Greg Kilminster
Head of Product - Content
CFTC: rethinking enforcement speech
In a speech at the ISDA Annual Legal Forum, Commissioner Summer K Mersinger of the US Commodity Futures Trading Commission (CFTC) suggested reforms to the agency’s enforcement approach, stressing the need for efficiency, clarity, and proportionality. Mersinger emphasised that these reforms are intended to enhance the CFTC’s oversight capabilities, not to signal any discontent with her role.
Concerns with the “September crunch”
Mersinger criticised the annual end-of-fiscal-year rush to close cases, which can pressure the CFTC to prioritise quantity over quality in its enforcement outcomes. “Wrongdoing occurs year-round. Our enforcement docket should reflect that,” she argued, urging the agency to move away from focusing on “headline stats” such as case numbers and fines, and to focus instead on sustained improvements in compliance. The rush to close cases, she noted, diverts attention from other agency functions and raises the risk of regulatory misinterpretation.
A shift from enforcement as the default
Mersinger contended that enforcement should not be the CFTC’s first approach to achieving compliance, especially in less severe cases. “Enforcement should be the last resort to achieving compliance, not the first,” she said, advocating instead for proactive oversight by the agency’s market divisions, which she believes can resolve many issues more effectively than resource-intensive enforcement actions. For major violations, such as fraud or manipulation, rigorous enforcement is essential, she emphasised, but proactive regulatory engagement may help prevent smaller issues from escalating.
Need for clearer regulations
Mersinger also stressed that ambiguous regulations should not be used as a basis for enforcement. “We must communicate our expectations by writing clear, sensible, and workable rules, so that we can fairly require compliance,” she said. By ensuring rules are transparent, Mersinger argued, the CFTC can foster voluntary compliance and avoid the pitfalls of vague or broad interpretations.
Strengthening settlement practices
Addressing the CFTC’s reliance on settlements, Mersinger cautioned against pushing legal theories in settlement orders that are novel or potentially exceed the agency’s authority, as such orders can shape public expectations. While settlements can achieve compliance without litigation, Mersinger noted that they should avoid “theories that are novel, arguably beyond the limits of the [Commodity Exchange Act], or likely to raise additional questions or issues.”
Promoting cooperation and self-reporting
Mersinger also proposed changes to encourage market participants to self-report and cooperate. Currently, the agency’s Division of Enforcement (DOE) must receive self-reports for entities to qualify for credit, which she views as restrictive. “A self-report to an oversight division serves the agency’s interests,” she argued, since it allows the CFTC to address issues collaboratively while reserving penalties for more severe cases. She further suggested that reduced penalties—or alternative remedies—should be available to companies that demonstrate robust cooperation and remediation.
Nonetheless Mersinger concluded by reaffirming her support for the CFTC’s enforcement efforts while calling for “strategic reform” to ensure clarity, consistency, and proportionality. As she said, “My hope is that today begins a conversation about the path ahead for enforcement at the CFTC.” Her remarks suggest a possible shift in enforcement philosophy, favouring measured, transparent regulatory practices that promote sustainable compliance over punitive measures.
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Singapore unveils enhanced anti-money laundering strategy
Singapore has announced its new National Anti-Money Laundering (AML) Strategy, reinforcing its commitment to combating money laundering (ML) through a proactive, risk-based approach.
Some context
Singapore has long upheld a firm AML stance. Since the 2016 release of the National Policy Statement on ML and Terrorism Financing (TF), Singapore has implemented stringent policies designed to identify, deter, and prevent ML activities. Over the years, Singapore’s authorities have noted increasingly sophisticated ML threats, especially given geopolitical changes and technological advancements. The updated strategy is informed by these insights, including a recently completed National Risk Assessment, which identifies emerging ML trends and supports the nation’s risk mitigation efforts.
