Financial services monthly wrap-up: July and August 2024

01 ASIC urges AFS licensees to correct records on the Financial Advisers Register

On 1 July 2024, ASIC called on Australian Financial Services (AFS) licensees to assess the accuracy of records about their financial advisers on the Financial Advisers Register. This came after a spot check in which ASIC identified errors and inconsistencies in some of the information provided. Issues related to the incorrect marking of qualifications and training courses as ‘approved’ on the Financial Advisers Register.

Other common errors included:

• Some of the qualifications marked as ‘approved’ did not accurately match the wording of the course in the Corporations (Relevant Providers Degrees, Qualifications and Courses Standard) Determination 2021 (the Determination).
• Some of the qualifications marked as ‘approved’ were not approved qualifications, rather they were professional designations.
• Some of the qualifications marked as ‘approved’ were not, in isolation, approved qualifications, rather they were bridging courses.
• Some of the qualifications marked as ‘approved’ were not approved qualifications under the Determination.

ASIC also identified instances where AFS licensees had not ensured that the contact details of their financial advisers were up to date.

ASIC also urged AFS licensees to immediately check all of the information recorded about their financial advisers on the Financial Advisers Register, with a particular focus on the adviser’s approved qualification(s), ability to provide tax (financial) advice services, business address and telephone number. ASIC issued guidance on its website on how to check an adviser’s qualifications against the Determination and how to determine if an adviser can provide tax (financial) advice services.

Incorrect or out of date information must be rectified by lodging a ‘maintain’ transaction via ASIC Connect. ASIC reminded AFS licensees that it is a serious offence to knowingly provide false or misleading information to ASIC or fail to take reasonable steps to ensure the information is true and correct.

From 1 August 2024, ASIC commenced a compliance program to ensure that the information recorded on the Financial Advisers Register about approved qualifications is correct, including considering enforcement action where necessary.

The full media release can be accessed here.

02 ASIC and APRA urge super trustees to strengthen oversight of retirement strategy implementation

On 2 July 2024, ASIC and APRA called on superannuation trustees to boost efforts to track and measure the impact of their strategies to improve retirement outcomes for members.

A recent pulse check on retirement income covenant implementation has revealed that some significant gaps remain a year after a joint ASIC and APRA thematic review identified a lack of urgency by trustees in embracing the intent of the Retirement Income Covenant.

In a follow-up survey of the broader superannuation industry, ASIC and APRA asked trustees to share their responses to the recommendations and findings from the thematic review to assist members who are retired or approaching retirement as required under the covenant introduced in 2022.

Key observations from 48 survey responses include that many trustees were taking steps to better understand the retirement needs of their members and had endeavoured to promote the availability and access to retirement-focused information for members. However, only one in five planned improvements identified by trustees were expected to be completed by mid-2024. The survey also identified that only incremental progress had been made to measure and track retirement income strategies.

The responses pointed to several challenges in implementing the covenant, including uncertainty around the financial advice framework, privacy, security and cost concerns on collecting more member data, and a lack of member engagement and financial capability.

The full media release can be accessed here. Report 784 Industry update: Pulse check on retirement income covenant implementation can be accessed here.

03 ASIC acknowledges royal assent of the DBFO Act

On 11 July 2024, ASIC acknowledged the royal assent of the DBFO Act. This marked an important step in the advancement of reforms to financial advice regulation as part of the Commonwealth Government’s response to recommendations 7, 8, 10, 13.1-13.5 and 13.7-13.9 of the Quality of Advice Review.

The DBFO Act implements several reforms, including:

• Clarifying the legal basis in the Superannuation Industry (Supervision) Act 1993 for superannuation trustees to charge individual members for financial advice from their superannuation account, and clarifying associated tax consequences under the Income Tax Assessment Act 1997.
• Streamlining ongoing fee renewal and consent requirements, including removing the requirement to provide a fee disclosure statement.
• Enhancing flexibility in how Financial Services Guide (FSG) requirements can be met.
• Simplifying and clarifying the provisions governing conflicted remuneration.
• Introducing new standardised consent requirements for life risk insurance, general insurance, and consumer credit insurance commissions.

