REGULATORY LAW GOVERNMENT REGULATION LEGISLATIVE DRAFTING GOVLAW

LEVEL 2

696 Bourke St

Melbourne VIC 3000

PRACTICE

AREAS

REGULATORY

LAW FIRM

Specialising in advising the gambling, finance and bullion sectors on government regulation including Anti-Money Laundering and Counter-Terrorism and AUSTRAC compliance.



GOVLAW WEBINARS

 

PRACTICE

AREAS

SERVICES

REGULATORY ADVICE

 

Legal advice on government regulation for Pubs and Clubs, Casinos, Banks, Credit Unions, Building Societies, super funds and bullion, crypto-currency and finance services. AUSTRAC, ASIC, APRA and sanctions (DFAT) compliance.

UPDATING CLUB RULES OR CONSTITUTION

For Clubs which are incorporated associations or companies limited by guarantee - updating your Rules or Constitution.

AML/CTF INDEPENDENT REVIEWS AND PROGRAMS

 

Independent Reviews and AML/CTF programs.

AML/CTF TRAINING

 

Staff, Management and Board or Committee training for AML/CTF compliance - webinars and on-site.

AUSTRAC ENGAGEMENT & EXEMPTIONS

 

Engagement with regulators on behalf of business, including regarding compliance issues.

LEGISLATIVE DRAFTING

​​

Legislative counsel services for principal and subordinate legislation of all types in plain language.

REGULATORY LAW GOVERNMENT REGULATION LEGISLATIVE DRAFTING GOVLAW

PURPOSE

 

GOVLAWTM advises global business on regulation, trains their people on compliance and negotiates with government.

We focus on innovation and clear communication with our clients, using plain language in drafting commercial contracts.

 

GOVLAWTM are your partners in sustainable profit through enhancing your reputation, and working with you on practical compliance solutions for laws on:

 

•    Investor confidence and protection in financial markets

•    Customer trust in financial services (banking and saving for retirement - superannuation)

•    Preventing terrorism financing and money laundering in gambling and gaming, bullion trading and financial services.

OUR MISSION

 

GOVLAWTM provides innovative legal and compliance advice and training to businesses on government and regulatory requirements. We can liaise with regulators on your behalf, for example assisting with applications for exemptions.

We have specialist experience in Commonwealth government regulation for the financial (including fintech), gambling and bullion industries for anti-money laundering and counter-terrorism financing (AML/CTF) laws. We can assess and report on the compliance of your business units with AML/CTF legislative requirements.

We are passionate about communicating in plain language about what can often be complex regulatory environments.

 

REGULATORY LAW GOVERNMENT REGULATION LEGISLATIVE DRAFTING GOVLAW

NEWS

What to do if AUSTRAC asks your Pub or Club to appoint an external auditor...


Earlier this year AUSTRAC changed the procedures around External Auditors which can be appointed to regulated businesses with gambling, such as Clubs or Pubs with gaming machines or ‘pokies’.

Where AUSTRAC finds that a Pub or Club’s compliance with the anti-money laundering and counter-terrorism financing requirements, or risk management is not sufficient, they may require the Pub or Club to appoint an ‘External Auditor’.

In the past, AUSTRAC kept a list of approved auditors on its website. This has changed, and Pubs and Clubs can now nominate an external auditor for consideration by AUSTRAC. This process involves the potential auditor providing information on their relevant expertise to AUSTRAC.


When could this be relevant for my Pub or Club?

Clubs or Pubs regulated by AUSTRAC (which offer gambling to patrons) will be aware of the headline civil penalties for non-compliance of up to $21 million under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).

However, there are many other steps in compliance, which AUSTRAC can take before an issue escalates to that level. Examples include:

  • infringement notices (for less serious contraventions with lower fines)

  • remedial directions (to take action to repair a contravention)

  • court ‘enforceable undertakings’ (these have been issued against Hotels in NSW and Queensland) and
  • the Club or Pub being required to appoint an ‘external auditor’.