Key takeaways
The National AML Strategy centres on three key pillars:
- Prevention: Aimed at blocking criminal proceeds from entering Singapore’s economy, this pillar strengthens checks on potential ML activities, especially among at-risk entities and companies. Pre-incorporation screenings, ongoing monitoring, and improved transparency in legal and ownership structures are among the preventive measures Singapore will continue to develop.
- Detection: Focused on enhancing capabilities to detect illicit activities and ML patterns in real-time, this pillar supports collaborative risk assessment efforts across public and private sectors. Singapore will bolster its surveillance tools and improve data-sharing channels, including those within its new AML Verification Interface for Government Agencies Threat Evaluation (NAVIGATE).
- Enforcement: This pillar emphasises decisive action against entities found guilty of ML offences. By prioritising law enforcement for high-risk cases and transnational ML crimes, Singapore is committed to advancing its legal frameworks, strengthening penalty structures, and focusing on asset recovery efforts.
The three pillars are reinforced by three essential building blocks: a commitment to whole-of-society collaboration, a robust legal and regulatory AML framework, and enhanced international cooperation. Together, these elements provide the framework for coordination among governmental and private sectors, ensuring a consistent and effective AML response.
Next steps
Singapore's approach to AML will continue to evolve in line with global best practices and emerging ML typologies. Upcoming legislative amendments, including those under the Mutual Assistance in Criminal Matters Act (MACMA), aim to strengthen the country’s ability to engage in international criminal cooperation. For local enforcement, additional measures will include expanded beneficial ownership requirements, enhanced penalty frameworks for real estate and legal sectors, and continuous monitoring of inactive companies.
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EU Sustainable Finance Disclosure Regulation report shows improvements
The European Supervisory Authorities (ESAs) have released their third annual report evaluating the Sustainable Finance Disclosure Regulation (SFDR) disclosures on Principal Adverse Impacts (PAI). This report analyses both entity and product-level PAI disclosures under SFDR, which are designed to show the impact of financial institutions’ investments on environmental and social factors. It highlights significant improvements in the accessibility and quality of PAI disclosures and provides insight into where further progress is needed.
Some context
Introduced in 2019, the SFDR requires financial market participants to disclose how their investments affect environmental and social sustainability. Financial institutions with more than 500 employees are mandated to disclose PAIs, while smaller institutions may provide disclosures voluntarily. The annual ESA reports assess how these disclosures evolve in quality, accessibility, and transparency, and they provide guidance for improvement.
This third report, covering disclosures up to June 2023, follows two previous ESA publications assessing compliance with SFDR and tracking improvements in accessibility and the level of detail. This year’s survey was broader, capturing responses from a larger pool of National Competent Authorities (NCAs), improving both the depth and representativeness of findings.
Key takeaways
- Improved disclosure quality: The report highlights advancements in the accessibility and clarity of PAI disclosures, especially at the product level. Institutions are increasingly providing disclosures that are straightforward to locate, enhancing transparency for investors. Additionally, the quality of information within PAI statements has improved, with more detail provided about the specific adverse impacts and the actions taken to mitigate them.
- Enhanced national compliance: The report indicates that several NCAs have noted increased compliance with SFDR requirements within their jurisdictions. Financial Market Participants (FMPs) have demonstrated greater alignment with SFDR standards, reflecting an industry-wide trend toward better regulatory adherence and commitment to transparency.
- Room for further progress: Despite improvements however, the report notes that overall SFDR compliance remains inconsistent across entities, particularly among smaller FMPs. Many institutions still fall short of providing the detailed explanations required under SFDR, specifically in PAI disclosures for financial products. In response, NCAs are being encouraged to foster a risk-based approach to supervisory practices, aiming to address these gaps more effectively.
- Good practices identified: The ESAs included an overview of good practices based on NCA feedback, such as recommendations on the ideal location, clarity, and readability of disclosures. These practices serve as a reference for institutions aiming to improve their SFDR compliance and make disclosures more user-friendly for retail investors.
