Afterpay hands interim report to Austrac

Afterpay hands confidential interim report to money laundering watchdog, says it has ‘not identified’ any law breaches.

Afterpay’s Anthony Eisen and Nick Molnar.

Afterpay’s shares have hit a new high after Goldman Sachs analysts pegged it as the one to beat in the “buy now, pay later” sector.

While Afterpay remains under a regulatory cloud for allegedly being non-compliant with current anti-money laundering and counter-terrorism financing laws, Goldman analyst Ashwini Chandra said the high uptake of Afterpay’s platform by both consumers and merchants would drive Afterpay’s growth.

“In addition to a $1 trillion market opportunity as a tailwind, frequency of use should drive strong operating leverage in the medium term,” Mr Chandra told clients in a note.

With Goldman upgrading Afterpay to a ”buy”, the company’s stock rose more than 15 per cent to an intraday high of $36.55 a share on Wednesday. It closed the session up 13.3 per cent at $36.

“Our revised gross merchandise value (GMV) forecast in financial year 2022 of $29.2bn is 46 per cent above Afterpay’s $20bn target and our net transaction profit margin of just under 2.2 per cent is above APT’s target of 2 per cent,” Mr Chandra said.

Afterpay is also a step closer to resolving its compliance issues with the anti-money laundering watchdog Austrac, having handed over the interim report by an external auditor to the regulator.

The report does not provide any recommendations, which Afterpay said on Wednesday would be contained in the final report.

The final auditor’s report is expected to be delivered to Austrac by November 23.

With the interim report now with the regulator, the external auditor is completing the assessment of the anti-money laundering and counter-terrorism financing programs Afterpay has in place. The external auditor was appointed after Austrac in June said it had “reasonable grounds” to suspect the company “has contravened and/or is contravening sections 32 and 81 of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act”.

Section 32 requires companies to verify customers using their name and either address or date of birth using “reliable and independent electronic data from at least two separate data sources”, while section 81 requires companies to have an anti-money laundering and counter-terrorism finance program in place.

Afterpay maintains that there is no evidence of any money laundering or terrorism financing on its platform to date.

“Afterpay reiterates that it welcomes the opportunity to continue to work co-operatively with Austrac and will approach this formal process as an opportunity to ensure that our AML/CTF compliance is robust,” it said on Wednesday.

Under the legislation, Afterpay could face a maximum penalty of up to $42m if it is found to have breached both sections.

According to Citi analysts, the audit poses a material risk to ­Afterpay.

While Citi analysts agree with their counterparts that Australian users are increasing their usage of Afterpay, they warn that a hefty fine on the compliance issues could yet dent the company’s numbers.