Fund Regulatory Update

AUSTRAC warns NAB on anti-money-laundering failures

Financial intelligence regulator AUSTRAC is chasing NAB over failures to make necessary improvements to anti-money-laundering and counter-terrorism financing program in the five years its been required to do so. NAB received correspondence on Friday stating ‘serious concerns’ about the bank’s compliance with the law, with the matter being escalated and a formal enforcement investigation commenced. AUSTRAC states in the letter that it is not considering civil penalty proceedings, however, that could change.

Reform: abusive partners can’t hide super in family law cases

 Long-time-coming reforms to the law will help prevent abusive partners hiding superannuation assets in family law cases. The draft legislation has been welcomed by many key players, including The Australian Institute of Superannuation Trustees and Women’s Legal Service Victoria. The draft legislation promises to make it easier to identify superannuation assets in family law proceedings, to prevent family violence perpetrators from hiding super assets as the case moves through the family law courts.

According to the draft, a party to family law property proceedings can apply to the court to request a partner’s superannuation information from the Australian Tax Office (ATO). Thousands of women have had to walk away from superannuation entitlements after a break-up. The difference can mean walking away from an abusive relationship with nothing versus a fair division of superannuation money that will help them to financially recover.

Superannuation may be the only asset in a relationship. Up until this point, getting accurate information about the amount has been difficult, so a single, reliable point of truth will make it harder to hide funds or under-disclose.

IOSCO launching 2021 World Investor Week

The International Organisation of Securities Commissions (IOSCO) is launching its fifth annual World Investor Week from 4-10 October 2021. Each jurisdiction can choose any other week of October or November to promote financial and investor education. The week-long global campaign is to raise awareness of the importance of investor education and protection and highlight the initiatives of securities regulators in these areas. The themes for 2021 are sustainable finance and frauds and scam prevention.

APRA updates

Smith’s speech on culture and conduct in super

APRA’s Suzanne Smith, executive director of APRA’s superannuation division, has given a speech on conduct and culture in superannuation. Smith outlined APRA’s expectations of best practice risk culture across 10 elements.

Main comments include:

• “A single serious accusation of misconduct can cause immense damage to an organisation’s reputation, eroding public trust, deterring customers and investors, or attracting financial penalties such as fines. That in itself is a prudential risk. APRA’s chief concern when it comes to misconduct, however, is what it says about an institution’s culture, and whether that culture potentially enables or even encourages damaging behaviour.”

• “Nothing influences an institution’s risk culture more than the words and actions of its board and senior executives – the tone from the top. Organisations that do this well have strong role models who champion the importance of risk culture and ensure good risk management is embedded across the business. They also have leaders who regularly monitor risk culture and take effective actions to address identified weaknesses, deal proactively with poor risk outcomes and aim to mitigate risks from manifesting.”

• “APRA gets concerned when we see evidence of individuals who avoid taking responsibility for risk in case they are blamed if something goes wrong, where individuals are not held accountable when things do go wrong, where issues drag on with no attempt to identify underlying causes, and where accountabilities for risk are not defined across the entity.”

• “A sound risk culture emboldens employees to speak up and voice concerns with their leaders. It produces better decisions by ensuring a broader range of views is considered and questionable ideas are appropriately challenged. It incentivises trustee boards and senior executives to prioritise what’s right over what’s simply profitable or expedient. In doing so, it helps to deliver better outcomes for superannuation members.”

APRA Connect ready to go

The Australian Prudential Regulation Authority (APRA) set up the test environment for the new data collection system, APRA Connect, due to go live on 17 June 2021. Users can become familiar with the system prior to launch, trialling data submission for those industries who are new to the requirements. The APRA Connect production environment is set to go ahead from 13 September 2021.

APRA: Super funds under $30bn should merge

APRA deputy chair Helen Rowell supports the view that superannuation funds under $30 billion in assets should merge. APRA knows of 12 super fund mergers that are currently underway.

Rowell said, "The emerging industry view seems to be that any fund with less than around [$]30 billion in assets under management is increasingly going to be uncompetitive about against the so-called mega funds.”

"And while there will inevitably be debate about a threshold level of assets that's needed...we generally agree with the sentiment."

Rowell warned industry, however, of mergers that end up with poor governance or two small, underperforming funds merge. Sustainability over the long term is the goal of mergers.