AUSTRAC finds PayPal deficient

PayPal has promised the Australian Transaction Reports and Analysis Centre (AUSTRAC) to improve its act on anti-money laundering and counter-terrorism financing.

PayPal has promised the Australian Transaction Reports and Analysis Centre (AUSTRAC) to improve its act on anti-money laundering and counter-terrorism financing.

"An assessment of PayPal Australia revealed deficiencies in the systems PayPal had in place to assess and manage its money laundering and terrorism financing risk," AUSTRAC CEO John Schmidt said in a statement.

The centre's concerns based around PayPal's assessment of how likely it was that new customers, whose account balances were less than $1000, were involved in money laundering or terrorist financing.

The concern was that PayPal wasn't compliant with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, which says that reporting entities should assess the risk of their customers, products and services. Following a declaration issued by AUSTRAC on 3 October, PayPal was required to present the centre with an enforceable undertaking — a written enforceable in a court.

The undertaking, presented yesterday, promised to strengthen PayPal's existing systems and controls to comply with risk assessment requirements. The company will also appoint an independent expert to review its compliance and prepare a plan to remedy deficiencies.

PayPal said that it not only had been running a global anti-money laundering and counter terrorism financing program since its founding 10 years ago, but had also spent US$13 million to enhance it, including changes for Australian requirements, over the last two years. It has introduced additional registration data collection, electronic identity verification for customers and additional reporting to AUSTRAC, to meet requirements and would work with AUSTRAC to meet others, the company said.

"We consider the [legislation] extremely important and take all of our compliance obligations seriously. We are confident we will meet AUSTRAC's requirements," PayPal Australia managing director Frerk-Malte Feller said in a statement.

"Compliance with the Act's risk assessment requirements is crucial in Australia's fight against money laundering and terrorism financing. The acceptance of this undertaking is a clear sign to industry that they must have robust systems and controls in place to manage and mitigate the risks their business may face," AUSTRAC's Schmidt said.

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