Next steps
The ESAs have provided recommendations to the European Commission to consider in their comprehensive SFDR assessment. Among these recommendations is a proposal to reduce the frequency of PAI disclosure assessments, suggesting a shift from annual to biennial reporting. This adjustment would allow the ESAs and NCAs to focus more resources on enhancing the analysis of PAI disclosures and responding to emerging trends.
In the coming months, the European Commission’s assessment of SFDR will determine potential amendments to the framework, guided in part by the insights from this ESA report. The ESAs emphasise that although significant progress has been achieved, continued collaboration between regulators, NCAs, and financial market participants remains essential to fully realise SFDR’s objectives and uphold transparency in sustainable finance practices.
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The future of financial services in Australia: competition and engagement
In a wide-ranging speech at the Australian Financial Review summit, Gina Cass-Gottlieb, Chair of the Australian Competition and Consumer Commission (ACCC), highlighted the organisation’s strategic approach to evolving issues in the financial services sector.
Prioritising competition and transparency in retail banking
Cass-Gottlieb began by addressing the impact of rising living costs, noting that, “with rising cost of living front of mind for many Australians, the ACCC has continued to have a strong focus on competition and consumer protection issues in essential services, including competition in financial services.” She stressed the importance of accessible financial products, particularly in times of high interest rates, to help consumers meet their financial needs and maintain purchasing power.
The ACCC has identified ongoing challenges in the financial services market, including limited competition and low consumer engagement, which have been further exacerbated by the complexity of retail banking products. Cass-Gottlieb pointed out that “consumer engagement in financial services remains low, largely due to friction and obstacles that make it harder for people to search, compare, and switch between products effectively.” To counter this, the ACCC is focused on improving transparency in the retail deposit and home loan markets. The organisation’s inquiries found that opaque pricing strategies, such as bonus interest rates, introductory offers, and discretionary discounts, create barriers for consumers looking to identify and secure the best deals.
Cass-Gottlieb noted that the government has endorsed several ACCC recommendations aimed at empowering consumers, including measures to “improve disclosure requirements for basic deposit products” and ensure consumers are notified when interest rates change. These initiatives aim to make it easier for Australians to make informed choices and switch financial products when needed. The ACCC has also suggested requiring comparison websites to disclose their commercial affiliations with financial product providers to give consumers a more objective view.
Small and medium-sized banks under review
Cass-Gottlieb discussed the role of small and medium-sized banks, highlighting the government’s directive to the Council of Financial Regulators, in consultation with the ACCC, to “undertake a review of the small and medium-sized banking sectors.” This review will focus on the competitive dynamics within this segment of the market and identify any regulatory or market barriers limiting their capacity to compete effectively.
Consumer Data Right: Empowering data-driven competition
The ACCC has made strides in supporting the Consumer Data Right (CDR), a measure designed to give consumers control over their data and stimulate competition. Cass-Gottlieb observed that “the CDR is an enabling innovation for the Australian economy,” initially applied to banking and now expanding to energy, with future applications anticipated. She described the CDR as an instrument that facilitates transparency, enabling consumers to access tailored financial products that meet their unique needs. With nearly 400 million consumer data requests reported by June 2024, CDR use has increased significantly.
Cass-Gottlieb also highlighted the ACCC’s collaboration with international jurisdictions to share best practices, stating that “we are working to deliver new priorities for the CDR,” including expanding its coverage to non-bank lending and enhancing operational rules to lower compliance costs.
Tackling excessive payment card surcharges
Cass-Gottlieb acknowledged the ongoing issue of excessive payment card surcharges, particularly for small businesses and consumers, announcing $2.1 million in funding to strengthen the ACCC’s capacity to enforce surcharge limits. The ACCC, which has long collaborated with the Reserve Bank of Australia on surcharging standards, will work to address the complexities of the Australian payment system. The Reserve Bank recently issued a consultation paper on merchant card payment costs, which has helped the ACCC identify areas for future reform. The goal is to provide a balanced outcome that supports consumers and businesses while ensuring fair competition in the payments system.