ASIC reminded industry participants to be aware of the reforms and any applicable transitional periods and that they should have, or should be in the process of updating, systems and processes as required.

ASIC has registered ASIC Corporations (Amendment) Instrument 2024/554 to reflect the changes to FSG requirements through consequential amendments to ASIC instruments and has amended condition 52 of Pro Forma 209 Australian financial services licence conditions (PF 209) to ensure technology neutrality in FSG record keeping requirements.

The full media release can be accessed here.

04 ASIC and APRA issue final rules and information for the FAR

On 11 July 2024, ASIC and APRA published new information to help insurers and superannuation trustees prepare for the commencement of the Financial Accountability Regime (FAR). The release of new information comes after a joint public consultation on the draft amendment to the Regulator rules and draft key functions descriptions for the insurance and superannuation industries.

The FAR imposes a strengthened responsibility and accountability framework to improve the risk governance cultures of APRA-regulated entities, their directors, and most senior executives. It has commenced for the banking industry and will take effect for the insurance and superannuation industries from 15 March 2025.

The package of information includes:

• An amendment to the Regulator notes which prescribes key functions information for inclusion in the FAR register of accountable persons for insurance and superannuation industries.
• A joint ASIC and APRA letter summarising key issues raised during consultation and their response.

The package also updates previously released information to reflect the final Regulator rules, including:

• An updated information paper to assist entities and their accountable persons in understanding and complying with their obligations under the FAR.
• An updated accountability statement guide and template to help entities subject to the FAR enhanced notification obligations to prepare accountability statements.
• Reporting form instructions to assist insurance and superannuation entities in providing the required information to ASIC and APRA.

The full media release can be accessed here.

05 New financial reporting and audit obligations for superannuation funds commence

On 25 July 2024, ASIC announced the commencement of new financial reporting and auditing obligations for superannuation funds. On 1 July 2023, the Treasury Laws Amendment (2022 Measures No. 4) Act 2023 came into force, which extended the financial reporting and auditing obligations under Chapter 2M of the Corporations Act 2001 (Cth) to most superannuation entities.

Superannuation trustees are now required to lodge audited financial reports for funds with ASIC within three months of the end of the fund’s financial year. This obligation promotes greater transparency and accountability in relation to superannuation funds.

Audited financial reports will need to be lodged via ASIC’s new Regulatory Portal. Trustees will be subject to increased scrutiny on the quality of their financial reports and audit work in relation to superannuation funds. As such, ASIC expects trustees to ensure financial reports are of high quality, containing useful and meaningful information to build public trust and confidence in the integrity of the financial system.

The full media release can be accessed here.

06 ASIC further extends transitional relief for foreign financial service providers

On 31 July 2024, ASIC announced that it is extending for a further 12 months the transitional relief for foreign financial service providers (FFSPs) from the requirement to hold an AFS licence when providing financial advice to Australian wholesale clients.

The current transitional arrangements for ASIC’s sufficient equivalence relief and limited connection relief were due to expire on 31 March 2025 and have been extended for a further twelve months by ASIC Corporations (Amendment) Instrument 2024/497.

After 31 March 2026, FFSPs will be required to notify ASIC of their intention to rely on the new licensing exemption regime, unless they choose to opt in by notifying ASIC earlier.

Treasury has introduced legislation for a new licensing exemption regime for FFSPs under the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 which is due to commence on 1 April 2025, subject to passage of the Bill through Parliament.

FFSPs that have been, or are granted a foreign AFS licence, will be able to continue to operate their financial services business in Australia under the licence issued by ASIC.

The full media release can be accessed here.

