The Afterpay Touch Group Ltd (ASX: APT) share price has come under pressure on Thursday after providing an update in relation to AUSTRAC and its Anti-Money Laundering/Counter Terrorism Financing (AML/CTF) program.
In morning trade the payments company’s shares are down 8.5% to $23.45.
What was in the update?
This morning Afterpay Touch revealed that its subsidiary, Afterpay Pty Limited, received a notice from AUSTRAC after 5pm on June 12 requiring it to appoint an AUSTRAC-authorised external auditor to carry out an audit in respect of its AML/CTF compliance.
The release explains that the notice, which has been issued in accordance with section 162(2) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), sets out a number of key areas that the external auditor is to focus on and covers the period from January 19 2015 to date.
A final version of the audit report is required to be provided to AUSTRAC within 120 days of the external auditor’s appointment.
Afterpay reiterated that it is committed to meeting the high expectations of its customers and retail partners. It also advised that its millions of customers use the service to budget for discrete, small value ($148 average), non-cash transactions.
In light of this, it has welcomed the opportunity to continue to work closely and constructively with AUSTRAC and “will approach this formal process as an opportunity to ensure that our AML/CTF compliance is robust.”
It added: “We have proactively engaged with AUSTRAC on our AML/CTF compliance over a number of months, including recent engagement about our intention to conduct an independent review as part of our AML/CTF program. We recognise that Buy Now Pay Later is a new and maturing sector not only for our customers, but also for regulators, and we will continue to work closely with AUSTRAC to develop a leading compliance regime specific to our business in a transparent and cooperative manner.”
Management also pointed out that its business model has several features that help to control its money laundering and terrorism financing risk, including the implementation of strict spending limits (up to a maximum of $1,500 per transaction).
Furthermore, the company has undertaken various measures to strengthen its AML/CTF framework including in focus areas identified in the notice and continues to invest in further AML/CTF compliance enhancements. It does not expect any impact to arise on the way customers and merchants currently use the Afterpay service.
It isn’t just Afterpay Touch’s shares that have come under pressure because of the news. The shares of fellow buy now, pay later providers FlexiGroup Limited (ASX: FXL), Splitit Ltd (ASX: SPT), and Zip Co Ltd (ASX: Z1P) have all dropped lower this morning.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended FlexiGroup Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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