Australian regulators weekly wrap — Monday, 22 May 2023

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.

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1. Binance (Crypto): the world’s largest crypto exchange has been debanked by Westpac in Australia. De‑banking is where a bank declines to offer or withdraws banking services to a customer. It has been a major issue for fintechs in Australia, especially for the crypto sector, where it has been the subject of a major RBA paper to address the issue (see here). In addition, Cuscal, Binance’s payment processor’s partner bank, made the decision to end AUD deposit services. Binance Australia customers can still buy and sell crypto with a credit or debit card, and there are no solvency concerns. “Digital exchanges have a legitimate role to play in the financial ecosystem. But since the rise of digital currency, we’ve noticed that scammers are increasingly using overseas exchanges” stated Westpac. Irrespective, it is hard not to feel somewhat flat — it is super important to address scams, though one would think Westpac, Cuscal and Binance working together (assuming that occurred) would find a way through!
2. Scams platform (ABA): Australian banks, through the ABA, have created a new digital platform that will facilitate the quick reporting of fraudulent payments in transit to or transferred to another bank. The Fraud Reporting Exchange platform is designed to enable faster and more targeted communication to help banks stop and recover as much money as possible when customers have paid scammers. The ABA has said it will have: near real-time reporting of fraudulent transactions between member banks; the ability to halt multiple fraudulent transactions taking place as part of the same scam; shared intelligence between banks to assist with fraud and loss prevention efforts; a faster, more streamlined return of funds, where possible; and, secure and tracked communications between member banks within the platform with agreed timeframes, reducing the need for multiple phone calls and emails between banks. Bravo!
3. CPS 190 (APRA): Prudential Standard CPS 190 Recovery and Exit Planning (CPS 190) has been finalised — it will ensure all APRA-regulated entities have recovery and exit plans for responding to severe financial stress. APRA has also now finalised Prudential Standard CPS 900 Resolution Planning, and its accompanying Prudential Practice Guide CPG 900 Resolution Planning. Copies are available here, and given consultation commenced in December 2021, will come as little surprise.
4. .Governance and risk forum (APRA): a great speech by Deputy Chair Helen Rowell on governance in the prudential sector. In her speech she identified that resilience of the financial sector is threatened by growing cyber threats, digital disruption to business models, a challenging path through climate transition, and rising geopolitical risk. The theme of the speech, touching on the Royal Commission, APRA’s focus on GCRA post Royal Commission, the CBA governance review, APRA’s current focus on super trustees was that prime governance evils included poor leadership, a weak risk culture, inappropriate financial incentives and a lack of accountability when things go wrong. My top read for the week, it is a great insight into the mind of one of the prudential regulator's top stars.
5. AMP (ASIC): the Federal Court has found MP Group breached the law when charging life insurance premiums and advice fees from the superannuation accounts of more than 2,000 deceased customers. The Federal Court ordered two of these AMP companies to pay a combined penalty of $24 million for the breaches. Both AMP Life Limited and AMP Financial Planning admitted that they engaged in unconscionable conduct by deducting and/or failing to properly refund insurance premiums and advice fees respectively from superannuation members after being notified of their deaths. The Court found at [166] “The contravening conduct involved here is very serious. Both AMP Life and AMP Financial Planning admit to contravening ss 12DI(3) and 12CB(1), which includes engaging in unconscionable conduct. There were a large number of Affected Members over a significant period of time. Despite receiving complaints, the systemic nature of the issues relating to the failure to refund remained undetected. Affected Members were charged amounts unlawfully. Whilst not deliberate, it was extremely serious.”

Thought for the future: Senator’s Bragg’s (revised) private member’s bill on crypto licensing has finalised for submissions. It is super important that proportionate regulation which protects consumers and encourages business growth is adopted. The revised bill is a great effort, but with a few more tweaks could be excellent — please get in touch if you’d like a copy of our submission!