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Financial Regulators Crack Down on Compliance Violations
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In a move to strengthen oversight and accountability, Australia’s financial regulators have been granted enhanced powers to discipline and punish infractions.
Enhanced Powers for Regulatory Bodies
The Australian Securities and Investments Commission (ASIC) can now take enforcement action against companies and individuals that breach regulations, including:
- Issuing adverse publicity orders
- Public warnings
- Infringement notices
- Enforceable undertakings
- Banning orders
- Disqualification of persons from managing corporations
- Commencing court proceedings against parties, seeking injunctive relief, civil or criminal prosecution
The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 has introduced a product intervention power for ASIC to address significant consumer detriment in the financial products market. This includes issuing stop orders and other enforcement actions.
Australian Prudential Regulation Authority (APRA)
APRA can take control of institutions, impose additional conditions on licenses, disqualify individuals, issue restraining orders, and seek criminal prosecution against uncooperative entities.
AUSTRAC
AUSTRAC, the Australian Transaction Reports and Analysis Centre, has also strengthened its enforcement powers under the Anti-Money Laundering and Counter-Terrorism Financing Act. The agency can now:
- Impose civil and criminal penalties
- Accept enforceable undertakings
- Issue infringement notices
- Cancel or suspend registrations of digital currency exchange providers
Tribunals and Courts
The Australian Financial Complaints Authority (AFCA) resolves disputes between consumers and financial services providers, while the Administrative Appeals Tribunal (AAT) conducts merits reviews of administrative decisions related to corporation and financial services regulation. Criminal infractions are adjudicated in Australian courts only.
Penalties and Settlements
In recent years, ASIC has demonstrated a willingness to accept settlements as a way to achieve faster and more certain outcomes. However, the Royal Commission questioned this approach, citing concerns that it may not hold individuals and companies fully accountable for their actions.
The court considers settlements on a case-by-case basis, taking into account the agreed statement of facts and any other relevant information provided by the parties. While settlements can be an efficient way to resolve disputes, they may not provide the same level of accountability as criminal prosecution or civil penalties.
Increased Enforcement Action
In response to the Royal Commission’s findings, financial regulators have taken a more proactive approach to enforcement. This has led to a significant increase in the number of investigations and prosecutions, with tougher penalties imposed on companies and individuals that breach regulations.
As the regulatory environment continues to evolve, it is clear that compliance violations will be subject to increased scrutiny and punishment. Companies and individuals must ensure they are fully compliant with relevant laws and regulations to avoid severe consequences.