Australian Regulatory Compliance Review

Anti-money laundering resources

I have placed a collection of anti-money laundering resource links in Compliance Toolkit.

The collection will grow as the legislation progresses.

You can see my archives under the Anti-money laundering category.

Insurance distributors

One of the most complex aspects of FSR is licensing and the system of authorised representatives, especially where insurance is involved. That system has now been simplified by the creation of "insurance distributors"..

ASIC class order 05/1070 deems a distributor of an Australian financial services (AFS) licensee, authorised to deal in general insurance products, as a representative of that licensee when they provide the financial service of dealing in a general insurance product.

This means that distributors (eg third party financial institutions or mortgage brokers) do not need to hold an AFS licence or be formally appointed as an authorised representative to deal in general insurance on behalf of a licensee.

The class order also means that the licensee will be fully responsible for all consumer protection measures under the Corporations Act for the provision of the financial service by the distributor, including providing proper disclosure and dispute resolution mechanisms.

The distributor can only provide the service for either or both of the following:
(i) a general insurance product;
(ii) a bundled consumer credit insurance product.

An insight into the decisions of the Banking and Financial Services Ombudsman

The  Banking and Financial Services Ombudsman believes that his processes may be enhanced by increasing the level of transparency about how his office operates and, in particular, the decisions he makes. To that end he has decided to publish a selection of case manager Findings.

The December 2005 Bulletin contains 3 Findings dealing with the following disputes:

• A disputant took out 2 unsecured personal loans for her boyfriend’s benefit. Despite assurance that he would meet the repayments, the boyfriend stopped making payments once his relationship with the disputant came to an end. The disputant’s father claimed that the loans should not have been granted and should be cancelled.
• A disputant received a foreign currency cheque in payment for dogs he had advertised for sale over the internet. The cheque was larger than the amount required to pay for the dogs and, at the purchaser’s request, the disputant waited 28 days for the cheque to clear and then transferred a large proportionof the funds to an overseas bank account nominated by the purchaser. Thecheque was dishonoured after the 28 day hold period had expired overdrawing the disputant’s account. The disputant claimed that he was nottold that the cheque could be dishonoured after the 28 day hold period hadexpired and sought reimbursement of the funds the bank had debited from his account.
• A small business referred a dispute to the Scheme involving three separate matters: an error in the registration of a floating charge over the assets of a company; failure to prepare and register a transfer of property and delay in the refinancing of a commercial bill facility.

The Findings reveal the detailed level of investigation undertaken by the Ombudsman's office before a decision is reached about the merits of a dispute. They also show the fact specific nature of disputes and the level of care taken to weigh the available information to reach a fair outcome. All Findings are made on a case by case basis and reflect the unique factual situation in each case. The sample Findings have been edited for external publication and de-identified.

Consumer Credit Code Comparison rates research released

The Uniform Consumer Credit Code Management Committee has released the results of a research project which is an investigation of the effectiveness of mandatory comparison rates in guiding consumer choices. Mandatory comparison rates have been in force for two years (1 July 2003) and are due to sunset 30 June 2006 (dependent on the outcome of a Regulatory Impact Statement currently being undertaken).

The results comprise a first issues paper and consumer research issues paper, together entitled 'The Effectiveness of Mandatory Comparison Rates:  Information, capacity and choice'. 

The Regulatory Impact Statement will be a key factor in deciding whether the comparison rate provisions will continue to apply in their current form, be changed, or deleted entirely from the Consumer Credit Code.

FSR refinements now law

Amendments to the Corporations Regulations to refine the regulation of the financial services industry (released in draft in October) are now law.

APRA stops unauthorised banking

The Australian Prudential Regulation Authority (APRA) has announced that it has obtained interim court orders preventing an unauthorised financial business calling itself and acting like a “bank”.

The interim orders prevent the entity from taking further deposits and freeze the current assets to prevent them being dealt with improperly.

A number of depositors have placed substantial funds with the self‑proclaimed Principality of Camside and Terra Nova Cache and were promised returns of approximately 50 per cent per annum.

UPDATE 11 January: APRA Takes further action

ASIC releases policy on financial calculators

Earlier this year ASIC released a consultation paper on online calculators.

It has now released its policy on the regulation of generic financial calculators (but not on calculators for specific financial products).

ASIC has issued a class order giving relief. Providers of generic financial calculators will not require an Australian Financial Services (AFS) licence with an advice authorisation or, if already licensed, will not need to meet the conduct and disclosure requirements in Part 7.7 of the Corporations Act 2001  subject to certain conditions including the disclosure of the assumptions.

The financial calculator must also display to the user in the ordinary course of its use or have printed on it all of the following:
(i) a clear and prominent statement about the purpose and limitations of the calculator;
(ii) a clear and prominent explanation of why the default assumptions, including any statutory assumption, are reasonable for the purposes of working out the estimate;
(iii) a clear and prominent explanation of the impact of any significant limitation of the calculator;
(iv) where the estimate is of an amount payable at a future time—a clear and prominent statement specifying whether or not the estimate takes into account an assumed change in the cost of living between the time of the preparation of the estimate and the future time;
(v) a clear and prominent statement to the effect that the calculator is not intended to be relied on for the purposes of making a decision in relation to a financial product and that the user should consider obtaining advice from a financial services licensee before making any financial decisions.

ACCC issues guide on misleading job ads

Misleading job and business opportunity advertisements carry heavy penalties under the Trade Practices Act 1974 , ranging up to $1.1 million for the most serious breaches.

The ACCC has issued a guide to help advertising staff of newspapers, websites and other places where job advertisements are found, to stop the publishing of misleading job and business opportunity ads.

ASIC releases EFT Code monitoring report

ASIC has released its monitoring report on the Electronic Funds Transfer (EFT) Code for 2003-2004

The EFT Code (the code) is a voluntary code however all banks, building societies and credit unions that provide retail EFTPOS and ATM services or telephone or internet banking subscribe to it. The code provides protections for consumers by requiring that key disclosures are made and privacy protections are in place. Importantly, the code sets down the rules for resolving disputes about unauthorised transactions.

Mr Greg Tanzer, ASIC's Executive Director of Consumer Protection said that institutions reported a high level of compliance with the code.

Between 2003 and 2004, 138,775 EFT complaints and 2.5 billion EFT transactions were reported.

'The most common source of complaints was again in relation to ATM cash dispensing problems. Overall, 71 per cent of complaints were resolved in favour of the customer', Mr Tanzer said.
 

USA anti-terrorist laws not renewed

During Australia's recent debate about its new Anti-terrorism Act there was discussion about a sunset clause (to ensure that the law would expire after a set period of time). Although there was argument for a 5 year sunset period, the provisions will sunset after 10 years  and will be reviewed by COAG after 5 years.

It is interesting to look at the US review process for its anti-terrorism laws introduced after the 11 September 2001 attacks.

The Wall Street Journal reports that the US senate has blocked renewal of certain Patriot Act provisions.

Whilst it is possible that an extension may be negotiated, the US public is concerned about alleged privacy and civil liberties breaches by the Bush Administration.

UPDATE: Washington Post: President acknowledges approving secret eavesdropping