The advice provided by global law firm Dentons to Australian fintech company Afterpay resulted in breaches of Australia's Anti-Money Laundering and Counter-Terrorism Financing Act regulations, an auditor has found.

But Dentons said the advice it provided in 2016 was in line with industry practice at the time.

The board of Afterpay Touch commissioned independent auditor Neil Jeans, principal of compliance adviser Initialism, to look into the breaches after it was ordered to do so by the anti-money laundering regulator, the Australian Transaction Reports and Analysis Centre (AUSTRAC), once the breaches came to light.

Jeans' report on the breaches stated: "Afterpay's compliance with its AML/CTF obligations was, from the outset and over time, based upon legal advice from top tier Australian law firms."

He said the initial legal advice concluded that Afterpay's business model was factoring receivables from merchants, so Afterpay initially focused its AML/CTF controls upon merchants.

"I am of the opinion this initial legal advice was incorrect," he wrote in a summary of his report to the Afterpay Touch board. "The initial legal advice provided to Afterpay did not reflect Afterpay's business model."

Afterpay provides loans to consumers in order to purchase goods from merchants, the auditor stated, and this has a different set of compliance obligations.

"Dentons was one of several firms that has acted for Afterpay," Dentons said in a statement. "Dentons is supportive of AUSTRAC's ongoing commitment to corporate compliance. Dentons considers the advice given to Afterpay was in line with the firm's understanding of Afterpay's business model and the law and industry practice."

Baker McKenzie also provided advice to the firm but said it did not do so at the time in question.

"References to the independent auditor's report regarding Afterpay's early non-compliance with anti-money laundering rules occurred at a time in which we [Baker McKenzie] were not advising the company on such matters," the firm said in a statement.

The auditor concluded that Afterpay is a low-risk business and is now compliant with the AML/CTF obligations.