the market last year when it demanded an external audit of Afterpay’s compliance with AML/CTF laws, but noted on Wednesday the company’s remediation work since last year to “ensure compliance”.

“After considering the report and the response by Afterpay, AUSTRAC has decided not to undertake further regulatory action,” the regulator said.

However, payments industry veteran McLean Roche’s Grant Halverson said Afterpay’s growing global presence means it will need to be vigilant about its platform being exploited for nefarious purposes.

“The anti-money laundering issues don’t go away,” he said.

“Now that Afterpay claims to be in eight countries, they are open to cross border money laundering and fraud – typically by a fraud syndicate that will set up dummy merchants and false consumer accounts.”

Mr Halverson added that Afterpay is facing other regulatory challenges, including the Australian Securities and Investments Commission’s review of whether BNPL providers act as lenders. A decision on that is due shortly.

Meanwhile, the Reserve Bank is also reviewing rules that prevent retailers from surcharging customers who use buy now, pay later schemes.

By Colin Kruger, The Age, 14 October 2020

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