Greg Kilminster
Head of Product - Content
OnePath fined AUS $5 million penalty for making false or misleading representations
Following fast on the fine imposed on Mercer for a similar breach, the Australian Securities & Investments Commission (ASIC) has fined OnePath Custodians Pty Ltd AUS $5 million for making false or misleading representations about its right to continue charging fees, and for failing to provide services to members efficiently, honestly and fairly due to its misleading conduct and by deducting fees when not entitled to do so.
Between December 2015 and November 2021, OnePath made false or misleading representations to members of the superannuation product ‘Integra Super’ about Adviser Service Fees and deducted $3.8 million in fees from members for advice services they did not receive.
During the same period, OnePath issued letters to approximately 766 members and annual statements nearly 16,000 members, containing false or misleading representations.
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Exploring central bank digital currency: Evaluating challenges & developing international standards
In a speech at the Exploring central bank digital currency: Evaluating challenges & developing international standards conference in Washington DC, Cecilia Skingsley, Head of the BIS Innovation Hub, discussed the future of central bank digital currencies (CBDC). The key points of the speech are as follows. Skingsley outlined two main dimensions of her speech.
- The long-term view of why innovation is imperative in the public sector
- The potential and limitations of CBDCs, emphasising the need for international standards in their development.
Skingsley began by highlighting the transformative nature of technological progress, particularly in the realm of money and payments. She argued that the evolving landscape, marked by 24/7 accessibility, instant settlements, and cross-border efficiency, requires a reevaluation of traditional financial concepts.
While acknowledging the potential of technological ideas, Skingsley stressed the importance of ensuring that these innovations align with public interests, especially regarding the fundamental nature of money as a public good. Central banks, being the monopolists in providing money, were emphasised as crucial players, with a call for continued vigilance and adaptation to evolving technological landscapes.
The speech covered various aspects of CBDCs, starting with a discussion on retail CBDCs in a domestic context. Responding to common criticisms, Skingsley defended the need for innovation, comparing it to advancements in other industries such as pharmaceuticals and automotive safety.
Addressing concerns about privacy, Skingsley emphasised the importance of protecting individual data and outlined ongoing projects, including Polaris (which considers the best design options for offline use) and Tourbillon (focused on enhancing privacy in CBDC transactions). She emphasised that a retail CBDC should provide choices, not impose a singular option, and reassured the audience that central banks have no commercial interest in personal data.
Regarding financial stability, Skingsley dispelled fears of CBDCs contributing to bank runs, asserting that with proper provisions, CBDCs can be “neutral in that regard”.
The speech then shifted to the global stage, emphasising the need for improvement in cross-border payments. While acknowledging the potential role of retail CBDCs, Skingsley discussed ongoing projects like Project Nexus to interconnect national fast payment systems and the significant potential of wholesale CBDCs in revolutionising cross-border transactions.
Skingsley pointed to the benefits of wholesale CBDCs, including operational transparency, faster settlement, and reduced risk. She also noted the ongoing efforts to explore tokenisation and its role in creating a more efficient financial ecosystem.
In concluding Skingsley highlighted the importance of common standards for CBDCs. She categorised these standards into legal and regulatory, payments-specific technology and operational, and cross-cutting technology standards. Finally, Skingsley encouraged collaboration among central banks and the global community to address questions around implementation and adaptability.
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DoJ speech on fighting white collar crime
In a speech at the New York Bar Association’s International White Collar Crime Symposium Principal Associate Deputy Attorney General Marshall Miller discussed the challenges faced by the Department of Justice (DoJ) and how the private sector can also adapt to combat misconduct and promote compliance. The speech effectively communicated the DoJ’s commitment to modernising its approach to white-collar crime, emphasising adaptability, collaboration, and a multifaceted strategy that combines enforcement with incentives for compliance.
Here are some of the main themes from the speech.
Evolution of corporate enforcement
- Global security focus: Miller acknowledged the evolving landscape of white-collar crime, emphasising the connection between corporate crime and threats to US and global security, adding that this reflects an awareness of the changing nature of criminal activities.
