Afterpay faces new audit over terror fears
Afterpay has been hit with a fresh audit amid concerns over its current compliance with money laundering and counter terrorism financing laws.
The audit, announced by AUSTRAC, comes after it identified concerns with its compliance.
The external auditor will examine Afterpay's current methods of identifying and verifying customers and its reporting obligations on "suspicious matters".
It will also look at the development of its money laundering and terrorism financing risk assessment.
The audit comes as nearly 95,000 new buy now pay later accounts are being opened every month in Australia.
Afterpay began four years ago before Zip Pay and the two companies have 2.6 million customers in Australia and New Zealand, according to figures from April this year.
AUSTRAC CEO Nicole Rose 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 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," she said.
"These laws are in place to protect businesses, the financial system and the Australian community from criminal threats."
In a statement from the AUSTRAC website today, it stated the audit will be used to determine the extent of any compliance issues and whether further regulatory action concerning Afterpay is required.
"AUSTRAC will continue to work with Afterpay to assist the company to mature and strengthen its compliance processes, staff training and suspicious matter reporting," Ms Rose said.
"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."
The audit will be at Afterpay's expense, with a preliminary report due to AUSTRAC within 60 days and a final version due within 120 days. "We welcome the opportunity to continue to work closely and constructively with AUSTRAC and we will approach this formal process as an opportunity to ensure that our AML/CTF compliance is robust," Afterpay said.
"We are committed to remaining focused on becoming better at what we do."
Buy now pay later schemes have been heavily scrutinised at a recent Senate inquiry into the purported harm these payment methods are causing to users.
Millennials have recently been turning to Afterpay to cover their dental costs over using private health insurance.
The buy-now-pay-later service was offered to Primary Health Care's dental surgeries last year, which resulted in 800 new customers in just eight weeks.
Millennials have one of the lowest participation rates in private health, and general dental is not covered by Medicare.
The Australian Securities and Investments Commission also found one in six buy now pay later customers had become overdrawn, delayed their payments or borrowed money to meet their repayments.