AUSTRAC Launches Tools For Industry As Important Deadline Arrives
Home Affairs Minister Bob Debus has launched a number of tools developed by the Australian Transaction Reports and Analysis Centre (AUSTRAC) to assist reporting entities to comply with their new obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 No. 169 (Cth) (AML/CTF Act).
On 12 December 2007 the requirement for reporting entities to implement an AML/CTF program came into effect under the AML/CTF Act. The tools are:
- AUSTRAC Regulatory Guide - to help businesses understand their obligations under the AML/CTF Act;
- AUSTRAC Online - an information portal designed to assist businesses with their regulatory and reporting obligations;
- AUSTRAC Typologies and Case Studies Report 2007 - provides information on current money laundering and terrorism financing methods and indicators; and
AUSTRAC e-learning - Introduction to AML/CTF, the first
course in AUSTRAC's AML/CTF e-learning program.
AUSTRAC has also released a series of fact sheets (December 2007) with further information about these tools.)
APRA Releases Its Second Consultation Package On Refinements To The General Insurance Prudential Framework(19 December)
The Australian Prudential Regulation Authority (APRA) today issued its second consultation package on proposed refinements to the general insurance prudential framework to recognise the differing risk profiles of insurers. The package comprises a response paper and draft prudential standards and prudential practice guides. The proposed refinements have been developed in the context of the Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Act 2007, enacted on 24 September 2007. The refinements are expected to apply from 1 July 2008.
The response paper outlines APRA's response to submissions received on the discussion paper released by APRA on 31 July 2007. It contains proposals for the categorisation of insurers that are largely aimed at clarifying and simplifying APRA's requirements of branches and subsidiaries of foreign insurers. The proposals will also scale back some of the requirements of smaller insurers and captives while maintaining the integrity of APRA's prudential framework.
The paper also contains a number of proposals applying to all insurers. They include the recognition of 'kangaroo bonds', the measurement of capital and, importantly, certain reinsurance and investment-related measures.
On reinsurance, the paper contains a proposal aimed at encouraging foreign reinsurers not authorised by APRA to lodge security in Australia, after a grace period, in respect of amounts recoverable by APRA-authorised insurers from these reinsurers. In cases where these reinsurers do not lodge security, APRA-authorised insurers will be required, after the grace period, to hold capital to match the unsecured recoverables.
On investment risks, APRA is proposing revised capital requirements that better reflect the volatility of equity and property investments. The required capital would be higher except in cases where insurers use derivatives to hedge their risks, when the required capital would be lower. APRA will also 'look through' unit trusts to the underlying investments to ensure the required capital responds to the risk of those investments.
APRA Releases Final Reporting Requirements For Discretionary Mutual Funds(17 December)
The Australian Prudential Regulation Authority (APRA) today released the final reporting requirements for the collection of data from discretionary mutual funds (DMFs). This follows the passage of the Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Act 2007 on 13 September 2007. This Act requires DMFs to provide data to APRA under the Financial Sector (Collection of Data) Act 2001 to assist the Government to assess the need to prudentially regulate DMFs. APRA believes that the proposed level of reporting will address this need.
DMFs are entities that offer 'discretionary cover', that is, an insurance-like product that may involve an obligation on the DMF to consider meeting a claim made on it, but gives the DMF a discretion as to whether it will pay the claim. A DMF may be a trust, mutual, company limited by guarantee or other structure. Because of their discretionary nature DMFs are not insurance companies and therefore are not required to be authorised by APRA.
APRA's reporting requirements are set out in the reporting standards, forms and instructions. APRA has established a specialist unit who can assist DMFs with any questions on the final forms and reporting requirements.
APRA Releases Basel II Prudential Standards(30 November)
The Australian Prudential Regulation Authority (APRA) today released the suite of prudential standards that will give effect to the implementation of the new Basel II capital adequacy regime, known as the Basel II Framework, in Australia.
The Basel II Framework is a major global reform of capital adequacy requirements for banking systems that seeks to harness into the regulatory process best practices in risk management. In Australia, all authorised deposit-taking institutions (ADIs) – banks, building societies and credit unions – will be subject to the Framework.
The Basel II prudential standards have been finalised after extensive industry consultation, dating back to 2005. This consultation process has aimed at ensuring that the adoption of the Basel II Framework in Australia maintains the integrity of APRA's prudential framework, is appropriately tailored to reflect local circumstances and takes into account practical implementation issues. The standards are accompanied by a response paper that addresses issues raised by industry on the final drafts of these standards.
The vast majority of ADIs in Australia will adopt the Basel II standardised approaches. APRA will shortly announce those ADIs it has approved to use the Basel II advanced approaches as from 1 January 2008.
The Basel II prudential standards will come into force on 1 January 2008.
Changes To Life Insurance Prudential Standards(28 November)
The Australian Prudential Regulation Authority (APRA) today released a package of new and amended prudential standards, including actuarial standards, for life companies (including friendly societies).
The changes will come into effect on 1 January 2008. They result mainly from the Government's recent amendments to the Life Insurance Act 1995 (Life Act) made under the Financial Sector Legislation Amendment (Simplifying Regulation and Review) Act 2007 (SRR Act).
In general, the new and amended prudential standards maintain the operation of APRA's prudential framework by reproducing sections from the Life Act that are better placed in prudential standards. The amended legislation also transfers responsibility for actuarial standards from the Life Insurance Actuarial Standards Board (LIASB) to APRA. These standards are being reissued as APRA prudential standards.
Two new standards Prudential Standard LPS 230 Reinsurance (LPS 230) and Prudential Standard LPS 310 Audit and Actuarial (LPS 310) will ensure that key provisions relating to actuaries, auditors and reinsurance continue to operate. In particular:
- LPS 230 will incorporate and replace prudential rules relating to the reporting of reinsurance arrangements (PR 23) and reinsurance contracts requiring approval (PR 24);
- under the new LPS 310, APRA will no longer approve auditors as this requirement was removed from the Life Act; and
- the criteria for the appointment of auditors and actuaries under LPS 310 will now be aligned with APRA's 'fit and proper' criteria.
By introducing these standards, APRA is also able to revoke two prudential standards for friendly societies relating to actuarial advice (PS1) and approved benefit fund requirements (PS2); these requirements have been incorporated into LPS 310.
APRA is making minor changes to Prudential Standard LPS 510 Governance (LPS 510) and Prudential Standard LPS 520 Fit and Proper (LPS 520) to re-align references to the revised Life Act:
- the revised LPS 510 is now consistent with the corresponding general insurance governance standard requiring, for example, that members of the Board Audit Committee be directors of the company and that the Board has an explicit Board renewal policy; and
- the revised LPS 520 requires that an Appointed Actuary be a Fellow or Accredited Member of the Institute of Actuaries of Australia.
LPS 510 has also been amended in response to the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations, as outlined in a separate media release today.
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