Reforming competition law to address mergers and unfair trading practices
Cass-Gottlieb outlined proposed reforms to merger control laws, which aim to “better identify and prevent anti-competitive transactions before they happen.” This marks a shift from a judicial enforcement model to an administrative one, with the ACCC as the first decision-making authority on mergers. The proposed reforms, expected to be in effect from January 2026, will provide more certainty for businesses and enable faster decision-making on transactions. Cass-Gottlieb explained, “these reforms are particularly important in the context of the current environment where increasing market concentration and growing cost of living pressures are impacting the economy and consumers.”
Beyond mergers, the ACCC has advocated for a prohibition on unfair trading practices, which would prevent exploitative tactics that harm consumers and small businesses. Cass-Gottlieb described this as a significant step towards a fairer marketplace, particularly for small businesses with limited bargaining power. She pointed out that similar prohibitions in other jurisdictions, such as the European Union, have proven effective in promoting consumer protection and healthy competition.
Addressing the decline in cash use
As digital payment methods proliferate, the demand for cash is steadily decreasing, which has raised concerns about the sustainability of cash-in-transit services. Cass-Gottlieb highlighted the ACCC’s decision to approve the merger of Armaguard and Prosegur, Australia’s two main cash-in-transit providers, under a court-enforceable agreement designed to maintain access to cash services, particularly in rural and remote areas. She acknowledged that “cash remains an important method of payment for many, especially the elderly, small businesses, and those in regions where digital infrastructure is not as robust.”
The Australian Banking Association and other industry participants have initiated collaborative efforts to ensure continued access to cash, particularly in underserved areas. The ACCC has granted interim authorisations to allow industry stakeholders to work together to address the challenges of declining cash demand, ensuring that cash services remain accessible for those who rely on them.
Safeguarding consumers in the digital economy
Cass-Gottlieb also spoke about the rise of scams in the digital economy and the ACCC’s role in protecting Australians from fraudulent activity. She praised the work of the National Anti-Scam Centre and expressed support for government efforts to introduce “mandatory and enforceable scam codes across the scams ecosystem.” The ACCC’s approach includes stringent requirements for sectors like banking and telecommunications, which are expected to have systems in place to prevent, detect, and disrupt scams. Cass-Gottlieb added that the framework would allow for “strong obligations to drive action against scams” and emphasised the importance of a cohesive effort across both public and private sectors to address scam prevention effectively.
Climate change protection
Finally Cass-Gottlieb turned to climate change and the risk to citizens in cyclone-prone and flood-prone areas face mounting insurance costs, often leaving them underinsured or uninsured. While the Australian Government’s cyclone reinsurance pool has shown some success, delivering reduced premiums in high-risk regions, Cass-Gottlieb cautioned that broader affordability challenges persist due to external pressures on insurers.
Cass-Gottlieb highlighted that “cost pressures” such as a hardening global reinsurance market, frequent extreme weather events, and rising building costs have offset some benefits of the reinsurance pool. “The reality is insurance premiums remain very high for many Australians,” she said, adding that prohibitive costs are forcing consumers into difficult decisions regarding insurance coverage.
Cass-Gottlieb called for expanded efforts to address affordability, noting that recommendations from the ACCC’s Northern Australia Insurance Inquiry remain critical to ensuring insurance accessibility. The ACCC will continue to collaborate with government and industry to protect vulnerable communities, ensuring fair access to insurance amidst rising climate risks.
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Australian Financial Complaints Authority reports record rise in complaints and new initiatives
In its latest Annual Review for 2023-24, the Australian Financial Complaints Authority (AFCA) has disclosed record complaint numbers, reflecting rising consumer demands for accountability in the financial services industry. AFCA received a total of 104,861 complaints in the year, marking an 8% increase from 2022-23, with consumers awarded a total of $313.9 million in compensation. These developments come as AFCA strengthens its capabilities in technology and service, including the launch of a new case management system and member portal.
