October « 2005 « Australian Regulatory Compliance Review from Langes+ Lawyers

October 12, 2005

Anti-money laundering update

The Australian Government has agreed to reforms to strengthen
Australia’s anti-money laundering (AML) and counter-terrorist financing
(CTF) system, the Minister for Justice and Customs, Senator Chris
Ellison, has announced.

The Government has agreed to progress Australia’s implementation of the FATF recommendations in two tranches:

The first tranche will cover the financial and gambling sectors and
bullion dealers. It will also cover lawyers and accountants but only to
the extent that they provide services in directcompetition with the
financial sector.
The second tranche will extend the obligations to real estate agents, jewellers and professionals, such as accountants and lawyers, when they provide non-financial services.

Under the first tranche of reforms, the industry sectors covered will be required to:

Verify the identity of customers
Report suspicious matters and high value transactions
Maintain rigorous internal AML/CTF programs, and
Keep appropriate records.

Importantly, the legislative framework will include AUSTRAC’s
development of a package of AML/CTF Rules which allow for a risk-based
approach. This means that the legislative package will reflect
commercial reality by recognising low-risk transactions. This will
ensure businesses are not subject to unnecessary compliance costs or a
‘one size fits all’ strategy.

The next step of
the reform process will be the release of an Exposure Draft of a Bill
for public consultation in November 2005 for a period of four months.

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Posted 12th October 2005 by David Jacobson in Anti-money laundering, Financial Services

Corporate insolvency reform

The Parliamentary Secretary to the Treasurer, the Hon Chris Pearce MP, has announced an integrated package of reforms to improve the operation of Australia’s
corporate insolvency laws.

The package proposes a number of reforms, including: improved access to the
General Employee Entitlements and Redundancy Scheme (GEERS); enhancing the prospect
of payment of employee entitlements and personal injury claims in insolvency;
and the establishment of a fund to finance preliminary investigations of ‘assetless’
companies to curb fraudulent phoenix activity.

The Government will retain the existing priority
of employee entitlements in insolvency. The Government will also move to prevent
this priority being downgraded in deeds of company arrangement without the agreement
of employees, and clarify the status and priority of the Superannuation Guarantee
Charge in external administrations.

Reflecting the findings of the Report of the James Hardie Special Commission
of Inquiry, the Government considers there is a strong case for introducing
new protections for personal injury claimants, where a company expects a large
number of successful personal injury claims arising from its conduct or products.
However, the recognition of mass future claims in insolvency has risks that
must be carefully addressed.

As such, the Government will refer this issue to its expert advisory committee,
the Corporations and Markets Advisory Committee (CAMAC), for detailed consideration.

It is anticipated that legislation will be circulated for public comment in
early 2006 and a bill introduced later that year.

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Posted 12th October 2005 by David Jacobson in Business Planning

FSR refinement draft regulations

The Parliamentary Secretary to the Treasurer, Chris Pearce, has released
for comment draft regulations implementing a number of proposed refinements to Financial
Services Regulation (FSR).

The refinements, originally outlined in the Refinements to Financial Services
Regulation proposals paper released on 2 May 2005, are designed to improve the
operation of the FSR framework.

‘In developing both the proposals paper and the draft regulations, we
sought to focus on the original objective for FSR: to help consumers make informed
financial decisions’, Mr Pearce said.

‘The proposals paper recognises the importance of ensuring consumers
receive information that is both concise and relevant to their needs. The draft
regulations develop this further and will help financial services providers
communicate clearly and effectively with clients’.

The draft regulations also implement refinement proposals to improve the operation
of the legislation in practice and to identify the intent of the legislation
by -

clarifying the retail/wholesale client distinction
streamlining disclosure where financial services are provided through intermediaries
fine-tuning the general advice definition
defining the jurisdictional reach of the law
simplifying authorisation procedures for representatives.

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Posted 12th October 2005 by David Jacobson in Financial Services

October 8, 2005

Coles Myer withdraws credit card and fuel discount advertising

ASIC has accepted an Enforceable Undertaking from
Coles Myer Limited to resolve concerns that Coles Myer Source
MasterCard advertising in June 2005 was misleading.

Coles Myer promoted two different offers for the
Coles Myer Source MasterCard. The first offer promoted an eight cents
per litre fuel saving associated with successful application for the
card. The second offer promoted a 10 per cent discount on purchases at
Myer and Megamart stores associated with successful application for the
card.

The actual fuel savings attributed to the use of the
Coles Myer Source MasterCard was four cents a litre for the first three
months and two cents a litre after that (further discounts required a shopper docket).

ASIC was concerned that the advertising may mislead
consumers to believe these savings were permanent features of the Coles
Myer Source MasterCard.

In addition:

the 10 per cent discount on purchases at Myer and Megamart stores only applied to a single purchase using the card; and
the promotional brochure that contained the
application form for the 10 per cent discount did not disclose that the
offer was limited in that it did not provide a discount on all good and
services in Myer and Megamart stores nor which goods and services were
excluded.

Lastly, ASIC was concerned that the promotional
brochures represented that an interest rate of 18.5 per cent, payable
by card holders on balances that are unpaid after 62 days, was a
‘competitive’ rate without identifying a basis for comparing this rate.

Coles Myer did not accept that its advertising was
misleading. However, Coles Myer has taken immediate steps to address
ASIC’s concerns and, under the Enforceable Undertaking, Coles Myer will:

withdraw relevant advertising;
review the advertising of the card and its benefits;
incorporate more prominent disclosure of
any limitations in future advertising of fuel price discounts and the
10 per cent discount benefit associated with using the credit card
facility; and
provide corrective notification to cardholders.

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Posted 8th October 2005 by David Jacobson in Financial Services, Trade Practices

October 7, 2005

Wealth management advice

In a speech by Professor Berna Collier, ASIC Commissioner, to the
Investment and Financial Services Association (IFSA) on 5 October 2005 she outlined the importance of quality of advice as well as regulatory compliance being factors in consumer confidence in the wealth management industry.

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Posted 7th October 2005 by David Jacobson in Financial Services

October 4, 2005

APRA releases Basel II operations risk policy for ADI’s

The Australian Prudential Regulation Authority (APRA) has released its discussion paper and accompanying draft prudential standard 115 on the implementation of the Basel II advanced measurement approaches to operational risk for ADI’s.

The discussion paper follows APRA’s release of draft Basel II standards in April and July 2005 which form part of a
suite of prudential standards that are expected to be finalised in 2007.

The new Basel II capital adequacy regime will come into force on 1 January 2008.

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Posted 4th October 2005 by David Jacobson in Financial Services