As we prepare for 2025, the outlook is a dynamic regulatory landscape. ASIC’s list of enforcement priorities offers us a map of the terrain set by the regulatory bodies. Understanding and preparing for what lies ahead is good business and crucial for maintaining compliance and mitigating risks.
ASIC’s enforcement priorities for 2025 will focus on:
- Misconduct exploiting superannuation savings
- Unscrupulous property investment schemes
- Failures by insurers to deal fairly and in good faith with customers
- Strengthening investigation and prosecution of insider trading
- Business models designed to avoid consumer credit protections
- Misconduct impacting small businesses and their creditors
- Debt management and collection misconduct
- Licensee failures to have adequate cyber-security protections
- Greenwashing and misleading conduct involving ESG claims
- Member services failures in the superannuation sector
- Auditor misconduct
- Used car finance sold to vulnerable consumers by finance providers
Here are the key areas compliance managers should focus on:
1. Superannuation Fund Management
The Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) are intensifying their scrutiny of superannuation funds. Compliance managers must ensure that their funds are delivering core services effectively and acting in the best financial interests of their members. Key focus areas include claims handling, complaints processes, and managing member accounts and contributions.
2. Insurance Sector Compliance
The insurance sector remains a high priority for regulators. ASIC will continue to challenge insurers on issues such as pricing irregularities, claims handling, and the treatment of vulnerable customers. APRA is also focused on reducing the cost of insurance and improving the timeliness of claims handling. Compliance managers should ensure fair and good faith when dealing with customers to avoid regulatory actions.
3. Third-Party Oversight
Regulators have clarified that financial services organisations must manage risks associated with third-party service providers. APRA’s updated prudential operational risk standards CPS 230 emphasises overseeing material service providers effectively. Compliance managers must ensure that outsourced activities are performed to the same standards as in-house operations.
4. Governance, Culture, and Accountability
Governance practices and organisational culture are under the microscope. ASIC and APRA will scrutinise how these factors contribute to compliance failures. The Financial Accountability Regime and APRA’s review of prudential governance standards will keep governance, culture, and accountability at the forefront of regulatory discussions. Compliance managers should foster a culture of compliance and ensure robust governance frameworks are in place.
5. Systemic Compliance Failures
Systemic compliance failures that cause widespread consumer harm will attract significant regulatory attention. Compliance managers must ensure adequate risk management arrangements and promote a culture of substantial compliance and risk management behaviours. Regular audits and compliance checks can help identify and address potential systemic issues before they escalate.
6. Emerging Areas of Focus
In addition to the traditional areas, regulators also focus on emerging issues such as auditor misconduct, unscrupulous property investment schemes, and business models designed to avoid consumer credit protections. Staying informed about these evolving priorities will help compliance managers proactively address potential risks.
Ongoing Priorities from 2024
1. Improving Consumer Outcomes
ASIC continues to focus on improving consumer outcomes by taking regulatory action against firms that target vulnerable customers, offer high-risk financial products, or engage in systemic non-compliance. Compliance managers should ensure their practices align with these expectations to avoid regulatory scrutiny.
2. Addressing Financial System Climate Change Risk
ASIC is committed to supporting the introduction of mandatory climate-related financial disclosures and deterring greenwashing. Compliance managers should ensure their organisations are prepared for these requirements and are transparent about their climate-related risks and strategies.
3. Bettering Retirement Outcomes and Member Services
ASIC’s focus on the superannuation sector includes targeting misconduct that erodes superannuation balances and improving member services. Compliance managers should prioritise member experience and ensure compliance with relevant laws and regulations.
4. Advancing Digital and Data Resilience and Safety
With the increasing digitisation of financial markets, ASIC emphasises the importance of technology and operational resilience. Compliance managers should enhance cyber resilience and ensure robust risk management practices for digital and data-related activities.
5. Driving Consistency and Transparency Across Markets and Products
ASIC aims to strengthen market integrity by examining changes in public and private markets and supervising financial market infrastructure providers. Compliance managers should stay informed about these developments and ensure their practices promote market transparency and fairness.
2025 promises to be another challenging year for compliance managers, with regulators maintaining a strong enforcement posture across various sectors. By focusing on these critical areas and ongoing priorities from 2024, you can better navigate the regulatory landscape and ensure their organisations remain compliant and resilient.
Prudential Standard CPS 230 Operational Risk Management – clean
