Australia's financial services regulatory and compliance landscape is changing rapidly - Clyde & Co's weekly Regulatory Roundup will ensure you are up to date with the most important changes. In each edition, we will set out five key developments from the past week for you to consider. 

Subscribe here: ONLINE LINK

1. FAR: APRA and ASIC have released more information on FAR, and how they will manage the regime: Financial Accountability Regime | APRA. The information largely applies to ADIs, in relation to which the consultation paper on the proposed Regulator Rules remains outstanding; please see our response on our dedicated FAR website here. There should not be too much in here of surprise, though please note in the guidance:

• the level of detail which APRA expects. The world has moved on since BEAR (see, for e.g. page 5);
• the “primary areas of focus” or PAFS, which APRA expects to see and roles within them (see pages 6 – 10);
• the handover points between APs. This is critical, and dovetails into the verbs below. For example, financial data. If the CPO is given bad data by the CFO, are they responsible? Is the CFO? (See page 6). What also happens when a new AP takes over an old AP’s area?;
• the focus on key verbs e.g. “manufacturing” a HR policy, as opposed to “implementing” it (page 6). We are deep in the detail here with many clients, and you can see our list of verbs in our consultation paper on our website.  Make sure to mesh with CPS 511 if you can!;
• limitations of liability should be used to the minimum extent. The ones we deploy in our implementations for our GI, LI and RSE clients are strongly arguable based on our overseas experience, though this call out is key i.e. there needs to be the proper frameworks for a Board or CEO to over-rule an AP (while the latter effectively discharges their responsibility); and
• the template is still basic, as it was under BEAR. The guidance is better now, but it is still very much a DIY regulatory implementation for each prudential entity, and critical to get the accuracy and detail right (because, at worst, it is an enforcement roadmap in a situation where something has broken and there is a cranky regulator).

2. Digital assets & debanking: it is no secret that digital asset providers are increasingly being debanked in Australia, and their (limited) payment providers are following suit. So what is the key law in this area?  Bank and customer relationships comprise a mixture of contractual, and common law duties “founded on trust and good faith in a commercial sense” (ASIC v Australia and New Zealand Banking Corporation Ltd (No 3) [2020] FCA 1421 at [13] per Allsop CJ). The recent case of Human Appeal International Australia v Beyond Bank Australia Ltd (No 2) [2023] NSWSC 1161 highlights the complexity.  In it, the bank purported to close an account based on AML / CTF concerns. The court in that case found that contractual agreements which gave Beyond Bank a discretion to terminate the banking contract without giving reasons was inconsistent with the bank’s obligations under the Customer Owned Banking Association guidelines (a voluntary code, which is similar to the Australian Banking Code of Practice for non-mutual banks). Those obligations needed the bank to “strike a fair balance” as between its legitimate needs and interests and the customers.  (There are also broader banking obligations to act "efficiently, honestly fairly" under s. 912A of the Corporations Act 2001 (Cth), and with "honesty, integrity, and due skill, care and diligence" under the Banking Executive Accountability Regime). Expect to see more disputes actions, as the digital assets industry comes under increasing debanking pressure / their business are impacted by these decisions...

3. Unlicensed credit:  ASIC has commenced proceedings against Cigno Australia and its directors for allegedly providing credit without a licence. In essence, Cigno Australia's "No Upfront Charge Loan Model" provided short-term credit to more than 100,000 consumers between July 2022 and December 2022, and charged fees which exceed the amounts allowed to be imposed under the National Consumer Credit Act 2009 (Cth). This requires an Australian Credit Licence.  It is just one part of the long-running battles between ASIC and Cigno Australia, which was one of the first entities to fall foul of product intervention powers of the design and distribution regime. The concise statement is here. 

4. Misleading statements:  ASIC has appealed its case against Youpla Group handed down by the Federal Court on 5 September 2023 (see here).  ASIC had alleged representations were made by Youpla and its subsidiaries (ACBF) that: ACBF Funeral Plans was owned or managed by an Aboriginal person or persons; the ACF Plan had Aboriginal community approval; the ACF Plan was more beneficial to Aboriginal consumers than other funeral insurance products generally available at the time; and, plan holders would receive a lump sum payment of their chosen benefit amount, when in reality they would only be reimbursed for funeral related expenses up to the benefit amount upon production of proof that those expenses had been incurred. The Federal Court found such representations were made but was not satisfied those representations were false. The ultimate result of the appeal aside, it worth noting ASIC's heavy focus on misleading & deceptive conduct now. 

5. Debit card market: The RBA has released a Conclusions Paper summarising its consultations on the options for further enhancing the competitiveness, efficiency and safety of Australia’s debit card market. Fascinatingly, it decided to endeavour to publish high-level expectations on the tokenisation of payment cards by the end of 2023, with a view to help improve the security, efficiency and competition for online card payments.

Learn more about our global regulatory and investigations team here.