Buy now, pay later provider Afterpay is being probed by federal financial intelligence agency Austrac for possible breaches of anti-money laundering and counter-terrorism financing laws.
The company confirmed it was “in dialogue” with the regulator in a statement to the ASX on Thursday.
“Although Afterpay has not identified any money laundering or terrorism financing activity via our systems to date, Afterpay is currently in dialogue with Austrac regarding issues that Austrac has raised regarding our AML/CTF [anti-money laundering and counter-terrorism finance] compliance, the outcome is yet to be determined,” it said.
Austrac also confirmed it has been scrutinising the company. “Austrac can confirm it has been working closely, over some time, with Afterpay in relation to AML/CTF compliance issues,” it said.
“Stopping the movement of money to criminals and terrorists is a vital part of our national security defences and it is critical for regulated businesses in Australia to comply with the AML/CTF regime.”
Afterpay said that in July 2018, it amended its compliance framework to include “external identity verification and other processes for all Afterpay customers”.
In a market update, Afterpay also confirmed it has launched its buy now, pay later service in the UK market, and belatedly reported its strong performance in the US.
Afterpay shares spiked as much as 10 per cent on Wednesday after the company announced in the US, that it now has 1.5 million customers in that market. On Thursday, the stock retreated 1.8 per cent to $23.45.
The ASX update reported that Afterpay underlying merchant sales on its buy now, pay later platform in the 11 months to May 31 were up 143 per cent to $4.7 billion. It said underlying sales in the US, based on unaudited financial data, was $780 million for that period.
The company said it now has 4.3 million active customers on the platform and has been adding 7,900 customers a day this year. It also now has 30,600 merchants as of the end of May.
“Our strategy remains focussed on global merchant and customer growth, platform innovation and global support and infrastructure given an increased appreciation of the size of our global market opportunity and confidence in our differentiated value proposition,” the company said on Thursday.
The company said it has kept its gross loss, net transaction loss and net transaction margins broadly in line with the December half year despite the strong growth.
Just as importantly, Afterpay confirmed it is making strong headway in its attempt to penetrate in-store retail sales which represents a far larger opportunity than the online space where it has become a dominant player.
Afterpay said in the five months to the end of May in-store sales grew to represent 20 per cent of its underlying sales in Australia and New Zealand, up from 15 per cent in the December half year.
“Close to a quarter of Afterpay’s new customer growth in Australia is currently through in-store acquisition,” it said.
On Wednesday, Afterpay co-founder and chief executive Nick Molnar announced it has signed up iconic brands like Levi’s, Ray-Bans and O’Neill to its service in the US as well as announcing it has passed 1.5 million customers just one year after its launch.
“We are thrilled to be expanding Afterpay to hundreds of thousands more shoppers in the US each
month,” Mr Molnar said in a press release.
Afterpay shares more than doubled this year to a peak of $27 last month on the basis of its strong growth prospects in the US and the United Kingdom.
According to figures cited by Afterpay, the UK market is worth $720 billion, with $130 billion of this representing online sales. By comparison, the Australian market is $320 billion with online worth just $30 billion.