07 ASIC continues action on misleading claims to deter greenwashing misconduct

On 23 August 2024, ASIC released Report 791 ASIC’s interventions on greenwashing misconduct: 2023–2024 (REP 791), which details the regulatory interventions undertaken by ASIC over the 15-month period ending 30 June 2024. Greenwashing and sustainable finance are key priorities for ASIC, as outlined in its Corporate Plan.

REP 791 outlined findings, recommendations, and best practice examples from ASIC's surveillance activities across a broad range of sectors, including listed companies, managed funds, superannuation funds and the wholesale green bond market.

Notably, REP 791 identified the following common issues giving rise to regulatory intervention:

• Insufficient disclosure on the scope of ESG investment screens and investment methodologies.
• Underlying investments that are inconsistent with disclosed ESG investment screens and investment policies.
• Sustainability-related claims made without reasonable grounds or without sufficient detail.

ASIC's media release can be accessed here. Report 791 ASIC’s interventions on greenwashing misconduct: 2023–2024 can be accessed here.

08 ASIC releases Corporate Plan and expands strategic priorities

On 22 August 2024, ASIC released its Corporate Plan for 2024-25. ASIC's Corporate Plan includes a new strategic priority to "drive consistency and transparency across markets and products". To address this priority, ASIC will focus on outcomes in public and private markets, as well as existing and emerging financial products and services, including new market participants.

ASIC's other strategic priorities for 2024-25 include to:

• Improve consumer outcomes.
• Address financial system climate change risk.
• Better retirement outcomes and member services.
• Advance digital and data resilience and safety.

The full media release can be accessed here. ASIC's Corporate Plan 2024-25 can be accessed here.

09 ASIC pilots new portal for Australian financial service licence applications

On 28 August 2024, ASIC announced that it is piloting a new digital portal for AFS licensees and applicants to apply for, vary, and cancel AFS licences. The pilot portal was launched on 12 August 2024 for a limited number of invitation-only applicants. All other applicants will continue to use the existing eBusiness licensee portal during the pilot phase.

The new portal seeks to offer a more streamlined and user-friendly experience by pre-filling information and only requiring the applicant to answer relevant questions. It is intended that all AFS licensees and applicants will transition to the new portal in the first quarter of 2025.

The full media release can be accessed here.

10 ASIC proposes to extend the operation of three legislative instruments

On 7 August 2024, ASIC proposed to extend the operation of three legislative instruments for a further five years. The instruments are due to expire in October 2024. However, ASIC has assessed that the instruments continue to form a necessary, useful part of the legislative framework and are operating efficiently and effectively.

Class Order [CO 14/923] Record-keeping obligations for Australian financial services licensees when giving personal advice inserts a new section 912G in the Corporations Act to impose specific record-keeping requirements when AFS licensees give personal advice to retail clients.

ASIC Corporations and Credit (Breach Reporting—Reportable Situations) Instrument 2021/716 modifies the Corporations Act to specify that certain forms of non-compliance are not deemed 'significant' breaches of core obligations, meaning licensees are not required to lodge breach reports for these instances of non-compliance.

ASIC Credit (Breach Reporting—Prescribed Commonwealth Legislation) Instrument 2021/801 specifies other Commonwealth legislation to be a core obligation for the purposes of the National Credit Act.

Stakeholders were invited to give feedback on the proposal by 5pm on 4 September 2024.

ASIC's media release can be accessed here.

11 APRA strengthens core prudential standard to support outcomes for members in superannuation

On 4 July 2024, APRA announced that it has enhanced Prudential Standard SPS 515 Strategic Planning and Members Outcomes (SPS 515) and related guidance which govern strategic planning and member outcomes in superannuation. APRA’s changes reinforce trustees’ duty to act in the best financial interests of members by ensuring that members’ interests are front-and-centre in trustees’ strategic and business planning, financial resource management, implementation of the retirement income covenant and fund transfers.

