The Australian financial intelligence watchdog has ordered an independent audit of digital payments giant PayPal over its compliance with international funds transfer obligations, amid concerns it is being used by child exploitation rings in Asia.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) has ordered PayPal Australia to appoint an external auditor and report back in 120 days on its compliance with international fund transfer obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF) and record-keeping rules.
AUSTRAC chief executive Nicole Rose told the ABC the agency is concerned that PayPal is being used to facilitate online child abuse material.
“Online child abuse material can be ordered from Australia to areas such as the Philippines in quite often small amounts that are repeated often, and PayPal unfortunately is one of the areas that they can use to do that,” Rose told the ABC.
“It’s a terrible thing – online child abuse material can be ordered by the offender in Australia to sometimes a parent or relative in a country such as the Philippines and offer money. That’s why we want to get the auditor in to really determine what sort of risks there have been and continue to be with PayPal systems or their reporting regime.”
But PayPal said it was “not correct” to connect the inquiry with these allegations, and that it is the result of the company self-reporting an issue relating to international funds transfer rules.
“The audit requested by AUSTRAC of PayPal’s Australian business primarily relates to compliance with international funds transfer instruction reporting obligations,” a PayPal Australia spokesperson said.
“Those obligations are important protections in the international fight against financial crime and the misuse of payment platforms, which PayPal takes very seriously. PayPal has a long track record working with global law enforcement agencies to proactively combat child exploitation.”
The outcome of the 120-day inquiry will determine whether AUSTRAC pursues further regulatory action against PayPal Australia.
PayPal was founded by prominent tech investor Peter Thiel, and was spun out from eBay in 2015. It now has nearly 300 million global users, with annual revenue of about $US15.5 billion and a market cap of $US123 billion.
The company holds a special Australian licence from APRA allowing it to act as a banking business.
“Following an internal review, our business in Australia self-disclosed an issue in our reporting system for International Fund Transfer Instructions to AUSTRAC,” a PayPal Australia spokesperson said.
“We are working in full cooperation with AUSTRAC to remediate this reporting system issue and to undertake the audit as outlined by AUSTRAC in the time specified. There is no impact to our customers, who can continue to use PayPal services as usual.”
AUSTRAC’s investigation follows a similar inquiry launched into Afterpay in relation to the company’s compliance with anti-money laundering and counter-terror financing laws.
Last year, the watchdog fined the Commonwealth Bank $700 million for more than 50,000 breaches of anti-money laundering and counter-terror financing laws.