This article is part of our 10 Lessons from 10 Years series, marking a decade of Forensic & Litigation Consulting in Australia. Explore how we deliver forensic insights, resolve complex disputes and support clients through critical challenges.
Australia's financial sector has experienced significant transformation over the past decade through comprehensive regulatory reform, but regulatory clarity doesn't always create operational simplicity. The cumulative effect of major reforms addressing banking misconduct, enhanced AML/CTF obligations, cybersecurity frameworks and scam prevention requirements has created a complex regulatory environment that risks undermining the very objectives it sought to achieve.
This paradox of progress represents one of the defining challenges of modern financial regulation: regulatory compliance is fundamentally about risk management, requiring obligation mapping and integrated oversight across multiple regulatory streams. As financial institutions wrestle with compliance demands and heightened enforcement risk, how can they navigate reform to foster sustainable and proportionate regulatory compliance that genuinely supports better customer outcomes?
The Promise of Comprehensive Reform (2015-2025)
Australia's financial system started changing in the mid-2010s as banking practices came under increasing scrutiny.1 This led to the 2017 to 2019 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which found serious cultural and operational problems.2 The Royal Commission sparked a wave of new rules: stronger prudential standards, closer supervision, new conduct requirements and the Financial Accountability Regime ('FAR') establishing personal accountability for senior executives.3 The FAR commenced for authorised deposit-taking institutions ('ADIs') and their authorised non-operating holding companies ('NOHCs') from 15 March 2024 and to insurance entities, their licensed NOHCs and superannuation trustees from 15 March 2025.
The AML/CTF rules were strengthened more recently. In late 2024, the Australian Parliament passed legislation introducing substantial reforms to the anti-money laundering and counter-terrorism financing ('AML/CTF') regulatory regime in Australia.4
Growing cyber threats also drove more regulation. APRA's CPS 234 started in 2019, followed by broader Security of Critical Infrastructure Act changes.5,6 More recently, efforts to tackle customer-authorised scams are adding regulation requiring 'reasonable steps' to prevent, detect, respond and disrupt scams, continuing the growth and complexity in regulations into the mid-2020s.
Each round of new rules tackled specific issues to rebuild trust. But put together across the decade and across regulators, the rules created a situation where just managing compliance is a major operational challenge and cost, necessitating more sophisticated and coordinated risk management.
When Multiple Reforms Collide in Practice
The cumulative weight of reforms has created overlapping compliance obligations that often intersect and create operational complexity, requiring institutions to carefully navigate competing regulatory demands and reporting requirements. Institutions must now manage multiple regulatory streams, each with distinct priorities, timelines and enforcement regimes.
Scam prevention requirements provide a clear example, where institutions must navigate ACCC-mandatory industry codes, ASIC consumer protection obligations, AML/CTF suspicious transaction reporting and privacy requirements for data sharing — each with different thresholds and timeframes.7,8,9,10 Similarly, climate risk reporting frameworks emerged alongside APRA's CPS 230 operational risk standards, creating alignment challenges.11
However, CPS 230 has also consolidated and replaced multiple legacy standards. This is a deliberate step by APRA to reduce duplication and modernise the prudential framework. Recognising these coordination challenges, regulators have begun initiatives like the Regulatory Initiatives Grid, which provides clearer guidance on overlapping obligations, though implementation complexity remains a significant challenge for institutions.12
The Real-World Impact: Compliance Burdens and Enforcement Risks
The sheer volume of overlapping reforms creates tangible operational challenges for financial institutions. This complexity makes it harder to maintain clear risk visibility across multiple regulatory streams, heightening the risk of compliance failures and enforcement actions.
AUSTRAC's intensified enforcement posture provides a stark example.13 Recent significant penalties demonstrate how failures often stem from implementation gaps rather than lack of intent. AML/CTF requirements, transaction monitoring obligations and reporting standards can create compliance blind spots in the complex banking multibrand, customer segments, product and channel operating model, resulting in significant enforcement actions.