The revised standard and guidance also set clear expectations for trustees on expenditure by setting out:

• Design principles for a robust expenditure management framework including board oversight, alignment to strategic objectives, and active monitoring and review.
• APRA’s view that better practice is for trustees to obtain a yearly attestation from accountable senior management that they are taking reasonable steps to meet the requirements regarding expenditure management.
• APRA’s view that such attestation should confirm that controls are in place and operating effectively to prevent expenditure that would be unjustifiable in the context of the duty to act in the best financial interests of beneficiaries.

SPS 515 will take effect from 1 July 2025.

The full media release can be accessed here.

12 APRA publishes final version of its Prudential Handbook

On 23 July 2024, APRA delivered its multi-year project to modernise the prudential architecture (MPA) with the publication of the final version of its new digital Prudential Handbook.

The new Prudential Handbook, which was released in beta version in June, consolidates all of APRA’s prudential standards, prudential practice guides and relevant supporting information into one place. The digital format ensures the Prudential Handbook can be easily navigated, and caters to a range of different users across regulated industries and in the broader community.

The full media release can be accessed here. The Prudential Handbook can be accessed here.

13 APRA shares further insights on common cyber control weaknesses

In a letter dated 15 August 2024, APRA offered further insights and guidance on common cyber control weaknesses to its regulated entities.

The letter focused on security in configuration management, privileged access management and security testing. APRA stated that it expects regulated entities to review their control environment against these common weaknesses.

APRA's media release can be accessed here. The letter can be accessed here.

14 APRA finalises new cross-industry Prudential Standard CPS 001 Defined terms

On 22 August 2024, APRA has finalised the new cross-industry Prudential Standard CPS 001 Defined Terms (CPS 001), which consolidates all existing standards on definitions for authorised deposit-taking institutions and general, life and private health insurers. CPS 001 will take effect from 1 October 2024.

In a letter published in August 2024, APRA provided its response to three submissions received for the November 2023 consultation on CPS 001. APRA noted that 'there is further scope to streamline definitions and improve consistency across the prudential framework'.

APRA's media release can be accessed here. The letter can be accessed here.

15 APRA releases Corporate Plan for 2024-25

On 28 August 2024, APRA has released its Corporate Plan for 2024-25, announcing some changes to its internal structure as well as updating its strategic priorities.

From 2 September 2024, APRA's five industry supervision groups will be managed in two frontline supervision divisions:

• A General Insurance and Banking division.
• A Life Insurance, Private Health Insurance and Superannuation division.

APRA's strategic priorities for 2024-25 include to:

• Maintain financial and operational resilience.
• Respond to significant and emerging risks.
• Address industry-specific challenges.

APRA has also flagged heightened regulatory focus on cyber resilience, crisis preparedness, GCRA, climate and nature risk, new and changing business models, retirement outcomes and protection gap for household insurance.

APRA's media release can be accessed here. ASIC's Corporate Plan 2024-25 can be accessed here.

16 APRA releases superannuation statistics for June 2024

On 29 August 2024, APRA has released its Quarterly Superannuation Performance publication and the Quarterly MySuper Statistics report for the June 2024 quarter.

Total superannuation assets reached $3.9 trillion as at June 2024 (an increase of 0.4% over the quarter and 9.1% over the past year), of which $2.7 trillion are in APRA-regulated funds (an increase of 10% since June 2023).

Other key statistics include the following changes from June 2023 to June 2024:

• Total self-managed super fund assets increased by 7.5% to $990.4 billion.
• Exempt public sector superannuation schemes assets increased by 3.4% to $167.7 billion.
• Balance of life office statutory fund assets increased by 14.6% to $57.2 billion.
• Total contributions increased by 11.2% to $183.9 billion.
• Benefit payments increased by 15.3% to $117.7 billion.

APRA's media release can be accessed here. The full quarterly superannuation statistics can be accessed here.

17 APRA releases 2024 superannuation performance test results

On 30 August 2024, APRA has released the results of the 2024 superannuation test – an annual performance test which assesses the long-term performance of superannuation products against tailored benchmarks. This year, 57 MySuper products (with total assets of $1,081.6 billion) and 590 trustee directed products (with total assets of $385 billion) were tested.

