Financial Services Blog – April 2014

APRA finalises risk standards – REs still holding out for ASIC guidance

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APRA-regulated entities should be familiar with two standards that are due to come into effect on 1 January 2015 – Prudential Standard CPS 220 Risk Managementand Prudential Standard CPS 510 Governance.

Submissions closed for the proposed new standards last week, which include a draft prudential practice guide on risk management.

The proposed risk management enhancements include the requirement that APRA-regulated institutions designate a Chief Risk Officer (CRO), who is responsible for the risk management function, as well as outlining further details of APRA’s expectations of the CRO.

Meanwhile, non APRA-regulated Responsible Entities (REs) are still waiting for the proposed Class Order and ASIC Regulatory Guide (currently contained within ASIC CP 204) to be released in its final form.

We reported last year that these enhanced Risk Management requirements for REs were due to be released in August 2013, then by the end of the 2013. However, we are now in the second quarter of 2014 and it has all gone very quiet on this front.

FoFA Semifreddo

At the end of last month, the Federal Government announced that its plans to ‘streamline’ the perceived compliance burden from the FoFA rules would be frozen, pending a Senate Committee inquiry. As reported in the media, the Senate inquiry followed widespread concerns from seniors and investment groups about the potential loss of consumer protection from the proposed changes.

The proposed streamlining regulations, contained in the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014, were designed to amend the FoFA provisions of the Corporations Regulations 2001.

The submission closing date for the Senate Economics Legislation Committee inquiry is 30 April 2014 and the Committee is due to report its findings to Parliament on 16 June 2014.

In the meantime, ASIC has supported the Federal Government by stating that it will not take enforcement action on the areas of the FoFA legislation that the Government plans to amend though the streamlining regulations. Pending changes to the law, licensees may be in a quandary about complying with the FoFA requirements in question. Despite ASIC’s announcement that it will not take enforcement action, these FoFA requirements are currently the law, which could still form the basis for an aggrieved investor to take legal action against any non-complying licensee.

Stay tuned for the next instalment.

AML/CTF Compliance Reports and Independent Reviews

A quick reminder for all AML/CTF Reporting Entities – the deadline for the lodgement of your S.47 Compliance Reports for the period 1 Jan 2013 – 31 Dec 2013 has now passed. These annual compliance reports should have been lodged via AUSTRAC Online by the 31st March 2014 at the very latest.

As part of this reporting process you will have been asked whether an Independent Review of your Part A Program was conducted by either an internal or external party. CompliSpace undertakes numerous independent reviews each year and we regularly see reporting entities who have introduced new products and services during the period without consideration of the money laundering or counter terrorism financing risks associated with the new offering.

So fund managers, when was the last time you introduced a new fund or won a new investment mandate? Are you a card or credit service provider? If so, you will have undoubtedly introduced new products since the AML regime was introduced several years ago and have you considered the potential risks associated with new delivery methods, customer types or even new designated services?

On the flip side, there have been several exemptions introduced through the ever expanding AML/CTF Rules, particularly in the last 6-12 months. So, you may actually find that you are no longer a reporting entity, or that your obligations have been significantly reduced.

How CompliSpace can help
Australian Financial Services Licence holders are inundated with a raft of corporate governance obligations and an ever-growing compliance burden, which can easily distract focus away from core business activities.

CompliSpace delivers industry specific web-based policies, programs and procedures that can be quickly tailored and configured to suit an organisation’s needs and are kept up-to-date with legal and regulatory changes by our team of specialists.
Our team of compliance professionals and lawyers combine extensive expertise with practical technology-enabled solutions to simplify the complexity of the regulatory environment and allow our clients to focus on allocating resources toward improving financial performance.

Contact Details
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This blog is a guide to keep readers updated with the latest information. It is not intended as legal advice or as advice that should be relied on by readers. The information contained in this blog may have been updated since its posting, or it may not apply in all circumstances. If you require specific or legal advice, please contact us on 1300 132 90 and we will be happy to assist.

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