April 16, 2024
Social video site TikTok has been referred to Australia's anti-money laundering authority after the company lied to Irish regulators about gaps in its payments screening.
Opposition Home Affairs spokesman James Paterson wrote to AUSTRAC last week to urge it to investigate TikTok because of money laundering issues that first emerged in Turkey.
TikTok operates a payments system that lets users give "gifts" in the form of digital gold to people streaming on the site that can be redeemed for real money. The system has become enormously popular among the site's largely younger user base, with some people relying on gifts to generate thousands of dollars a week.
But in 2022, a Turkish government news site reported that local authorities had found millions of dollars were being transferred via TikTok to accounts suspected to be linked to terrorist groups.
That resulted in HSBC closing TikTok accounts after finding the platform had insufficient controls, which in turn prompted questions from Irish banking regulators who noticed large cash movements linked to the account closures. TikTok, according to US tech publication The Information that first reported the Irish connection, brushed off the transfers as usual business practice in early 2023 but later disclosed the real reason behind them.
Senator Paterson, a persistent critic of TikTok because its ownership structure places it under the potential direction of the Chinese Communist Party, said AUSTRAC should investigate.
"TikTok's national security and privacy risks to our country would be seriously compounded if any allegations are proven that the company's platform has been implicated in counter-terrorism financing activities of a proscribed terrorist organisation under Australian law," he wrote in a letter seen by The Australian Financial Review.
TikTok has always denied that it is owned or controlled by the Chinese Communist Party, and it is separate to the Chinese version of the same app, Douyin. "Australians can be reassured that TikTok takes its legal obligations seriously, and has robust controls in place to ensure compliance with those obligations," said a TikTok spokeswoman. "TikTok has not received any queries from Australia regulators with regards to this issue."
The app tightened compliance in Turkey after the 2022 issues but would not comment on the issues in Ireland.
AUSTRAC has a focus this year on digital businesses that move funds, with its then-acting chief executive Peter Soros previously telling The Australian Financial Review that criminals target businesses with weak compliance.
Even as TikTok grows its revenue rapidly, the app faces scrutiny in many Western countries. A bill to force its parent company ByteDance to sell it in the United States or face a ban is stalled in the country's Senate. The company's local boss, Lee Hunter, departed in January and has not been replaced.
A spokesman for AUSTRAC confirmed it had received Senator Paterson's letter but said the agency could not comment on "operational matters". It is not obliged to pursue the referral.
