Keeping on top of the latest financial services regulatory & compliance trends?
Investing time in your professional development within a rapidly changing financial services industry is challenging. To meet that challenge, the Australian regulators weekly wrap is designed to keep you at forefront of your practice by quickly setting out the top 5 developments from the past week, analysis and practical considerations for the future.
- AML / CTF (Treasury): amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) and Anti-Money Laundering and Counter-Terrorism Financing Rules 2006 (Cth) (AML/CTF Rules) came into effect on 18 June 2021, changing the previous due diligence obligations and introducing new obligations for reporting entities. The key amendments to the AML/CTF Act are: reformed Customer Identification Procedures (subject to a small number of exceptions, the previous regime did not allow reporting entities to rely on CIP undertaken by other entities. They now can where there is a valid written agreement between reporting entity and the party undertaking CIP, or where there are reasonable grounds to rely on the other party’s CIP); additional correspondent banking prohibitions; new exceptions to tipping off offences; and, increased pecuniary penalties for cross-border movement of ‘monetary instruments.’ Reporting entities should revisit their AML /CTF programs and systems to see if efficiencies can be extracted from the new amendments. Detailed guidance is available on AUSTRAC’s website here.
- Financial reports (ASIC): ASIC has highlighted key focus areas for financial reporting by companies for reporting periods ending 30 June 2021 under COVID-19 conditions. ASIC expects directors, preparers of financial reports and auditors to pay attention to: asset values; provisions; solvency and going concern assessments; events occurring after year end and before completing the financial report; disclosures in the financial report and Operating and Financial Review. I, for one, really appreciate how ASIC does this each year i.e. proactive nudging of the industry to pay attention to what it sees as problem areas, rather than waiting for them to occur and relying on enforcement action(s) alone.
- Modern Slavery (NSW): the NSW Special Minister of State gave a motion of his intention to introduce Modern Slavery Amendment Bill 2021; the latest in the tortured history of NSW seeking to introduce its version of the Federal legislation already in place. The bill is currently not available, though all eyes will be on the threshold for reporting i.e. will it be lower than the $100M federal threshold as past iterations of the bill have been?
- Foreign Service Providers (ASIC): ASIC has extended to 31 March 2023 transitional relief for foreign financial services providers (FFSPs) from the requirement to hold an Australian financial services licence, pending the outcome of the Australian Government’s consultation about the regulation of FFSPs announced as part of the Federal Budget released on 11 May 2021, the Government announced that it will consult on options to restore regulatory relief for FFSPs who are licensed and regulated in jurisdictions with comparable financial service rules and obligations, or have limited connection to Australia, from holding an AFS licence, and create a fast-track licensing process for FFSPs who wish to establish more permanent operations in Australia.
- AUSTRAC make-over (AUSTRAC): the AML / CTF regulator is undertaking a systems transformation program over the next four years to transform the way reporting entities interact and report to AUSTRAC. The system transformation program will replace ‘AUSTRAC Online’. The new system is aiming to be modern and user-friendly, with improved reporting capability and self-service options to help reporting entities meet their regulatory obligations e.g. SMR reporting. Hopefully it has an API functionality, unlikely ASIC’s breach reporting system, to enable entities to summit SMRs and other prescribed transactions to AUSTRAC easily.
Thought for the week: catching up on my reading this weekend, in the recent robo debt class action (Prygodicz v Commonwealth of Australia (No 2)  FCA 634), I noted that former head of Slater & Gordon’s plaintiff class actions practice Murphy J had this to say in his judgment “Finally, for those perpetual critics of the Part IVA class action regime, the present case is one more example where the regime has provided real, practical access to justice. It has enabled approximately 394,000 people, many of whom are marginalised or vulnerable, to recover compensation from the Commonwealth in relation to conduct which it belatedly admitted was unlawful. The proposed settlement demonstrates, once again, that, when properly managed, our class action system works.” Irrespective of your position on class actions, which involve complex macro considerations, this policy-type position statement from a sitting judge sits uncomfortably with me and I would hope we see less of it, lest we eventually become inured to accept statements such as this one from Alito J over in the US Supreme Court where the Obamacare law was just upheld “Today’s decision is the third installment in our epic Affordable Care Act trilogy, and it follows the same pattern as installments one and two. In all three episodes, with the Affordable Care Act facing a serious threat, the Court has pulled off an improbable rescue.”