Recently on 14 January 2020, Splitit Payments Ltd (ASX: SPT) announced to have registered with AUSTRAC to offer factoring facilities in Australia, with the registration enabling the company to offer its funded model to merchants in the country directly after essential screening along with underwriting. Moreover, the registration enables faster onboarding of merchants opting for its funded solution. Australia is one of the countries, where the company needs to have a registration for providing these services.
About the Company: SPT is a leading global monthly instalment payments solution business, which allows clients to pay for items with a debit or credit card (existing) by dividing the cost into interest & fee free monthly payments without any extra registrations or applications. The company allows merchants to provide their customers with an easy method for making payment for items in the form of monthly instalments with immediate approval, while reducing cart abandonment rates & growing revenue.
The company’s target is to become the leading card-based instalment payment solution, globally.
Let’s take a look at the business model of the company, which generates revenue from its Funded model and Basic Model.
Funded Model: As per the funded model of the company, merchants receive the full purchase price upfront. The full amount is transferred to the Merchant net of Merchant fees payable to SPT & financing fees representing the interest cost payable to the funder (the third-party financial institution). The funder offers the liquidity to the transaction & in return, it gets financing fees.
SPT collects amounts owed by the merchant to the funder but is not responsible for any credit risk. In case of default by the merchant, the funder would incur the credit losses without any impact to Splitit. Fees collected upfront are acknowledged on a straight-line base throughout the funding period.
Basic Model: In the basic model, merchants deliver the liquidity. The customer makes payment directly to the merchant. On a monthly basis, SPT will invoice the merchant and revenues are recognised on issuance of the monthly invoice.
On getting registered with AUSTRAC, Splitit CEO, Brad Paterson commented:
2019 AUSTRAC Investigation into APT and WBC
In 2019, Afterpay Limited (ASX: APT), an ASX-listed company, which earns revenue from retail merchants by providing a BNPL (buy-now, pay-later) option to their customers, was under AUSTRAC’s radar. Moreover, near the end of the year, AUSTRAC launched civil proceedings against major player in the Australian banking industry - Westpac Banking Corporation (ASX: WBC).
APT Case: Afterpay’s subsidiary Afterpay Pty Limited received a notice from AUSTRAC to carry out an audit process related to AML/CTF compliance. The entire audit process was carried out by an external auditor, who provided a final copy of the audit process to AUSTRAC on 25 November 2019.
The audit confirmed that the present program of the company was in line with the AML/CTF Act and confirmed that the business of APT is low risk with respect to its exposure to be used for terrorist financing or money laundering activities.
WBC Case: AUSTRAC, on 20 November 2019, applied to the Federal Court of Australia for civil penalty orders against Westpac Banking Corporation, concerning systemic non-compliance with the Anti-Money Laundering & Counter-Terrorism Financing Act 2006. AUSTRAC alleged Westpac of violating the act on more than twenty-three million instances.
On 9 December 2019, Westpac and AUSTRAC appeared in the Federal Court for a case management hearing, jointly updating the court regarding the commencement of talks related to a Statement of Agreed Facts. Based on this, the court postponed the matter to late February or early March 2020. Westpac is working with AUSTRAC to get the issue sorted out & fix the issues around financial crime compliance on an urgent basis.
AUSTRAC or the Australian Transaction Reports and Analysis Centre is the anti-money laundering and counter-terrorism financing (AML/CTF) regulator in Australia. The regulator also plays the role of Australia’s financial intelligence unit. The agency regulates 14k+ individuals, businesses and organisations in the country.
With these tasks, the agency focuses on its vision of a financial system that is free from criminal abuse. And, in order to realise this vision, the agency works towards ensure that entities that are regulated are educated, alert and capable of addressing the threats of criminal abuse and exploitation in terms of detection, prevention and response.
It is the responsibility of all the institutions engaged in financial activities to aid AUSTRAC and other law enforcement agencies in preventing criminals from carrying out illegal activities. Following the requirements like getting registered with the concerned agencies not only help the companies in running their operations smoothly and efficiently but also create transparency while helping the organisations in getting idea regarding violation of laws.
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