Australian financial sector regulations are a bit like the rules in Aussie rules football: while we know they exist, few of us could explain them in detail. This is changing. Influenced by regulatory practices from the UK, regulators down under are starting to beef up their measures. Financial sector firms need to up their game if they’re to avoid penalties.
The most significant development in this respect has been the introduction of the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill, which came into force on March 13, 2019. This law gives the Australian Securities and Investments Commission (ASIC) the power to pursue a range of regulatory and enforcement sanctions to respond to misconduct in the corporate, financial market and financial services sectors. The impetus for this legislation was the belief that existing fines for misconduct were not a sufficient deterrent to misconduct. New powers include:
- Prison sentence for the most serious offences increased to a maximum of 15 years.
- Civil penalties for companies increased to a maximum of $525 million.
- Civil penalties for individuals increased to a maximum of $1.05 million
Not only is the regulatory atmosphere now hotter than a Bondi Beach barbie, but accountability is falling on individuals. This is thanks to the Banking Executive Accountability Regime (BEAR), introduced in mid-2018, which increases the accountability of senior managers at Authorized Deposit-taking Institutions for regulatory breaches. This is another import from the UK, having been based on the FCA’s Senior Manager’s Certification Regime.
A Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has since proposed to extend BEAR to all ASIC-licensed entities in Australia, which has prompted lobbying from firms worried by the size of the proposed fines. Like a stern Aussie rules ref, it’s unlikely these petitions will have much effect on the regulator.
Simon Green, Head of Compliance at RIMES, explains: “There are signs that significant fines for financial market impropriety may follow in due course. Not only do Australian authorities have the power to enforce misdeeds, but they are gaining experience in pursuing high profile cases – recent examples of which include big name institutions pursued for giving poor financial advice and for AML breaches.
“The efforts of the regulator are being rewarded, with one major financial institution reporting itself to the authorities for an AML breach. This sort of good citizenship is created by the fear of being found out and is evidence of the growing effectiveness of The Australian Transactions Reports and Analysis Center.
“In the light of this, firms trading in the Australian markets should review their compliance arrangements, in particular those for trade surveillance and conduct monitoring, before they too find themselves on the wrong side of the Regulator. Managed data services provided by companies like RIMES can help firms enhance their capabilities at speed and at a lower total cost of ownership than with internal systems development.”
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