The digital age has also changed the threats and the stakes. High-profile data breaches and operational disruptions now generate instant, widespread media reactions, further amplified by social media. Ten years ago, such events may not have made national headlines. Today, they can erode trust with leaders called and held to account within hours. This immediacy has fundamentally changed how licensees must manage both operational resilience and crisis communications.
The role of risk management has likewise evolved over the last decade. Regulators once viewed risk as the remit of the second line of defence. Today, accountability sits firmly with the first line — the business. Boards, CROs and executives are also accountable and expected to embed proactive risk ownership at every level. This shift, reinforced by the Royal Commission findings, has made clear that risk is everyone's responsibility, requiring active management rather than reactive oversight.
Practical Steps Forward: A Risk-Based Approach
The past decade delivered essential improvements in Australia's financial system integrity and resilience. However, it exposed a fundamental truth: well-meaning regulatory clarity can create operational complexity that undermines compliance effectiveness and increases enforcement risk.
From our experience advising financial institutions through major regulatory transformations, the most successful institutions have invested in three key areas: first, integrated obligations registers and risk assessment capabilities spanning multiple regulatory domains; second, sophisticated compliance monitoring systems; and third, expert advisory relationships providing ongoing guidance.
Several practical priorities have emerged for sustainable progress.
For regulators:
- Regulatory Coordination: Greater collaboration between agencies to harmonise requirements and reduce duplication, supported by comprehensive risk impact assessments considering cumulative effects
- Risk-Proportionate Enforcement: Approaches recognising implementation realities and focusing on systemic improvements rather than punitive measures for isolated breaches
For financial institutions:
- Integrated Risk Management: Cross-functional capabilities integrating legal, compliance, operational, product and technology perspectives, breaking down silos to ensure appropriate risk management and compliance actions are taken
- Proactive Advisory Support: Given enforcement risks in complex regulatory environments, institutions need access to expert capabilities to guide or independently review regulatory remediation across the full spectrum of regulatory challenges
The Clear Path Ahead
As Australia looks ahead, the key lesson is that progress cannot be measured solely by reform volume or legal precision. True progress lies in crafting a regulatory environment that is operationally sustainable whilst recognising that comprehensive risk assessment and management processes are critical to achieving regulatory objectives.
For financial institutions navigating this landscape, the message is clear: regulatory compliance is no longer just a legal obligation but a fundamental risk management challenge. This requires expert advisory support, integrated risk assessment capabilities and proactive governance frameworks. The choice for institutions is whether to invest proactively in these capabilities to manage regulatory compliance effectively or face the alternative of reactive responses to court judgments, regulatory fines, enforcement undertakings and litigation.
Footnotes:
1: "Final Report: The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry," Royal Commissions (February 4, 2019).
2: Id.
3: "Financial Accountability Regime," Australian Prudential Regulation Authority (July 11, 2024).
4: "AML/CTF Reform," AUSTRAC (August 4, 2025).
5: "Prudential Standard CPS 234: Information Security," Australian Prudential Regulation Authority (July 2019).
6: "Security of Critical Infrastructure Act 2018 (SOCI)," Critical Infrastructure Security Centre (August 27, 2024).
7: "ACCC welcomes passage of world-first scams prevention laws," Australian Competition & Consumer Commission (February 13, 2025).
8: "A guide to unfair contract terms for businesses and legal practitioners," Australian Competition & Consumer Commission (April 22, 2016).
9: "Reporting," AUSTRAC (January 15, 2024).
10: "Read the Australian Privacy Principles," Office of the Australian Information Commissioner (July 25, 2022).
11: "Prudential Standard CPS 230: Operational Risk Management," Australian Prudential Regulation Authority (July 2025).
12: "Regulatory Initiatives Grid," Treasury.gov.au (December 19, 2024).
13: "Lists of enforcement actions taken," AUSTRAC (August 4, 2025).
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