- Diverse threats: The nature of various threats, from terrorist financing to cybercrime and crypto-enabled crime, requires a comprehensive understanding of the multifaceted nature of modern corporate offences. Miller noted the increase in team size – adding 25 new crime prosecutors – to help deal with these increased threats.
Operational successes
- Operational highlights: The speech provided specific examples of successful operations, showcasing the Department’s ability to adapt to emerging challenges.
- International reach: The international dimension of cases, involving entities from France, the UK, Iran, and Hong Kong, such as BAT, LaFarge and Suez Rajan Ltd, demonstrated, Miller argued, the global nature of white-collar crime and therefore the need for the DoJ’s continued commitment to international collaboration.
Modernisation strategies
- Resource allocation: The decision to allocate additional resources to the National Security Division and the Bank Integrity Unit reflects a commitment to addressing the intersection of corporate crime and national security comprehensively.
- High-profile cases: Miller argued that the inclusion of high-profile cases, such as Binance, indicates a strategic focus on impactful prosecutions, including targeting high-ranking corporate executives, thereby sending a strong deterrent message.
Collaborative approach
- Interagency collaboration: The emphasis on collaboration across divisions and agencies, especially in developing crypto expertise, suggests, noted Miller, that the DoJ recognises the need for interdisciplinary efforts to address complex cases.
- Trial emphasis: The commitment to taking cases to trial when appropriate reinforces the Department’s dedication to pursuing justice, even in resource-intensive and challenging situations.
Promoting compliance
- Voluntary self-disclosure: Miller was keen to stress that the DoJ’s measures of success were not just convictions, but also the incentives provided to encourage compliance. Hence the introduction of Voluntary Self-Disclosure (VSD) policies which, he said, demonstrates a proactive approach to identifying and addressing misconduct. The transparency and predictability of VSD policies incentivises companies to self-report and remediate.
- Incentives for compliance: This combination of compliance with reduced penalties and declination of prosecution creates a dual approach of punishment for wrongdoing and rewards for responsible corporate behaviour.
Focus on mergers and acquisitions
- Corporate whistleblowing: The encouragement of M&A-related voluntary disclosure positions the disclosing company as a corporate whistleblower. This approach aligns with the Department’s strategy to incentivise reporting of illegal conduct in different entities.
- Antitrust coordination: Miller stated that coordination with Antitrust and National Security Divisions ensures that M&A-related disclosures align with antitrust and CFIUS enforcement efforts and helps avoid conflicts of interest.
Compensation programmess and corporate citizenship
- Aligning incentives: Miller said that the DoJ expects companies to be linking corporate compensation systems to good corporate citizenship which should encourage responsible behaviour from executives, aligning their interests with broader corporate values. He noted that: “when Department prosecutors evaluate the strength of a compliance program, a key consideration will be whether the company’s compensation system effectively incentivizes good behavior and deters wrongdoing”.
International collaboration
- Cross-national collaboration: Miller emphasised the importance of collaboration between nations and private-public sectors, especially in the context of national security, again recognising the global nature of threats and the importance of shared information.
- Cyber and crypto crimes: Miller acknowledged the collaboration with companies in combating cyber and crypto-enabled crimes which again helps the Department’s adaptability to technological advancements.
Conclusion
Summing up, Miller stressed again the increasing internationalisation of white collar crime saying: “more and more frequently, the cases we investigate and charge are international in nature and impact our collective security. We are working every day not only to conduct robust enforcement and hold white-collar criminal actors accountable, but to do so with transparency, consistency, and predictability so we can empower and incentivize companies to detect, deter, and report corporate misconduct.”
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HK Dear CEO letter confirms final stage of Broker Rules
The Hong Kong Insurance Authority (IA) has written to its regulated insurance companies to remind them of the incremental changes of the Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules (Cap. 41L) (Broker Rules), which initially came into effect in September 2019.
The final step of the Broker Rules takes place on 31 December 2023 and involves the following changes.
