The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC), the Regulators, have issued a joint letter detailing their observations about how the banking industry has implemented measures to comply with the Financial Accountability Regime (FAR).
The letter, addressed to all APRA-regulated entities, highlights the Regulators’ observations about registration and notification lodgements that authorised deposit taking institutions (ADIs) have made since the commencement of the FAR.
The Importance of Upholding the FAR’s Requirements
The FAR came into effect for the Australian banking industry on 15 March 2024 and will apply to the Australian superannuation and insurance industries from 15 March 2025. See our detailed article, The Financial Accountability Regime (FAR Bill), for more information and background.
The FAR aims to strengthen the responsibility and accountability framework for APRA-regulated entities. It also defines the obligations of directors and senior executives of financial entities in the banking, insurance and superannuation industries—including aspects of accountability, key personnel, deferred remuneration and notification to the Regulators.
The Regulators now specifically remind regulated entities about the importance of registration and notification lodgments, stating, "Accountable entities should have robust frameworks in place to ensure that registration and notification submissions are complete and comply with applicable obligations under the FAR.”
Observations from the Regulators for Ensuring Robust FAR Implementation
Observations made by the Regulators indicate a shortfall in the assignment and notification of prescribed responsibilities. The letter stresses that firms must be mindful of ensuring an accountable person covers all such responsibilities—and that firms notify the Regulators via the relevant FAR forms.
The Regulators continue to explain that individuals with general responsibilities may be deemed as accountable persons. In such instances, firms should separately identify these responsibilities in the relevant FAR forms.
Additionally, the Regulators highlight that, apart from Board Members, situations of multiple accountable persons jointly holding prescribed responsibilities should be kept to a minimum. They remind firms to consider whether it is appropriate for multiple accountable persons to hold the prescribed responsibility or whether firms should make changes to ensure a single accountable person holds the prescribed responsibility.
Firms must notify the Regulators about the allocation of key functions, as required for their register of accountable persons, and inform them of any changes to that allocation. The Regulators also remind firms to allocate key functions only to senior executives.
Finally, regarding the cessation and material changes of accountable persons’ responsibilities, firms must submit timely notifications to the Regulators through the approved FAR forms. Should there be any transfer of business or licence revocation, the Regulators expect firms to submit their notifications beforehand.
The proactive approach by the Regulators to inform firms of potential gaps and shortfalls in their FAR implementation is a positive step towards reducing risks and enhancing governance culture across the financial sector. See the original letter as published—Observations from the implementation of the Financial Accountability Regime for the banking industry.
How Technology Helps Firms Remain Compliant with FAR
As Australian superannuation and insurance firms continue their implementation of the FAR, it is an ideal time to review monitoring and reporting in line with regulatory compliance requirements.
Regulatory Technology (RegTech) solutions, such as MyComplianceOffice (MCO), equip firms with highly efficient means of capturing their accountable persons’ functions, responsibilities, and activities.
MCO’s Role Monitoring and Assurance (RMA) solution within the Know Your Employee (KYE) suite empowers compliance teams with a comprehensive dashboard of employee and accountable person information. With a comprehensive view, compliance teams can be assured of appropriate qualifications and authorisations required for individuals’ roles. They can also easily manage ongoing reviews and certification of individuals to ensure they are meeting the requirements of their role - and of regulators where accountable persons are concerned.
Learn more about how MCO’s RMA solution can help your firm:
- Manage annual certification processes and Fit & Proper assessments.
- Quickly generate certificates and reports for regulators, including Statement of Responsibilities (SoRs) & Responsibility Maps.
- Identify, record, and report conduct rule breaches.
- Monitor changes to senior managers’ roles and responsibilities.
- Strengthen the overall conduct and accountability culture.
Download your detailed Role Monitoring and Assurance brochure now.
