Regulatory Policy Watch

The new financial year is well underway, reporting season is ramping up, and policymakers are very busy as the last sitting weeks of federal parliament for 2024 start to tick down.

Here’s a rundown of what issues we’re keeping on our policy radar.

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Buy now, pay later

The bill to extend the application of the Credit Code to buy now, pay later contracts and establish low cost credit contracts as a new category of regulated credit is entering its final stages in federal parliament.

While most providers are already licensed, BNPL products themselves are not. We wonder how BNPL providers will approach meeting the new requirements, particularly since some measures will make granting quick approvals at point of sale more difficult to offer.

ASIC is also likely to update RG 206 accordingly.

Quality of Advice Review

Legislation to implement the first tranche of reforms recommended by the Quality of Advice Review recently passed federal parliament but it does little to make seeking financial advice viable for most consumers.

Industry awaits Tranche 2 changes, which will reform statements of advice, modernise the best interests duty and remove the safe harbour steps, and increase the range of institutions and representatives that can give limited scope financial advice.

Thought leadership in this area abounds. ASFA research finds Australians of all ages continue to lack access to financial advice, with under-35s more likely to listen to a ‘finfluencer’ and become exposed to poor advice and scams.

Similarly, the Council of Australian Life Insurers State of Australia’s Safety Net report found more than two-thirds of Australian workers were concerned about their ability to afford life insurance in the future and could benefit from life insurers being able to provide simple advice on their own products.

And APRA has reminded super funds that under the retirement income covenant they are required to support all members who are in or approaching retirement, regardless of the size of a member’s super balance, their level of engagement with super, or whether they have access to financial advice.

Better access to information and advice could help increase consumers’ awareness of scams. The National Anti-Scam Centre’s latest Targeting Scams report found that while combined losses have fallen slightly, scam reports rose 18.5%.

Cyber resilience and information security

Cyber and data protection remain trending topics given there has been no let-up in activity and business need in these areas. Late 2023, the Australian Government released the 2023-2030 Australian Cyber Security Strategy.

As well as ongoing work on amending the Privacy Act, several government departments and agencies have been collaborating on the DigitalID and Trust Exchange (TEx) projects with the aim of reducing the number of places Australians’ personal ID information is stored and shared.

ASIC’s latest Cyber Pulse Survey 2023 has exposed gaps in risk management of critical cyber capabilities, with results indicating organisations are reactive rather than proactive when it comes to managing their cyber security.

Financial services business have obligations under ASIC licensing (RG 104) and APRA licensing (CPS 220, CPS 230 and CPS 234) to adequately manage their technological resources, particularly any outsourced systems. Third party vendor risk was underscored during the Latitude and Crowdstrike cyber incidents.

Businesses can evaluate the resilience of their systems and procedures against a variety of frameworks, including Essential Eight and the Council of Financial Regulators’ Cyber Operational Resilience Intelligence-led Exercises framework (CORIE framework v2.0).

Anti-money laundering

The Attorney-General’s Department recently concluded a second round of consultation on reforming Australia’s AML/CTF regime. The reform agenda comprises both simplifying and modernising the regime and extending it to cover high‑risk services provided by some professions.

So-called Tranche Two entities include lawyers, accountants, trust and company service providers, real estate professionals, and dealers in precious metals and stones. The broader regime changes will apply to them also.

More clarity regarding the implementation roadmap would be most welcome.

In the meantime, AUSTRAC has released new National Risk Assessments for money laundering and terrorism financing to increase reporting entities’ understanding of trends in threats and vulnerabilities.

Recordings of information sessions conducted for individual sectors will be made available via AUSTRAC’s YouTube channel.

AUSTRAC expects entities to use assessment insights to evaluate business risks and strengthen their AML/CTF programs.

Reporting season

When examining all those reporting season disclosures, it’s worthwhile going beyond the numbers to explore underlying themes likely to be expanded on when annual reports and annual general meetings follow soon after.

We’re always on the look-out for discussion of social value and governance matters (the S and G in ESG). Accountability and organisational competence are the foundation of any soundly operating business, with commercial success an inherent by-product of achieving good customer outcomes.

Well conceived, properly contextualised learning, suited to each line of defence and role can aid in ensuring your whole organisation operates purposefully and smoothly.

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