The Parliament passed the long-awaited Financial Accountability Regime Bill 2023 (FAR) on Sept. 5.
The FAR replaces and extends the Banking Executive Accountability Regime by imposing new accountability obligations to insurers, banks, and superannuation funds to clearly identify individuals who will be held responsible for the organisations' actions. An executive who breaches these obligations can face loss of income, disqualification from working in the sector, and individual civil penalties for assisting the organisation's contravention to its obligations.
The move completes the Banking Royal Commission's final major recommendation to the government.
The FAR will apply to the insurance and superannuation industries 18 months after Royal Assent and to the banking industry six months after Royal Assent. This follows the passing of the legislation to establish a Compensation Scheme of Last Resort, which will deliver compensation of up to $150,000 to victims of financial misconduct that have unpaid determination from the Australian Financial Complaints Authority (AFCA).
Law firm Gilbert + Tobin (G + T) said implementing FAR will positively impact accountable entities.
“It will protect directors and executives and assist in the proper functioning of accountable entities. Clients who have been subject to BEAR and those clients who have already pre-emptively implemented the regime are overwhelmingly positive about the benefits that have been realised from doing so,” said G + T's Silvana Wood, Janina Del Rosario, Chris Whittaker, and Lilian Wan.
G + T advised insurers, superannuation funds, and banks to do the following as part of their obligations under the FAR:
In July, APRA and the Australian Securities and Investments Commission (ASIC) sought industry feedback on the FAR, including proposed regulator rules prescribing information for the inclusion in the FAR register of accountable persons, including supporting detail about ADI key function descriptions.