Complaint volumes and compensation
The review outlines that the 8% rise in complaints has driven AFCA to manage an exceptionally high caseload, with 29,236 open cases as of June 30, 2024. This influx spanned across key categories, with banking and finance generating the most complaints, amounting to 59,156 cases, followed by general insurance and superannuation. Average complaint resolution time increased slightly to 74 days, largely due to the growing complexity of cases and higher demands on resources.
AFCA’s compensation awards to consumers reached a total of $313.9 million, representing a 24% rise over the previous year. Notably, many of these cases involved banking and finance issues.
Innovations in case management and efficiency gains
A major highlight of the review is AFCA’s successful deployment of Project Fusion, an IT transformation initiative launched on June 17, 2024. This new platform integrates a case management system with enhanced portals for both members and consumers, improving transparency and accessibility. Project Fusion aims to streamline dispute resolution processes by reducing manual work and providing more timely updates to users on case progress, timeframes, and required actions.
Independent review recommendations implemented
AFCA also reported significant progress in implementing the recommendations from the Treasury-led Independent Review. This three-year program, now nearing completion, has led to several critical reforms, including updated rules and operational guidelines approved by the Australian Securities and Investments Commission (ASIC). These revisions aim to improve clarity around AFCA’s decision-making processes and exclude certain cases that fall outside its jurisdiction.
According to AFCA, these initiatives are expected to enhance the authority’s transparency and efficiency in handling complaints, offering a more balanced approach that benefits consumers and member institutions alike.
Focus on accessibility and systemic issues
The report highlights that accessibility remains a core focus, with AFCA providing services in 78 languages and engaging directly with various communities, including First Nations groups, through targeted outreach programmes. AFCA handled cases across a diverse range of topics, such as scams and financial hardship complaints, reflecting the broader financial challenges facing Australian consumers. The organisation has pledged to work closely with industry participants to resolve emerging issues, such as unauthorised transactions and aggressive debt collection practices.
AFCA’s investigations and remediation efforts led to more than $44.7 million in financial redress for 159,051 consumers from systemic issues. This included several cases flagged for serious legal contraventions, which AFCA subsequently referred to regulators .
Looking ahead
With increased complaint volumes, AFCA’s Board has approved a 27.7% increase in member fees effective from July 1, 2024. This move is aimed at sustaining AFCA’s operations, especially as complaint levels are expected to continue their upward trajectory due to economic pressures and increased scam activity.
This financial year marks the end of AFCA’s current three-year Strategic Plan, during which it has established itself as a vital ombudsman service. Moving forward, AFCA has committed to refining its services to support all Australians seeking fair dispute resolution with financial service providers
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FATF issues latest alert on AML deficiencies
The Financial Crimes Enforcement Network (FinCEN) has issued an update informing financial institutions of the Financial Action Task Force’s (FATF) recent revision of its AML/CFT/CPF watch lists. FATF’s October 2024 plenary saw Algeria, Angola, Côte d’Ivoire, and Lebanon added to the list of Jurisdictions
Under Increased Monitoring, while Senegal was removed. Iran, the Democratic People’s Republic of Korea (DPRK), and Burma continue on FATF’s list of High-Risk Jurisdictions Subject to a Call for Action.
Jurisdictions under increased monitoring
Financial institutions are advised to review obligations under AML requirements, especially regarding correspondent accounts for foreign financial institutions (FFIs). They should ensure due diligence programs detect and report suspicious activity. FinCEN warns against the misuse of these standards for indiscriminate de-risking and recommends referring to interagency guidance on services for foreign diplomatic missions.
High-risk jurisdictions
Enhanced due diligence is recommended for Burma, with stronger countermeasures advised for Iran and DPRK. Institutions must observe extensive restrictions on any account relationships with financial institutions from these nations.
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