- From 1 January 2024, the amount of paid-up share capital and net assets which a specified insurance broker company must maintain at all times increases from HK$300,000 to HK$500,000.
- Hence specified insurance broker companies (which have not already done so) must increase their paid-up share capital and net assets to an amount of not less than HK$500,000 by 31 December 2023.
- From 1 January 2024, the deductible amount under the Professional Indemnity Policy (PII) maintained by a licensed insurance broker company must not be more than 50% of the company’s net assets as at the end of its financial year immediately before the commencement date of the policy period under the policy.
- Hence specified insurance broker company should ensure that if its PII policy with a policy period commencing on or after 1 January 2024, includes a deductible, then that deductible must not be more than 50% of the company’s net assets as at the end of its financial year immediately before the commencement date of the policy period.
The letter notes that: “Accordingly, 31 December 2023 marks the end of 4-year plus transition period under the Broker Rules. From 1 January 2024 onwards, in terms of the requirements under the Broker Rules, the playing field is finally levelled for all licensed insurance broker companies in Hong Kong.”
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Australia consults on scams framework
The Australian government has announced a new consultation which seeks feedback on a proposed Scams Code Framework (Framework).
The consultation states that “the primary objective of the Framework is to set clear roles and responsibilities for the Government, regulators, and the private sector in combatting scams. This includes ensuring that key sectors in the scams ecosystem have measures in place to prevent, detect, disrupt, and respond to scams, including sharing scam intelligence across and between sectors.”
The Framework is built upon three principles:
- Principle 1: A whole-of-ecosystem approach to address scams.
- Principle 2: The Framework must be flexible and responsive.
- Principle 3: The Framework will complement and leverage existing interrelated regimes, systems and initiatives.
The consultation also notes that the initial sectors covered by the Framework would be those most targeted by scammers – banks, telecommunications providers and digital communications platforms. Further sectors – which may include the superannuation sector, digital currency exchanges (cryptocurrency), other payment providers, and transaction-based digital platforms like online marketplaces – will potentially be incorporated at a later date.
The final date for comments is 29 January 2024.
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EPC publishes business conditions for the SPAA scheme
The European Payments Council (EPC) has released the business conditions for the SEPA Payment Account Access (SPAA) scheme. The scheme builds upon the revised Payment Services Directive (PSD2). It includes the regulations, practices, and standards that facilitate the exchange of payment account-related data and the initiation of payment transactions.
Gijs Boudewijn, the Dutch payments association general manager and SPAA co-chair, said, “I am proud that we have created the necessary conditions for the development of a thriving European open banking ecosystem in a multi-stakeholder environment.” He added, “This is just the beginning, and our next challenge is to introduce SPAA to the market together.”
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HMKA fines CA Indosuez HK$3,500,000
The Hong Kong Monetary Authority (HKMA) has imposed a fine of HK$3,500,000 on CA Indosuez (Switzerland) SA, Hong Kong Branch (CAHK) for contraventions of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.
The disciplinary action follows an investigation by the HKMA on CAHK’s systems and controls for compliance with the AMLO. The control lapses identified in the investigation relate to CAHK’s failure to continuously monitor business relationships with some of its customers.
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Basel Committee issues a progress report on the application of BCBS 239
The Basel Committee (Committee) has issued a report outlining banks’ progress on implementing the BCBS 239 “Principles for effective risk data aggregation and reporting”. The report provides an overview of assessment results, recommendations, and case studies.
In the report, the Committee notes that even seven years after the expected compliance date, only two of the 31 banks assessed fully comply with all the principles. Moreover, there is not a single principle that has been fully implemented across all banks.
Therefore, the Committee recommends that supervisors consider using more intensive targeted activities, such as onsite inspections, deep-dive reviews, or fire drills, to address long-standing risk data aggregation and reporting deficiencies. They also suggest applying more forceful measures like capital add-ons, restrictions on capital distributions, penalties/fines, and encouraging the application of the principles in a broader context.
The Committee will continue to monitor G-SIBs’ progress in adopting the principles.
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