Greg Kilminster
Head of Product - Content
ASIC speech: effective compliance perspectives
In a speech at the Australian Compliance Institute Annual Conference, Australian Securities and Investments Commission (ASIC) Chair Joe Longo highlighted the evolving and expanding role of compliance professionals, calling for a culture of ethics, integrity, and continual learning.
Drawing on a quote from British philosopher Bertrand Russell, Longo stressed the importance of aligning what is preached and practised in compliance, urging compliance professionals to demonstrate that integrity underpins their role: “When not taken seriously, compliance can devolve into a mere lip service.”
He reinforced that effective compliance is more than ticking regulatory boxes. It’s about fostering a culture where ethical behaviour is at the core of an organisation’s operations. This alignment, Longo argued, nurtures consumer and investor trust—a vital foundation for sustainable business success. “A profitable business is – and must be – a compliant one,” he asserted.
A crucial strategic role
Longo emphasised that compliance professionals are pivotal to embedding ethical practices within organisations. Their influence, he noted, extends beyond ensuring regulatory compliance to shaping corporate behaviour and supporting the board in overseeing risk and governance frameworks. “You are part of the fabric of the business,” Longo said, positioning compliance teams as instrumental in guiding ethical decision-making and promoting a customer-centric approach.
The modern compliance officer must keep an open and curious mind. This, he explained, allows them to ask the critical questions that ensure both legal and ethical obligations are met, while also providing the board with insight on risks and the effectiveness of compliance measures. This intellectual curiosity, he said, is key to evolving in an increasingly complex regulatory environment.
The expanding scope of compliance
Longo reflected on how the responsibilities of compliance professionals have broadened significantly in the last decade. Rapid technological advancements, the rise of environmental, social, and governance (ESG) issues, and an increase in regulatory expectations have created a more challenging landscape for compliance teams.
Citing a global KPMG survey, he noted that 84% of chief compliance officers expected increased regulatory scrutiny in the next two years. ESG, cybersecurity, and data privacy were ranked among the top priorities, with many organisations still in the early stages of developing comprehensive ESG compliance programmes. Longo also acknowledged the strain this places on organisations, remarking that “regulatory expectations are becoming ever more complex and nuanced.”
He reassured compliance professionals that ASIC’s approach to supervision and enforcement would be pragmatic and proportionate, particularly during transitions to new requirements such as mandatory climate-related reporting. But Longo urged teams to begin preparing now, stating that integrating sustainability reporting into existing risk and compliance frameworks would be crucial to navigating these new obligations.
A focus on greenwashing and AI regulation
Longo also highlighted two key regulatory areas: greenwashing and artificial intelligence (AI). In a clear distinction between the new mandatory climate reporting regime and ASIC’s enforcement of voluntary ESG claims, he warned against misleading or deceptive conduct, particularly in sustainability statements. He quoted directly from Justice Horan in the recent Mercer Superannuation judgement: “It is vital that consumers in the financial services industry can have confidence in ESG claims made by providers”.
On AI, Longo expressed concerns over the ethical and responsible development of the technology, calling for stronger regulatory guardrails to mitigate risks like bias, misinformation, and loss of privacy. “Safe and responsible use of AI can only be realised through strong governance, transparency, and accountability,” he said, acknowledging the rapid transformation AI is bringing to the financial services industry.
ASIC’s approach, he assured, will not involve rewriting laws but rather ensuring that existing regulations—on privacy, directors’ duties, and anti-discrimination, among others—are applied robustly in the context of new technologies. Longo pointed to ongoing consultations on AI regulation and noted the significance of these developments for both the regulatory landscape and the broader economy.
A commitment to curiosity and learning
Throughout his speech, Longo returned to the theme of intellectual curiosity and its vital role in compliance. A curious mind, he said, enables compliance professionals to be effective gatekeepers, advising the board on risks and ensuring that compliance systems not only meet regulatory obligations but also support ethical behaviour across the organisation. “There’s no rule book that maps out every step,” he said, reinforcing the importance of continually questioning the status quo to ensure compliance frameworks remain robust and fit for purpose.
In concluding, Longo affirmed that compliance professionals are integral to creating and sustaining an ethical culture within their organisations. Their role as trusted advisers, he stated, is key to enabling boards to foresee risks and refine compliance arrangements in a rapidly changing regulatory environment. “More than ever, you play an influential and strategic role in the boardroom,” he said, closing his remarks with a call to embrace the challenges and opportunities presented by an evolving compliance landscape.
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Australian Treasury and RBA publish paper on the future of digital money
The Reserve Bank of Australia (RBA) and the Australian Treasury (Treasury) have published a report presenting existing research on central bank digital currency (CBDC). Among other considerations, the report specifically outlines the potential benefits and challenges associated with launching a retail CBDC and a wholesale CBDC.
Assistant Governor (Financial System) of the RBA, Brad Jones, discussed the findings, stating that, at present, the perceived advantages of introducing a retail CBDC in Australia are limited but noting that "the role that a wholesale CBDC and other forms of digital money and infrastructure upgrades could play in enhancing the functioning of our wholesale markets will be the principal focus of our future work program."
The report also outlines a three-year plan for future work on digital currency in Australia, culminating with a paper detailing the RBA and Treasury's stance scheduled for 2027.
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CFPB releases guidance on improper overdraft opt-in practices
The Consumer Financial Protection Bureau (CFPB) has released guidance on improper overdraft opt-in practices to assist federal and state consumer protection enforcers in implementing the Electronic Fund Transfer Act (EFTA) and Regulation E.
Some context
This move follows the CFPB's enforcement actions against various banks for their practices related to overdraft fees. These actions include enforcement against Regions Bank for employing unintelligible and manipulative processes that led to unexpected overdraft fees, as well as Atlantic Union Bank, which was ordered to pay $6.2 million for, among other overdraft violations, improperly enrolling customers in overdraft. Similar actions were taken against TD Bank and TCF National Bank.
Earlier this year, the CFPB proposed a rule to mandate the application of longstanding consumer protections, such as interest rate disclosures, to overdraft loans for the nation's largest banks.
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CFPB issues report on mortgage interest rates and refinancing opportunities
The Consumer Financial Protection Bureau (CFPB) has issued a report on the impact of changing mortgage interest rates on home affordability, the distribution of interest rates on existing mortgages, and the potential for refinancing as interest rates decrease.
The report covers:
- Post-pandemic interest rate trends
- Effects of elevated interest rates on affordability
- Potential for future refinances
In the report, the CFPB notes that it will continue to monitor and report on refinancing activity and industry practices that encourage or discourage borrowers seeking to refinance. The CFPB is also exploring ways to streamline the refinancing process and reduce closing costs.
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OCC issues final rule amending Bank Merger Act procedures
The Office of the Comptroller of the Currency (OCC) has issued a final rule amending its application review procedures under the Bank Merger Act (BMA). The changes include introducing a policy statement that outlines the principles guiding the OCC's review of proposed bank merger transactions.
Some context
The BMA and the OCC's implementing regulation govern the OCC's assessment of business combinations involving national banks and federal savings associations with other insured depository institutions.
Key takeaways
Changes include:
- Removing provisions related to expedited review and the streamlined business combination application from the OCC’s implementing regulation.
- Adding a policy statement outlining the general principles for the OCC's review of BMA applications, the OCC's consideration of financial stability, managerial and financial resources, future prospects, and convenience and needs statutory factors under the BMA, as well as the decision process for extending the public comment period or holding a public meeting.
Next steps
The final rule will be effective on 1 January 2025.
Click here to read the full RegInsight on CUBE’s RegPlatform