The Afterpay Touch Group Ltd (ASX: APT) share price has continued to fall at the start of this week as it dropped 6.1%.
That means over the past week it has declined by close to 18%. Over the past year the Afterpay share price has been one of the most volatile shares I can remember.
The cause for the share price decline has been the developments with AUSTRAC, which is an Australian government agency, it stands for the Australian Transaction Reports and Analysis Centre.
You may remember that AUSTRAC handed out a huge $700 million fine to Commonwealth Bank of Australia (ASX: CBA) for "serious breaches" of anti-money laundering and counter-terrorism financing (AML/CTF) laws relating to the 'Intelligent Deposit Machines' (IDMs), being the advanced ATMs.
Last week Afterpay received an order from AUSTRAC to appoint an external auditor to carry out an audit of its AML/CTF compliance. That audit will look at a number of key areas from 19 January 2015 to date and the report is required to be lodged within 120 days of the appointment.
As an article in the AFR pointed out, third-party verification of customer ID was only introduced last year. Who knows what AUSTRAC and the auditor will make of Afterpay's compliance and business model between January 2015 and the verification introduction?
The buy now, buy later company very recently raised more than $300 million to fund its international growth aspirations at $23 per share. Sadly for those investors they are already 12% underwater.
Foolish takeaway
Afterpay is trading at 68x FY21's estimated earnings. With this AUSTRAC scrutiny, rising competition and the potential of a retailer pushback about Afterpay's fees, I'm not sure Afterpay is good value today.