Despite the title, an ‘external auditor’ does not need to be an ‘auditor’ in the accounting sense, but rather a professional, external to the Pub or Club with relevant expertise.

Where a Club or Pub receives enforcement related correspondence from AUSTRAC, this is a serious matter and professional advice is recommended.

 

Note: As originally published in the Spring Hub Magazine, Victoria, 2019, page 42.

Andrew Fernbach, Lawyer

FEBRUARY 2019

AMP - Annual results - $3 billion net cash outflows - implications for banking sector

On 14 February 2019, AMP’s share price closed down 7.8%, following publication of their annual results. For international readers, AMP is a large Australian diversified Financial Services company, including wealth management (superannuation) and banking.

 

Their shares are trading at under half the value of their yearly peak. So what went wrong?

 

Cost of compliance

Banks, Credit Unions, Building Societies or other ADIs (authorised-deposit-taking-institutions) may often ask, what is the cost compliance, including staff, legal advice, reference materials and policies and training. A better question is, what is the cost of NON-compliance?

 

$3 billion outflow

According to the AMP Investor Report - Full Year 2018, net cash outflows for Australian wealth management were around $3 billion higher than in the previous financial year “reflecting a range of factors including the impact of AMP’s appearance at the Royal Commission”.

 

Take a moment to compare $3 billion in outflow of customer funds and the share price impact for AMP, with the solid performance of Macquarie Group (Investment and Retail Bank) over the year:

 

https://www.asx.com.au/asx/share-price-research/company/MQG

 

Far sighted executives at the “silver doughnut” (market shorthand, based on its logo appearance) had invested heavily in compliance following an earlier ASIC compliance action known as an ‘enforceable undertaking’. Given the Royal Commission letters patent (similar to ‘Terms of Reference’) excluded matters which have been “sufficiently and appropriately dealt with” by another investigation or proceeding, Macquarie was able to side-step the Royal Commission.

 

We have also seen Commonwealth Financial Planning Limited (CFPL), trigger the enforcement of an undertaking, having failed to leap the compliance hurdles in the required time frame. So what can be done?

 

Compliance as part of daily ‘workflow’

Compliance is not just a matter of paying large law firm invoices and purchasing lengthy manuals which sit gathering dust on the shelf. Compliance processes may need to be risk-based (follow a Risk Assessment of the business) and should be embedded in performance management and daily business processes. Where compliance can be targeted against the greatest risk, it is more efficient and cost effective.

 

For example, the AML/CTF Program obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) are risk-based. There is a certain amount of trust in regulated entities built into the scheme of the AML/CTF legislation, to know their businesses best and to effectively manage and mitigate their risks.

 

Where this trust has been breached, we have clearly seen the consequences in enforcement actions by AUSTRAC against Tabcorp ($45m) and the Commonwealth Bank ($700m).

 

On the other hand, the Fintel Alliance is a shining example of the major banks, remitters and selected regulated entities partnering with AUSTRAC to strengthen their relationship and fight money laundering, terrorism financing and criminal infiltration of the financial system.

Banks to change course

Large corporations have multiple layers of management and even with CEO willpower can steer like an ocean liner - taking a long time to change course. from what appeared to be focus on short term profit, almost at all cost, including customer welfare and sustainability of the business.

 

With increasing competition from the customer owned sector and a looming challenge from the FinTechs in 2019 (the Volt Bank received its full banking license less than a month ago) the for-profit banking sector may seek to emulate the world’s best, such as the Seven Seas Explorer (Regent Cruises) or the Silver Muse (Silver Sea Cruises), rather than the Titanic.

TUESDAY 11 DECEMBER 2018  [NOTE: APRA was not successful in this action and has decided not to appeal - 17 October 2019.]

 

In a landmark proceeding, the Australian Prudential Regulation Authority (APRA) recently announced it was taking enforcement action in the Federal Court against IOOF, and some of its senior executive team.

