Afterpay share price soars 10% as audit report summary is released
We examine some of the broad details that emerged as part of the independent audit report into Afterpay's AML/CTF practices.
Afterpay share price: audit report at a glance
The Afterpay (ASX: APT) share price soared as much as 10% during the morning session after the company released a summary of the independent auditor's report requested by AUSTRAC earlier this year.
The broad strokes of this report summary were positive: with the independent auditor flagging Afterpay’s business model as inherently low risk as it related to AML/CTF matters and pointing out that the company had a strong compliance culture.
Beyond that, the auditor made a number of recommendations for Afterpay to consider. Here, the auditor noted that the company should continue to constructively engage with AUSTRAC on AML/CTF compliance matters, continue to refine customer identification procedures and customer due diligence practices, as well as evolve its procedures around ‘suspicious matter reporting content.’
Given Afterpay’s ever-increasing size and customer-base, the independent auditor also noted that compliance matters – as they relate to politically exposed persons – should rank as a key priority for the young company.
History doesn’t always repeat itself
Even with the above considered, as the Australian Financial Review was keen to point out that:
‘Fintech payments juggernaut Afterpay breached anti-money laundering laws because it initially received incorrect legal advice about how to comply, an independent audit has found.’
Indeed, there were historic ‘breaches’ – not current – with the independent auditor himself pointing out that:
‘Despite Afterpay having a compliance-focused culture, the consequence of being provided with incorrect legal advice has resulted in historic non-compliance with the AML/CTF Act and Rules.’
Afterpay’s (ASX: APT) approach to AML/CTF compliance – like the rest of the company – has changed and matured over time – and is currently fully aligned with the relevant laws, according to the audit report summary. Not only that, but according to the independent auditor: the nature of Afterpay's business – as it relates to money laundering or terrorist finance – is inherently low risk.
This likely explains today’s bullish price action: markets are forward facing, after all. Afterpay’s past problems are likely to not worry investors if the company has taken steps to address the things that caused such issues to begin with.
Finally, the summary of the report noted that while Afterpay 'commenced providing services designated by the AML/CTF Act, providing loans to facilitate consumer purchases to merchants' – in February 2015 – it wasn't until June 2016 that 'Afterpay finalised its first AML/CTF Program.'
A second and third version of Afterpay's AML/CTF Program would emerge in April 2017 and July 2018 – as the company grew in scale and complexity.
Interestingly, it wasn't until September 13 2019 – that Afterpay's 'AML/CTF Program was fully aligned to the requirements of the AML/CTF Rules.'
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