Austrac close to completing probe into PayPal reporting obligations

The boss of Australia’s financial crimes regulator says a probe into whether global payments giant PayPal complied with its legal reporting obligations will soon come to a head.

Austrac boss Nicole Rose, left, expects to wrap up the regulator’s PayPal investigation in coming months. Picture: Britta Campion

Austrac chief executive Nicole Rose says a probe by the financial crimes regulator into whether global payments giant PayPal complied with its legal reporting obligations will soon come to a head.

Austrac has been conducting a detailed assessment of whether PayPal Australia complied with laws surrounding the compulsory reporting of the transfer of funds in and out of the country, as the regulator ramped up efforts to stop the movement of money to criminals and terrorists.

“Austrac is nearing completion of our enforcement investigation into PayPal,” Ms Rose told The Australian on Friday. “It is our strong expectation it will be concluded in the coming months.”

Ms Rose declined to comment further on how the regulator viewed the probe and whether it may take legal action or opt for another avenue of enforcement activity against the payments group.

Sources close to the matter said Austrac was currently leaning toward entering an enforceable undertaking with PayPal rather than initiating action in the courts. The regulator was initially said to be probing as many as 300 million potential local breaches of the law by PayPal, although that figure is likely to be markedly lower given some transactions won’t meet the legal definition of a funds transfer.

Austrac’s website notes that it has a range of enforcement actions in its armoury to ensure entities comply with the law.

They include civil penalty orders, enforceable undertakings, infringement notices and remedial directions.

As foreshadowed by The Australian, PayPal was hit with a spate of legal notices in 2019-20 to produce information to Austrac. That followed the self-reporting of potential violations by PayPal of its legal obligations.

PayPal has been the subject of scrutiny by Austrac for at least three years, with the regulator in 2019 forcing the appointment of an external auditor to the local entity to assess its compliance with anti-money-laundering and counter-terrorism financing laws.

Austrac has been conducting a detailed assessment of whether PayPal Australia complied with laws surrounding the compulsory reporting of the transfer of funds in and out of the country, as the regulator ramped up efforts to stop the movement of money to criminals and terrorists. Picture: AFP

PayPal appointed accounting firm EY as the independent auditor and submitted four interim reports to Austrac, with a final one being lodged in August 2020. It has continued to actively engage with the regulator.

Over the weekend a PayPal Australia spokesman said: “We continue to work closely with Austrac on this matter. It would not be appropriate to comment any further at this stage.”

PayPal facilitates the buying and selling of goods and services online, via a mobile app or in person by linking a customer’s bank account, debit and credit card to their PayPal ­account.

As well as PayPal, the domestic banking sector has also been in Austrac’s sights in recent years.

National Australia Bank in May entered into an enforceable undertaking with the regulator following an investigation that started in mid-2021. NAB agreed to a remedial action plan to address deficiencies in its compliance with anti-money laundering and counter-terrorism financing laws.

Westpac, however, was Austrac’s biggest corporate scalp when it agreed to pay a record $1.3bn penalty to the regulator in 2020.

Ms Rose said she believed Westpac was progressing well on its remediation efforts and investing heavily to boost its financial crimes monitoring.

“They have absolutely invested a bucketload,” she added. “They are doing a really good job.”

Westpac’s lax compliance with anti-money laundering laws cost former chief executive Brian Hartzer his job after millions of breaches of the legislation were uncovered. Some of those helped facilitate payments to child exploitation groups offshore.

Westpac is set to report its full-year results on Monday and analysts are expecting cash earnings to print at $5.25bn. Analysts and investors will also be monitoring whether the bank retains its cost target.

Commonwealth Bank’s breaches of anti-money laundering and counter terrorism financing laws preceded those of Westpac, with the nation’s biggest bank paying a $700m penalty in 2018.

The gambling sector has also been a target of Austrac’s actions. Ms Rose on Friday said the regulator would have an outcome in its investigations into Star Entertainment and SkyCity Adelaide within a month.