 

IOOF is a large Australian financial services provider, including superannuation, with a market capitalisation of $1.5 billion as of today ($4.34 per share). This compares to around $2.5 billion ($7.17 per share), on Thursday last week, before the news broke on the APRA enforcement action.

Federal Court action

APRA is seeking to impose additional licence conditions on IOOF group entities. The proposed conditions and directions to comply with conditions seek to achieve significant changes to the identification and management of conflicts of interest at the financial services provider.

 

APRA has also commenced disqualification proceedings against a:

•  Managing Director

•  Chairperson

•  Chief Financial Officer

•  General Manager – Legal, Risk and Compliance

•  Company Secretary and

•  a General Counsel.

 

It is important to avoid prejudice and these individuals will have a chance to put their defence in the Federal Court. The acting IOOF Chairperson has stated the allegations were ‘misconceived’ and would be ‘vigorously defended’.

 

IOOF has announced that the Managing Director and Chairperson would step aside from their positions and focus on defending the APRA action (10 December 2018).

 

However, APRA’s enforcement action is a salutary compliance warning to all superannuation ‘responsible officers’, following the Royal Commission proceedings.

 

APRA has the power to apply to the Federal Court for an an order disqualifying a person from being a superannuation trustee or responsible officer under section 126H of the Superannuation Industry (Supervision) Act 1993 (SIS Act).

Demutualisation context and implications for banking in Australia

The IOOF was a ‘friendly society’ with a long history dating back to 1846 and stands for the “Independent Order of Odd Fellows". Friendly Societies were established in Australia in the 1830s and were traditionally founded on mutual self-help ideals to provide joint medical and essential services, prior to the establishment of government welfare services we are familiar with today.

 

Those with an interest in Melbourne, or a few minutes on a coffee break can still see the history of IOOF in the foyer of the Neo-Gothic MU building (corner of Collins and Swanston Streets):

https://govlaw.info/IOOF-building-Melbourne

 

The IOOF demutualised in 2002 then listed on the ASX in 2003. Another former mutual was the AMP, which began 1849 as the Australian Mutual Provident Society and demutualised in 1998.

 

The issues which have emerged in the Royal Commission regarding the AMP, may lead to speculation on the value of ‘demutualisation’ more generally.

 

It should also provide grist for the Customer Owned Banking Association (COBA) mill as it lobbies government to ensure that their members are not disadvantaged by any ‘one size fits all’ regulatory response, following the financial services Royal Commission.

 

Former ACCC chair, Professor Graeme Samuel has observed that (22 October 2018) the mutual or customer-owned banks are unburdened by the profit focus of institutional shareholders and “have the flexibility and motivation to not just talk about placing the customer first, but to actually walk the walk”.

 

In this strategic context, there is also an implicit challenge for the Australian Bankers’ Association (ABA) - on how to articulate a vision for the ‘for-profit’ banking sector, to justify its lion’s share of the market.

 

Perhaps the words of NAB CEO and Managing Director, Andrew Thorburn before the Royal Commission may serve as a guide: “to back the bold who move Australia forward”.

 

Ideally, this will translate the for-profit banks global networks, technology and available resources into a more sustainable balance between community, shareholder, staff and customer interests.

 

Andrew Fernbach, Lawyer

 

 

 

Are you a board member or responsible officer for a superannuation fund (RSE licensee)? For legal or compliance advice, please feel free to contact GOVLAW: info@govlaw.com.au

Key legislation

•  Superannuation Industry (Supervision) Act 1993

•  Federal Court of Australia Act 1976

•  APRA, Prudential Standard SPS 520 - Fit and Proper

•  APRA, Prudential Standard SPS 521 - Conflicts of Interest

•  APRA, Prudential Practice Guides

 

© GOVLAW 2018

 

REGULATORY LAW GOVERNMENT REGULATION LEGISLATIVE DRAFTING GOVLAW

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