Cash Converters has been forced to tighten up its anti-money laundering program and has flagged plans to write-off its entire goodwill.
Cash Converters International has been forced to tighten up its anti-money laundering program and has flagged plans to write-off its entire goodwill.
The Perth-based subprime lender and second-hand retailer has entered into an enforceable understanding (EU) with AUSTRAC after the company was investigated over its compliance with anti-money laundering and counter-terrorism financing laws (AML/CTF).
The regulatory body launched the investigation into Cash Converters in August 2020, which identified concerns with the company's AML/CTF program.
The investigation found that the company's program was not properly implemented and did not include sufficient detail on important components such as transaction monitoring and customer due diligence.
AUSTRAC acting chief executive Peter Soros said that the EU aimed to ensure that Cash Converters’ AML/CTF program was fit for purpose and laid the foundations for ongoing compliance.
“Cash Converters has demonstrated a commitment to maturing its AML/CTF compliance arrangements, cooperating with AUSTRAC throughout the course of our regulatory enquiries.” he said.
"To date, Cash Converters has undertaken work to rectify shortcomings in its AML/CTF program. AUSTRAC will continue to work with Cash Converters to ensure it is compliant, both now and into the future.”
“Businesses with obligations under the AML/CTF Act are our front line in protecting the community from the harm caused by money laundering and terrorism financing. That’s why it’s so important they have robust systems in place to ensure they meet their AML/CTF obligations and play their part in protecting Australia’s financial system from criminal exploitation.”
The Australia-wide retailer has not been fined during the process.
Cash Converters managing director Sam Budiselik said the company had taken its a AML/CTF obligations seriously.
He said Cash Converters had undertaken an uplift program to address shortcomings identified during AUSTRAC’s investigation.
“The uplift has resulted in a significant improvement in the Company’s AML/CTF compliance obligations, with the EU representing the final stages in that process, affirming the company’s ongoing commitment to AML/CTF compliance," Mr Budiselik said.
“AUSTRAC has acknowledged the significant steps taken by Cash Converters and the cooperation of the company, demonstrating our commitment to ongoing compliance.
“Cash Converters is aware of the role financial service providers play in protecting the community from the harm caused by money laundering and terrorism financing."
Under the EU, the company is required to complete a remediation acquittal report, appoint an external auditor to conduct an assessment, provide the external report to AUSTRAC and provide their response to the findings.
Meanwhile, the company has foreshadowed an impairment to its goodwill of between $90 million and $110 million in its first half FY22 results.
Cash Converter’s current goodwill value of $110.4 million represents about a quarter of its total assets.
The expected impairment is a result of legislative changes passed by the Federal Parliament in December 2022, including several financial sector reforms which relate to small amount credit contracts (SACC).
The financial services reform bill includes changes to the regulation of SACC loan products offered by Cash Converters, which comes into effect in June.
The main impact will be the extension of a protected earning amount requirement to all borrowers which was previously only applied to Centrelink recipients, according to the company.
“Whilst uncertainty exists as to customer behaviour resulting from these changes, our customer’s need for cash does not,” the company said in today’s ASX release.
“If anything, the need is growing with Australians struggling to deal with rising energy and general cost of living pressures.
“The company continues to believe that further restricting access to this regulated credit product will have significant unintended consequences, making SACC loans longer in duration and more expensive for the borrower as a result.”
