Australian regulators weekly wrap — Monday, 23 December 2019

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. BEAR & Westpac (APRA): APRA has confirmed that it is investigating Westpac for breaches of the Banking Act 1959 (Cth)— including the Banking Executive Accountability Regime (BEAR)— or contraventions of APRA’s prudential standards. The investigation centres on AUSTRAC’s allegations that Westpac breached AML / CTF laws 23 million times in its Statement of Claim filed with the Federal Court on 11 November 2019, and also the bank’s actions to rectify and remediate these issues after they were identified. APRA has also imposed an additional $500 million capital requirement on the bank and initiated an extensive review program focused on Westpac’s risk governance framework. APRA plans to co-operate with ASIC’s parallel investigation into the bank (which it is required to do under their new enforcement MOU). Somewhat unusually, but understandably given the febrile surrounding political / public debate, APRA has announced the scope of their investigation. It will cover: the banks’s governance, control and risk framework; accountability and remuneration arrangements for non-financial risk; accountability obligations under the BEAR; failure to comply with the prudential standards e.g. CPS 220 - Risk Management; and failure to notify APRA of significant breaches. This is the first action taken under the BEAR, and so one to watch very closely. In particular, from an individualistic perspective — as I have previously written, despite the public noise, I doubt whether the regime can be effectively wielded against the entire board or more than one or maybe two executives. The whole point of BEAR, from an enforcement lens, is to zero down on specific individuals where there have been failings in their key areas of responsibility.

Thought for the future: ASIC is increasingly engaging with the media / financial services industry and I think that is great. (Perhaps also strategically picking its timing to issue claims as well e.g. on NAB before its AGM?) More engagement with its regulated population is a good thing in my view, as it helps firms to understand the expectations placed on them in what is a currently a fluid time for financial services regulation. Hopefully the quantity and quality of its releases will continue into 2020, such as ASIC’s reminder to the industry this week to get their whistle-blower policies in place and communicate it to their officers & employees ahead of 1 January 2020.

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(These views are my own and do not constitute legal advice. Photo credit Tom Wheatley)

AU financial services lawyer in compliance, regulatory & disputes. Email sign-up: http://eepurl.com/gG9Kk1 and LinkedIn: https://www.linkedin.com/in/lthennessy/