All 57 MySuper products passed the test. Of the trustee directed products, 37 out of 192 platform products failed, while all 398 non-platform products passed.

APRA's media release can be accessed here. The results of the annual superannuation performance test can be accessed here.

18 Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill passes Senate

On 22 August 2024, the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill (Bill) passed through the Senate. The Bill introduces two significant reforms: mandatory climate reporting requirements for large companies and new powers for regulators to protect Australia’s financial market infrastructure in the event of a crisis.

The new laws establish Australia’s climate risk disclosure framework, including the development of internationally-aligned reporting standards by the Australian Accounting Standards Board. Reporting requirements will commence in a phased approach, beginning 1 January 2025.

Under the new laws, regulators will have expanded powers to manage financial market infrastructure risks, including powers to resolve a crisis at a domestic clearing and settlement facility.

The Treasurer’s media release can be accessed here. The Bill can be accessed here.

19 Treasury releases Sustainable Finance Roadmap

On 19 June 2024, the Australian Government released the Sustainable Finance Roadmap (Roadmap). The Roadmap details the implementation of new regulatory mechanisms to integrate sustainability into existing financial frameworks, with the goal of supporting Australia’s transition to a net zero economy.

The Roadmap focuses on the following 10 priorities:

1. Implementing climate-related financial disclosures.
2. Developing the Australian Sustainable Finance Taxonomy.
3. Supporting credible net zero transition planning.
4. Developing sustainable investment product labels.
5. Enhancing market supervision and enforcement.
6. Identifying and responding to systemic financial risks.
7. Addressing data and analytical challenges.
8. Ensuring fit for purpose regulatory frameworks.
9. Issuing Australian sovereign green bonds.
10. Stepping up Australia's international engagement.

The Sustainable Finance Roadmap can be accessed here.

20 AUSTRAC publishes update from FATF on global money laundering and terrorism financing risk from June 2024

On 8 July 2024, AUSTRAC published an update from the Financial Action Task Force (FATF) in relation to the ‘grey’ and ‘black’ lists managed by the FATF.

AUSTRAC noted that the 21 February 2020 call for action remains in effect for the Democratic People’s Republic of Korea, Iran and Myanmar (the ‘black list’).

AUSTRAC noted the jurisdictions under increased monitoring from the FATF due to strategic deficiencies in their AML/CTF regimes. Following FATF’s June 2024 review, two countries have been added to the ‘grey list’ – Monaco and Venezuela. Jamaica and Türkiye have been removed from the list.

The full media release can be accessed here. The FATF updates can be accessed here (‘black list’) and here (‘grey list’).

21 AUSTRAC releases two national risk assessments

On 9 July 2024, AUSTRAC released two national risk assessments on ML/TF in Australia.

The first assessment looks at money laundering in Australia and the existing and new threats emerging in Australia. The full assessment can be accessed here.

The second assessment looks at terrorism financing and who is most at risk in Australia and the misuse of remittance services and foreign exchange providers. The full assessment can be accessed here.

The full media release can be accessed here.

22 AUSTRAC releases latest insights into taking the profit out of crime

On 9 July 2024, AUSTRAC released its latest insights on taking the profit out of crime.

AUSTRAC CEO Mr Thomas highlighted the importance of AUSTRAC’s co-operation with the national intelligence community, law enforcement and regulatory agencies to build national risk assessments and provide a comprehensive picture of what is happening around Australia, and where to focus its attention.

The full media release can be accessed here.

23 AUSTRAC CEO Mr Thomas speaks at the National Press Club

On 9 July 2024, AUSTRAC released the speaking notes of Mr Thomas’ launch of the national risk assessments at the National Press Club.

Mr Thomas highlighted the importance of the risk assessments to understand the nature and scale of money laundering and terrorism financing challenges in Australia.

