iSignthis suspends outbound SWIFT transfers over money laundering concerns

Written on the 9 December 2019 by Matt Ogg

iSignthis suspends outbound SWIFT transfers over money laundering concerns

Update: Since this article was originally published on 6 December, iSignthis has downgraded its FY19 (ending 31 December) guidance from $10.7 million to $6.5 million.

Payment identity verifier iSignthis (ASX: ISX) has made the decision to temporarily suspend outbound international SWIFT transfers from Australia due to concerns around anti-money laundering (AML) standards at Australian banks.

"Due to the various problems faced by Australian banks, including a number of AML failures, the Company is no longer in a position to reliably conduct SWIFT transfers originating from Australia," iSignthis said in an announcement this afternoon.

Westpac Group (ASX: WBC) has been under scrutiny of late after AUSTRAC alleged it had breached anti-money laundering regulations, while in mid-2018 Commonwealth Bank (ASX: CBA) paid a $700 million penalty over its AML and counter-terrorism systems.

iSignthis appears to be leveraging these problems to fast-track implementation of its own 'Paydentity' platform, described as "an advanced anti-money laundering, anti-fraud and anti-crime systems that screens transactions in real-time".

"It can screen inbound and outbound SWIFT transactions from the external sender or to the external beneficiary in real time against law enforcement, sanction, politically exposed person lists, and court databases, ensuring the integrity of transactions executed by ISXPay," the company said.

iSignthis' decision on SWIFT is expected to lead to a softening of its gross processed transaction value (GPTV) until the end of February, which on an annual basis stood at $2.25 billion in October. 

The group, which is also listed on the Frankfurt Stock Exchange and has recently launched a legal battle against the ASX over its share trading suspension, will however still be handling inbound SWIFT transfers.

In its revised earnings guidance published today ISX reduced its 2019 calendar year EBIT forecast from $10.7 million down to $6.5 million, however the group is still celebrating the fact this would be a maiden profit. 

Founder and CEO John Karantzis adds iSignthis is also considering integration of popular accounting and gaming platforms to further increase the interconnectivity and appeal of its platforms.

"Given the headwinds caused by the ASX's suspension of the company from quotation, this set of numbers is a credit to the iSignthis team," says Karantzis.

"We are on track to deliver a maiden profit, we have in excess of $14 million of cash, and we can give consideration to issuing our first dividend.

"The work done by the ISX team to complete the Tier 1 card network rollout in the EU, whilst integrating to a number of third-party trading platforms during 2018 has paid off."

If iSignthis can put its own Tier 1 arrangements in place via Europe's TARGET2 framework, the company's Paydentity platform will be able to facilitate incoming and outbound transactions independently of SWIFT. 

"In conjunction with Paydentity's Know your Customer's Customer ("KYCC") function, ISX has the ability to determine whether the initiator of a transaction is, in fact, the person(s) authorised to operate the sending account and can verify the identity and screen the sender," the company said.

"When using its own Tier 1 infrastructure, the Company is able to detect and report Suspicious Matter Reports in real time to financial intelligence units.

"The ability to offer SWIFT outbound capability contributes to the attractiveness of the IBAN based ecosystem, and ultimately inflow GPTV."

The company also released a briefing for the Australian Securities and Investments Commission (ASIC) today, incidating its subsidiary iSignthis Money (AU) had applied to the regulator for a non-cash payment license, a custodial license and a depositary license.

"By April 2020 iSIgnthis will offer card acquiring services in Australia as a principal licensee of the major schemes, under the Reserve Bank of Australia's card access regime," the company said.

"It is intended (subject to ASIC and APRA licensing) that the "stored value" electronic money services will soon also be available to the Australian public."

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Author: Matt Ogg

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