Australia's financial crime watchdog AUSTRAC has surprised the buy now, pay later group Afterpay with demands for an external audit of its compliance with anti-money laundering and counter-terrorism financing laws.

"The audit will help identify if Afterpay has developed and implemented the systems and controls it needs to ensure it complies with its obligations," AUSTRAC chief executive officer Nicole Rose said in a statement on Thursday morning.

Afterpay's shares plunged as much as 11.6 per cent to a low of $22.93 after the announcement – below what investors paid for their shares in the company's $300 million capital raising on Monday.

The notice served to Afterpay by AUSTRAC, which was released to the ASX, states the regulator has "reasonable grounds to suspect that Afterpay is a reporting entity that has contravened and/or is contravening sections 32 and 81 of the AML/CTF [anti-money-laundering and counter-terrorism financing] Act".