Issue 750, 16 April 2020
In this issue:
- COVID-19 Coronavirus: early release of super – updated APRA FAQs
- COVID-19 Coronavirus: early release of super – AML/CTF exemption
- COVID-19 Coronavirus: updated ASIC FAQs
- COVID-19 Coronavirus: new APRA deferrals
- COVID-19 Coronavirus: AFCA extension of time to resolve complaints
COVID-19 Coronavirus: early release of super – updated APRA FAQs
APRA has updated its frequently asked questions (FAQs) on the new Coronavirus compassionate ground for early release of super, following the publication of the initial FAQs earlier in April (see ASFA Action issue 746).
The two new FAQs set out APRA’s expectations for trustees on the release of benefits under the COVID-19 temporary early access to superannuation provision. The new FAQs state as follows:
1. In dealing with payments to members under the release of benefits on compassionate grounds (COVID-19), what are APRA’s expectations of RSE licensees in terms of processing the payments?
SIS Reg 6.17D(3) requires an RSE licensee to pay the benefit to the member as soon as practicable, after having received a copy of a determination from the ATO.
In complying with this requirement, APRA expects that:
- where the RSE licensee’s automated checking has not identified a red flag, payments will generally be made within five business days of receipt of a determination from the ATO; and
- in exceptional circumstances – such as where the RSE licensee’s automated checking has identified a red flag and additional fraud or other verification steps are required, or where the payment is being made from interests held in defined benefit funds – APRA acknowledges that the process for making a payment may take longer. Nonetheless, APRA expects the RSE licensee to make payments as expeditiously as possible in these cases.
APRA acknowledges that these timeframes may extend slightly where an RSE licensee experiences a high volume of applications at any particular time.
APRA notes that such a process differs from the usual process for making payments under existing early release grounds, as the application process has additional security controls, and RSE licensees are exempt from undertaking upfront customer verification in accordance with their anti-money laundering and counter-terrorism financing (AML/CTF) obligations1.
Footnote:
1 AUSTRAC introduced a Rule under the Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF Act), which makes clear that an RSE licensee is not required to carry out its customer verification required under the AML/CTF regime before releasing benefits on COVID-19 compassionate grounds under an ATO determination. AUSTRAC has produced guidance on how other AML/CTF obligations such as ongoing customer due diligence obligations, including customer verification, may apply where a fund assesses that there is a fraud or financial crime risk.
2. In circumstances where RSE licensees follow the approach set out in these FAQs but fraud nonetheless occurs, what is APRA’s position on civil penalty action and trustee liability?
APRA acknowledges that the process for determining and paying amounts under the COVID-19 early release of super measure is different to the usual process for making payments under existing early release grounds. The AML/CTF Rule exempting RSE licensees from undertaking up-front customer verification means that RSE licensees will, in most cases, have less RSE licensee-verified information upon which to form a view about a payment. However, the security controls around the application process and the RSE licensee appropriately acting on red flags identified by their automated checking process will mean that for the majority of applications it will be reasonable for RSE licensees to depart from their usual fraud control measures in order to ensure payments are made to members as soon as practicable.
In circumstances where an RSE licensee is able to satisfactorily demonstrate to APRA that it has followed the approach set out in these FAQs, APRA would be unlikely to take action against an RSE licensee should a fraudulent payment/s occur.
COVID-19 Coronavirus: early release of super – AML/CTF exemption
In ASFA Action issue 745, we reported that AUSTRAC intended to make a rule under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF) to ensure that funds making payments to their members under the new Coronavirus compassionate ground for early release of super would not have to conduct additional customer verification under the AML/CTF regime.
AUSTRAC has now registered the Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2020 (No. 1) to give effect to this exemption.
The instrument exempts a trustee of a superannuation fund (other than a self-managed superannuation fund) from the requirement to carry out the ‘applicable customer identification procedure’ before cashing the whole or part of a member’s interest in the fund under the early release initiative.
The exemption applies to payments resulting from applications made to the ATO during the period 15 April to 24 September 2020 and is specifically limited to benefits approved by an ATO determination made under sub-regulation 6.19B(3) of the Superannuation Industry (Supervision) Regulations 1994. (An equivalent exemption has also been made for providers of retirement savings accounts.)
The explanatory material notes that trustees will still have suspicious matter reporting and ongoing customer due diligence obligations relating to the benefit payment.
COVID-19 Coronavirus: updated ASIC FAQs
ASIC has published some updated FAQs regarding superannuation regulatory issues that have arisen from the COVID-19 pandemic. The new FAQs cover:
- how trustees should communicate the potential long-term impacts of the COVID-19 early release of superannuation on retirement balances
- ASIC’s plans to extend relief from portfolio holdings disclosure obligations
- how trustees can find out about how COVID-19 has affected other ASIC activities.
COVID-19 Coronavirus: new APRA deferrals
APRA has announced new commencement dates for a number of prudential and reporting standards that have been finalised but are yet to fully come into effect.
The new deferrals follows last month’s announcement that APRA was suspending the majority of its planned policy and supervision initiatives in response to COVID-19 (see ASFA Action issue 742).
Of relevance to superannuation trustees, APRA notes that the third-party arrangements transition provision for CPS 234 Information Security was due to apply from 1 July 2020. APRA has indicated it will consider requests for a six-month extension (to 1 January 2021) by regulated entities on a case-by-case basis. Entities seeking an extension must advise APRA of the nature of their third-party arrangements, and how they are monitoring the risks associated with these arrangements. Given the potential for increased vulnerability to cyber risks in the current environment, APRA advises all regulated entities to remain vigilant in maintaining their information security.
Also of potential relevance for superannuation, APRA will defer the next two phase-in periods of initial margin requirements for non-centrally cleared derivatives as set out in CPS 226 Margining and Risk Mitigation for Non-Centrally Cleared Derivatives by 12 months, consistent with a joint decision by the Basel Committee on Banking Supervision and the International Organisation of Securities Commissions.
COVID-19 Coronavirus: AFCA extension of time to resolve complaints
The Australian Financial Complaints Authority (AFCA) has announced it will give consumers and financial firms extra time to respond to complaints due to the COVID-19 pandemic.
The nine-day extension comes into effect immediately and will apply to all complaints, including those relating to financial difficulty. Financial firms currently have 21 days to respond when AFCA notifies them that a complaint has been lodged, this will be extended to 30 days.
AFCA has indicated it is taking a flexible approach to assisting all parties in a dispute in these difficult times. AFCA is also providing as standard, a flat 21-day timeframe to provide an initial response, once the dispute reaches the case management stage.
The changes are a temporary measure which AFCA anticipates will be in place for up to six months and will be reviewed and adjusted as appropriate. All internal dispute resolution ‘refer back’ timeframes remain unchanged.
AFCA is encouraging financial firms to continue to:
- work constructively and reasonably with affected consumers during any period of disruption, particularly consumers in hardship
- openly and transparently communicate with consumers about any delays they may experience in decision-making, claims or complaints handling caused by the impact of COVID-19 on their business.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
