Author: Brooke Benson

ASIC v Storm Financial: The Battle Has Ended

ASIC v Storm Financial: The Battle Has Ended The principals of Storm Financial, Emmanuel and Julie Cassimatis, have both just received civil penalties of $70,000 and a seven year disqualification from managing corporations. This is as a result of breaching their duties as directors and failing to ensure that the financial services which they were providing under their AFSL were provided efficiently, honestly and fairly. ASIC argued that Storm Financial provided advice to a variety of unsuitable investors who would later become ‘stormified’ and encouraged to invest substantial amounts in index funds using ”double gearing” (‘Storm Model’). At a (fairly) high level,...

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Financial Service Updates: RG 259 and AUSTRAC’s New Guidance Material

RG 259: It’s the Final Countdown Responsible Entities (REs) have just four weeks before ASIC’s facilitative period for compliance with RG 259 comes to an end.  RG 259 clarifies ASIC’s expectations in relation to REs fulfilling their risk management obligations and suggests that wholesale fund managers, managed discretionary account operators and IDPS operators would also benefit from the guidance. Although ASIC recognises that most REs have been undertaking risk management to some degree, documented systems, proper practices and procedures and well-considered and documented risk appetites have not been adequate. Key Requirements of RG 259 Below is a summary of...

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Uber and Equifax – Data Breach Responses are Critical

Another week another data breach as Uber revealed that it had been the subject of a data breach which resulted in the theft of personal information of approximately 57 million users. With the ever increasing reliance on technology to deliver most consumer services, these breaches are almost impossible to completely prevent. However, your reaction to these breaches could save your business millions of dollars, and how you respond will soon be further prescribed in Australian law.    The Uber breach took place in late 2016, where two hackers accessed its user data stored on a third-party cloud based service....

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Why AML/CTF training must be on your radar in 2017

Compliance training is often seen as a ‘tick the box’ activity, without much thought being given to the return on investment to be gained. From an AML/CTF perspective, the main point of requiring reporting entities to undertake employee training is not simply to establish compliance. It is to establish an effective anti-money laundering program. Training indicates the seriousness of the organisation’s program, and identifies whether its risk assessment and risk profile have been adequately assessed, effectively communicated to staff and successfully translated into operations. Having undertaken countless Independent Reviews since 2008, not to mention regular communication with AUSTRAC since...

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AUSTRAC: Who woke the Sleeping Giant?

Aside from the remittance sector, AUSTRAC’s enforcement activity has been relatively dormant over the last few years, occasionally bubbling away like a volcano, quietly active but not posing an immediate threat. Then… BOOM ! – it erupts with force, power and unequivocally on its own terms, taking everyone in its sights by surprise. It is fair to say that the recent enforcement actions against CBA and Tabcorp demonstrates that the Regulator certainly has teeth and the confidence to take on any reporting entity it considers the not to have met its AML/CTF obligations. The AML/CTF Act and Rules creates a regime...

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“It was more than just a Coding Error” – CBA and Conduct Risk Management

It has been an extraordinary month for CBA.  One which the other banks, and the market, watched unravel with bated breath. Let’s take a moment to recap. CBA’s initial response to AUSTRAC’s civil proceedings that the alleged misconduct was a “coding error” was misguided, potentially misleading and demonstrated a serious misread of consumer and regulatory sentiment.  For the past couple of years, CBA, along with its peers, have repeatedly responded to criticism of poor conduct enforcement action with relative indifference and, after serious arm bending, an occasional apology. In the world of Australian banking, another day another dollar. After a string of...

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Key Takeaways from ASIC’s Surveillance on Holding Assets

If you have custodial and depository authorisation on your AFSL, pay attention! Yesterday ASIC released Report 531: Review of compliance with asset holding requirements in funds management and custodial services, which highlights key areas identified during market surveillance undertaken in 2016/17. ASIC’s objective was to assess how well licensees were complying with RG 133 and related instruments following the conclusion of the two year grace period in November 2015. So, what are the Key Takeaways from ASIC’s Report? Capacity is key to identifying conflicts A lack of understanding and management of conflicts of interest which may arise between custodian...

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Avestra – A tale of RE Risk Mismanagement

Last week the Federal Court disqualified two former directors of Avestra Asset Management Ltd, a Queensland-based responsible entity that operated a number of registered and wholesale managed investment schemes. The directors were disqualified from managing corporations and restrained from providing financial services for a period of ten years due to multiple contraventions of the Corporations Act. What went wrong? Back in 2015, the Federal Court ordered the shut down of five investment schemes run by Avestra which was drawn into Malaysia’s 1MDB crisis. The orders were made after a report from provisional liquidators which found that: Avestra had failed to...

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