He stated that drug offences, tax and revenue crimes, government-funded program fraud, proceeds of illicit tobacco sales, and global proceeds of scams are the largest sources of money laundered in Australia.

Mr Thomas also highlighted that major banks and financial remittance service providers are still exposed to significant money laundering risks. The increased speed of financial transactions has made it harder for financial institutions to identify and freeze suspicious transactions before they leave the account.

The full media release can be accessed here.

24 AUSTRAC releases new financial crime guide on money mules

On 11 July 2024, AUSTRAC released a new financial crime guide to help businesses understand and identify criminal networks seeking to exploit vulnerable foreign students to launder money, using them as ‘money mules’.

The guide has been developed by Fintel Alliance, in partnership with the Australian Federal Police and the Australian Border Force.

The full media release can be accessed here, and the financial guide can be accessed here.

25 AUSTRAC releases update on second stage consultation on AML/CTF reforms

On 11 July 2024, AUSTRAC released an update on the second round of public consultation on proposed reforms to the AML/CTF regime.

All feedback received is currently being reviewed by the Attorney-General’s Department to inform the development of the draft legislation.

The full media release can be accessed here.

26 AUSTRAC releases guidance for businesses in light of new risk assessments

On 11 July 2024, AUSTRAC released guidance for businesses in light of the new risk assessments being released.

AUSTRAC advised businesses to:

• Read the two risk assessments to understand how their business might be exposed to money laundering and terrorism financing.
• Ensure their business complies with their obligations under the AML/CTF Act.
• Report suspicious matters to AUSTRAC.

The full media release can be accessed here.

27 AUSTRAC releases update on the Reporting Entity System Transformation Program

On 11 July 2024, AUSTRAC released an update on its Reporting Entity System Transformation Program (REST Program).

The REST Program will replace the current AUSTRAC Online interface with a modern and user-friendly platform. New features may include:

• A new capability enabling reporting entities to submit increased volumes of certain transaction reports (IFTI-E).
• A new IFTI-E schema enabling our entities to report in international standard format (ISO 20022).

For those entities still looking to transition to reporting in the ISO 20022 format using the IFTI-E v2.0 schema, we encourage you to commence testing in the AUSTRAC Online training environment as soon as possible.

Prior to live reporting in the new functionality, entities must complete a test file assessment. Please note that the assessment process can take several weeks and timeframes can also be influenced by the number of entities undergoing testing at a particular time. AUSTRAC recommends you commence test file assessment as soon as you are ready to avoid potential delays.

The full media release can be accessed here.

28 AUSTRAC releases statement on Fintel Alliance

On 11 July 2024, AUSTRAC released a statement behind the purpose of the Fintel Alliance.

In recognition of the need for a multilateral and collaborative response, an AUSTRAC-led public-private partnership was created in 2017 with representatives from government, law enforcement and industry.

The Alliance currently has 30 members. The Fintel Alliance leverages its resources and expertise to address risks across the financial sector and implement government intelligence priorities.

Over the next two years, the Fintel Alliance will focus on six streams of work:

1. A public-private data-sharing hub.
2. Enduring and persistent financial crime threats.
3. Emerging technologies and fintech capabilities.
4. High-risk sectors and jurisdictions.
5. Responding to emerging and community harms.
6. National security threats.

The full media release can be accessed here.

29 AUSTRAC releases update on its work with international partners

On 11 July 2024, AUSTRAC released an update on its work with its international partners.

In May, AUSTRAC hosted its ASEAN counterparts for the Financial Intelligence Consultative Group Plenary, also attended by the Cook Islands and Japan.

AUSTRAC also hosted a Financial Intelligence Analysts Course through the Indo-Pacific Economic Framework in May.

In June, AUSTRAC CEO Mr Thomas attended the Egmont Group’s 2024 Plenary in Paris, of which AUSTRAC is a founding member.

The full media release can be accessed here.