Australia's money-laundering cop is worried about fintech startups such as Afterpay

Afterpay Touch boss David Hancock received the Finnies award for FinTech Organisation of the Year this week.

Australian global fintech Afterpay has been “in dialogue” with the federal government’s financial crimes body, AUSTRAC, over concerns about potential money-laundering concerns, the company has revealed.

In a statement to the ASX on Thursday, where the company revealed that global sales were set to pass $5 billion in FY19 – and the unaudited year-on-year figures were already up 143% for the first 11 months to May 31, Afterpay disclosed that while it had “not identified any money laundering or terrorism financing activity via our systems to date” the financial transactions watchdog, the Australian Transaction Reports and Analysis Centre (AUSTRAC) had raised concerns about Afterpay’s Anti-Money Laundering/ Counter-Terrorism, Financing (AML/CTF) compliance.

The outcome of the discussions have “yet to be determined” the company said.

Afterpay amended its AML/CTF compliance framework in July 2018 to include external ID verifications and other systems to comply with Australian law. The regulator said it had been working with the company on the issue “over some time”.

While AUSTRAC has been focused on digital currency exchanges and its use by organised crime, the regulator flagged earlier this week that is was preparing to launch legal against banks that failed to properly monitor suspicious overseas transactions.

Last month, Westpac admitted it was talking to AUSTRAC over a decade-long failure to report a international transfers in a timely fashion.

This time last year the Commonwealth Bank settled a case involving more then 53,000 breaches of money-laundering provisions for $700 million.

In its statement to the ASX, Afterpay said: “As a scheduled part of our existing program, we are in the process of appointing a leading
professional services firm to conduct an independent review of the design and operation of our AML/CTF framework to see if any further improvements or actions can or should be made”.

Aside from the regulatory hiccup, the company’s results were impressive, with more than 4.3 million active customers transacting using the buy-now-pay-later service by the end of May and around 7,900 new customers signing up daily since the beginning of 2019.

Australia and New Zealand now have a combined customer base of more than 2.7 million active customers with access to 27,300 merchants.

After a year in the US market, the business now has 1.5 million active customers and more than 3300 active merchants.

The business has also had a “soft test” in the UK market and trades under the Clearpay name.