Australia's current financial services regulatory & 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 key developments from the past week for you to consider. 

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1.  Sanctions & crypto: the Australian Sanctions Office has issued a new advisory note on sanctions for digital currency exchange (DCE) providers. The advisory note: 1) explains how sanctions obligations apply to the DCE sector; 2) provides recommendations to help prevent a sanctions contravention; 3) and, explains what to do if DCEs identify a possible sanctions contravention. Digital currencies (and other funds or economic resources) are considered to be “assets” for the purposes of Australian sanctions laws. DCEs have a responsibility to take reasonable precautions and exercise due diligence to ensure they are not facilitating a cryptocurrency payment to or from a designated entity e.g. one sanctioned or their associates.  Given the global conflicts playing out, and oft-times structural challenges with determining recipients of digital assets i.e. whose wallet is receiving the assets, this one should be top of mind for AML / CTF and financial crime experts at DCEs. 

2. ASIC issues new info sheet for unlicensed fin services providers: ASIC has continued its campaign against unlicensed entities offering financial services through its publication of its new Info Sheet 282. The new info sheet is targeted at unlicensed entities engaging with consumers providing financial advice and serves as a warning for such providers, immediately highlighting the significant criminal and civil penalties available for contraventions of section 911A of the Corporations Act. Additional areas that ASIC has addressed in the new Info Sheet include unsolicited contact through call centres and telemarketers and online providers offering services that in the end result in contact with the customer promoting a change in financial services providers.  The publication of the Info Sheet follows a media release last week in which ASIC called out “dodgy cold calling operators and online baiting tactics” and threatened action against such operators. It is a great information tool for the market, and one we highly recommend spending some time reading! 

3. ASIC successful in its Director ID action: as we covered in the 25 March week Regulatory Roundup, ASIC commenced its first prosecution against two directors for failure to comply with director identification number requirements. On 3 May the Perth Magistrates Court convicted each of the directors, fined them $5,000 each and made a costs order for failing to comply with the Director ID scheme. These penalties should serve as a timely reminder for all (prospective) directors to ensure that they have applied for their director IDs prior to their appointment. With this successful prosecution, ASIC are likely to keep pursuing these breaches which could result in a maximum fine of $18,780 for directors.

4. ASIC cancels AFSL of Octillion Partners: following the 20 March 2024 permanent ban of Shane Rose from providing financial services, ASIC has cancelled the Australian Financial Services License of Octillion Partners under whom he was an authorised representative and a responsible manager. In issuing the banning order, ASIC specifically called out the failure to take reasonable steps to ensure that Octillion’s representatives comply with financial services laws and the likelihood of Octillion to continue to fail to comply with the general obligations under section 912A of the Corporations Act. Mr Rose was found to have dishonestly used client superannuation funds for purposes other than which they were given. Whilst this outcome is on the extreme end of the consequences available to ASIC for failing to ensure representatives comply with Financial Services Laws, licensees should take this warning to ensure that their arrangements for supervision of their authorised representatives are appropriate.  It follows a broader focus on authorised representatives, after ASIC's ground-breaking action against Lanterne.  

International perspective: the UK Court of Appeal has handed down a significant judgement as to the proper construction of warranty and indemnity policies in the decision of Project Angel Bidco Ltd (In Administration) v Axis Managing Agency Ltd & Ors [2024] EWCA Civ 446 . The case centred on a conflict between the operation of an anti-bribery and corruption liability exclusion, which are commonly found in W&I policies and exclude loss flowing from non-compliance with anti-bribery and anti-corruption laws from the scope of cover, and the inclusion of certain warranties covering the same issues as part of the “Insured Obligations”. The Court of Appeal found by majority that the coverage of insured warranties is subject to the terms of the policy and as such the wording of the exclusion prevailed. This decision is an important reminder to both underwriters and insureds to carefully check the wording of exclusions, which are generally hotly negotiated, to ensure that cover afforded under the policy is as expected!