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Buy-now pay-later sensation Afterpay (ASX: APT) has been cleared by the financial crimes regulator today, with AUSTRAC deciding to take no further regulatory action.
Afterpay today confirmed that it has received final notification from AUSTRAC following its consideration of a report examining the company's compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the AML/CTF Act).
AUSTRAC says after considering this final report, and Afterpay's response to the findings, it has decided to not take any further regulatory action.
The watchdog noted Afterpay has uplifted its AML/CTF compliance framework and financial crime function, and satisfactorily completed all required remediation activity.
"We are pleased to have received AUSTRAC's decision following the external audit as it provides the company and its stakeholders with certainty and acknowledges the work the company has undertaken to strengthen its AML/CTF risks," said Afterpay chair Elana Rubin.
"The external audit provided Afterpay with the opportunity to better understand our obligations and improve the way we manage our AML/CTF risks.
"We will use these learnings and out ongoing engagement with AUSTRAC to continue enhancing our AML/CTF framework as the business continues to grow."
The independent audit, undertaken by independent auditor Neil Jeans, was handed to AUSTRAC in November 2019 and confirmed Afterpay's alignment with the AML/CTF Act.
The report concluded the majority of historic non-compliance matters had been addressed, with the remainder covered in its recommendations.
Jeans also noted Afterpay's compliance with its AML/CTF obligations was based on legal advice he believed to be incorrect from top tier Australian law firms.
"The initial legal advice concluded that Afterpay's business model resulted in the provision of the AML/CTF Designated Service factoring receivables from merchants. I am of the opinion this initial legal advice was incorrect," Jeans said in the report.
"The initial legal advice provided to Afterpay did not reflect Afterpay's business model. Having fully analysed Afterpay's buy-now pay-later business, it is my opinion that Afterpay have never provided the factoring receivables Designated Service.
"The Designated Service being provided by Afterpay is that of loans to consumers (which are designated under the AML/CTF Act) in order to purchase goods from merchants and this activity constitutes the provision of a loan and repayment of a loan."
He also said Afterpay's systems and controls were "appropriate, focused and continue to be adequately resourced as customer numbers and loan volumes increase".
In August this year Afterpay released its FY20 results, showing a statutory loss of $22.9 million including increased costs of $3.7 million relating to the AUSTRAC investigation.
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