Welcome to the latest edition Financial Services Thinking showcasing the news from the corporate regulators.

We also share a 'hot tip' about AUSTRAC's updated guidance on employee due diligence and anti-money laundering and counter-terrorism financing (AML/CTF) training and what you should do next.

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ASIC updates guidance on breach reporting - are you up to date?

ASIC recently released updated guidance for industry on making notifications to ASIC under the reportable situations regime (formerly breach reporting). The revised Regulatory Guide 78 Breach reporting by AFS licensees and credit licensees-

  • clarifies the circumstances in which licensees may group multiple reportable situations into one report to ASIC
  • contains new guidance on the information to include when licensees describe a reportable situation, and
  • contains new guidance for licensees on ASIC's expectations when licensees are providing updates related to a reported breach.

The current regime came into effect on 1 October 2021 and substantially overhauled the former breach reporting framework.

It is important licensees have current procedures in place to ensure compliance with the regime, as non-compliance carries significant penalties.

Please contact a member of our Funds Management team if you would like to discuss compliance with the new regime.

AFS licence of the world's largest crypto exchange cancelled

On 6 April 2023, ASIC cancelled the AFS licence of the world's largest cryptocurrency exchange--Binance. ASIC cancelled the AFS licence of Oztures Trading, which traded under Binance Australia Derivatives (Binance) after Binance requested to cancel its AFS licence. Prior to the cancellation request, ASIC had been reviewing whether to cancel or suspend the AFS licence, with attention placed on how Binance classified retail and wholesale clients. This is a stark reminder that ASIC views it as 'critically important that AFS licensees classify retail and wholesale clients in accordance with the law'.

We have extensive experience with AFS licence applications, variations, and compliance. Reach out to our team for more details and assistance.

Whistle while you work

On 6 April 2023, ASIC Commissioner Danielle Press released an article Whistle while you work encouraging directors to revise their company's whistleblower policy in accordance with ASIC Report 758 Good practices for handling whistleblower disclosures. The Commissioner reaffirmed 'directors have a key role to ensure their firm's program is useful and effective'. That means directors' responsibility extends to overseeing the firm's whistleblower program, as opposed to just handling individual disclosures. Please contact our Funds Management team for help developing or reviewing your whistleblower policy.


AUSTRAC opens consultation on AML/CTF reforms

Consultation is open until 16 June 2023 on proposed reforms to modernise the Australian anti-money laundering and counter-terrorism financing (AML/CTF) regime. This is the first in a two-stage consultation process with preliminary reforms including removing the Financial Transaction Report Act and revising customer due diligence and risk management obligations. It is unclear if this consultation will result in significant amendments to the regime. However, it may result in the adoption of singular AML/CTF Programs rather than the current two-part (Part A & Part B) framework.

Our Funds Management team can help with your queries.


ACCC seeks new merger regime

The Australian Competition and Consumer Commission (ACCC) has proposed significant reforms to the country's merger control regime. Currently, it is not mandatory for companies to inform the ACCC about their intended merger, nor postpone the merger until they obtain approval from the ACCC.

The proposed changes include a mandatory and suspensory notification system, call-in power below thresholds, and upfront notifications. The substantive merger test would include a second-stage public benefit-based test and an update to the merger factors considered when assessing whether a merger is anticompetitive. The proposals are currently under consideration by the Commonwealth government and await the Treasurer's views on the matter. We will keep you up to date with further developments.

Safeguard Mechanism reforms

The Safeguard Mechanism (Crediting Amendment) Act (Act), which aims to establish a framework for creating Safeguard Mechanism Credits (SMCs), was recently passed by Parliament and takes effect from 1 July 2023. SMCs are a form of new carbon credit which are automatically issued by the Clean Energy Regulator to facilities of large industrial emitters when their emissions fall below their baseline. SMCs will be treated as 'financial products' under the Corporations Act and will be able to be traded and used by other facilities to reduce their own net emissions. Please contact our Funds Management team if you have any queries about the Safeguard Mechanism reforms.


Updated guidance on employee due diligence and AML/CTF training

AUSTRAC has released particularly helpful guidance on employee due diligence and AML/CTF training of employees. The employee due diligence guidance includes practical recommendations on steps to take when considering a new employee, how to screen and rescreen employees, and examples of good and bad practices. The AML/CTF training guidance includes guidance on how regular training should be, outsourcing of training, and examples of good and bad practices.

We have assisted countless prospective and existing businesses on complying with financial services laws, including the AML/CTF laws, throughout the life cycle of their business.

With the updated AML/CTF guidance on employee training, it may be worth reconsidering your current arrangements. There are many internal and external options so reach out to our team for more information.