Amanda Mark

Australian Financial Services Licensees (AFSLs) face a 12-month run up unlike any “business as usual” compliance cycle, with a convergence of hard reform deadlines, stepped-up penalty regimes and overlapping regulatory scrutiny set to test the sector through 2026.

“20206 will be a genuine regulatory stress-test for licensees,” said Amanda Mark, CEO of Mintegrity. “AFSLs need to treat 2026 readiness as a strategic program, not a compliance tick-box, because the risk now is cumulative.”

“We are heading into the perfect storm driven by three forces. First, non-negotiable reform deadlines are landing in quick succession. Major legislative overhauls, most notably AUSTRAC’s AML/CTF rewrite and new privacy obligations, require substantial operational and policy change on fixed timetables. AUSTRAC’s new rules require current reporting entities to have updated, fully operational AML/CTF programs by 31 March 2026.

“Second, regulators are shifting decisively from guidance to litigation, using expanded civil penalty powers in areas such as cyber resilience, consumer contracts and sustainability claims. Recent greenwashing cases, including significant penalties against well-known firms, underline the scale of exposure for inaccurate or unverified ESG statements.

“Third, regulatory lines are increasingly blurred. A single product or technology decision can attract parallel scrutiny from ASIC, the ACCC and the OAIC, particularly around AI-enabled advice, client data use and ESG-labelled offerings.”

The strategic challenge is less about any single rule change than the operational load of implementing all of them at once. The greatest risk is not misunderstanding one obligation, but failing operationally because time, budget and technology resources are stretched across multiple concurrent reforms.

Enforcement risk is already immediate. One of the most significant exposures for AFSLs is unfair contract terms.

“Multi-million-dollar penalties now apply and the ACCC has flagged UCT enforcement as a priority. Clauses commonly embedded in advice agreements, such as automatic renewals or restrictive cancellation and termination rights, sit directly in scope. The danger for licensees is scale: a single clause used across an entire client base can trigger per-contract, per-clause penalties that become financially severe. If not already completed, firms should review all client service and advice agreements for UCT compliance and remediate templates quickly,” she said.

Greenwashing has also become a high-penalty trap. ASIC and the ACCC are treating ESG misrepresentation as top-tier enforcement, and the recent penalty environment shows regulators are focused not on the philosophy of sustainable investing but on verification.

Advisers and licensees face direct risk if they promote or repeat “green” claims that cannot be substantiated. Firms should re-validate due diligence supporting every ESG-labelled product on their Approved Product List and remove vague, unprovable descriptors like “green” or “sustainable” from websites, brochures and advice documents unless they are backed by evidence.

Alongside these immediate enforcement threats, several non-negotiable projects should be underway now.

“AUSTRAC’s AML/CTF reforms represent the single largest and most complex compliance build for AFSLs over the next 18 months. This is not a tweak to an existing program but a full rewrite of risk assessment methodology, governance and controls, requiring senior management approval and documented implementation planning. AUSTRAC has signalled it expects to see sustained effort and a formal transition plan well before 2026, meaning firms that delay will struggle to demonstrate adequate governance. Licensees should draft a formal implementation plan now, commence new ML/TF risk assessments immediately, and begin drafting updated AML/CTF programs based on those risks,” noted Mark.

Privacy is the other major liability front. Since 10 June 2025, the Statutory Tort for serious invasion of privacy gives individuals a direct right to sue for serious privacy breaches, including human-error incidents such as emailing the wrong file. Separately, by 10 December 2026, firms must comply with automated decision-making transparency obligations covering any automated process that significantly affects an individual’s rights or interests.

This reaches beyond future AI to existing systems that segment clients, rate risk profiles or influence service levels. AFSLs should update breach response plans to assess tort exposure for every incident, confirm Professional Indemnity coverage for privacy tort risk, and begin an “automated decision register” to catalogue and review all relevant tools and workflows.

ASIC is simultaneously lifting baseline expectations. Cyber resilience is now treated as a core, non-delegable AFSL obligation, and ASIC has begun framing cybersecurity failures as breaches of statutory duties of care and diligence by licensees, directors and Responsible Managers. These expectations extend through supply chains to CRM providers and cloud hosts that handle client data. Firms should conduct documented cyber risk assessments and audit third-party provider contracts to ensure robust security controls and clear breach-notification procedures.

Finally, the Quality of Advice Review reforms add another fixed deadline. Under QAR Tranche 1, legacy clients on ongoing fee arrangements predating 10 January 2025 must be migrated to the new consent model by 10 January 2026. Missing the deadline risks leaving firms unable to legally collect ongoing fees from those clients. Licensees should ensure transition programs are well advanced and fully resourced.

“The compliance load through 2026 is heavy. Deadlines from AUSTRAC, the OAIC, the ACCC and ASIC are not distant concepts; they are imminent and overlapping. Firms need to act early and treat readiness as a whole-of-business change program. Those who do will not only meet the requirements but can emerge resilient in a tougher enforcement era.”

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Amanda Mark

New changes to shorten the standard settlement cycle for most broker-dealer transactions in securities from two business days after the trade date (T+2) to one (T+1) are coming into play from May 28, 2024 in the USA.

This rule is designed to benefit investors and reduce the credit, market and liquidity risks in securities transactions faced by market participants.

“This move will have huge global ramifications, for both industry participants and other markets, as the changes required for T+1 are significant,” says Amanda Mark, Co-CEO of MIntegrity, a risk consultancy firm.

“The benefits are clear for investors: reduced settlement risk, reduction in capital, margin requirements and collateral. It will lead to an increase in efficiency of markets, improve liquidity and provide quicker access to capital,” she notes.

“This, however is causing unease amongst some brokers, advisers and investors as they don’t know what to expect or how it will work,” says Mark.

“Brokers and advisers will need to navigate potential regulatory hurdles to ensure a smooth transition to the accelerated settlement cycle. One of the critical concerns is the impact on security deposits and risk management strategies. Currently, Australian brokers often use proceeds from local settlements to trade into the U.S and Canada. The trade matching, processing and settlement are fairly standard processes and are not seen as insurmountable challenges.

“It’s the regulatory consideration that weighs heavily on the industry,” says Mark.

Brokers and advisers need to be strategic about managing these challenges.

“Improve your processes now. Get your business in order, whether you are a financial advisory practise or a broking firm,” she says.

Mark lists four steps that firms can undertake to be well prepared ahead of the changes.

1. Vetting of client stock and cash: For stock that is held on Shareholder Reference Number (SRN) consider streamlining processes to eliminate delays. Review historical data to see where issues have occurred and investigate ways to improve processes. Particularly for retail clients, the broker should ensure they have access to the client’s cleared funds. Firms should consider how efficient their payment methods currently operate. Consider your current process and the number of exceptions you are dealing with for Direct Debit, Cash Management Trusts, BPay, Cheques and online payment gateways. Now is the time to remove inefficient settlement methods.
2. Note that there will be an uptick in failed settlement initially: Firms should review what type of transactions are failing settlement. Is it SRN transfers, offshore clients with late allocations or large clients placing orders without pre allocations of trades. Address these issues now to ensure you are prepared.
3. Ensure accounts are set up prior to trading: Firms need to fully onboard clients prior to trading including settlement instructions. For insto trades ensure you have the trade allocation prior to execution.
4. Investment managers, fund managers and other large institutions should know which accounts they are trading on before placing an order. Ensure you get the allocations up front prior to execution.

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