FAAA cautions AUSTRAC on regulatory duplication

The Financial Advice Association of Australia (FAAA) has reminded AUSTRAC that the provision of financial advice under the licensing regime in the Corporations Act is unique and should be recognised as such with respect to outsourcing.

The FAAA has provided the reminder as part of its response to AUSTRAC’s draft outsourcing guidance and has recommended that advisers be excluded from some elements of the guidance in circumstances where they already meet obligations under the Corporations Act.

“The provision of financial advice under the licensing regime in the Corporations Act is unique. This is why AFSLs that provide financial advice only fall into the unique AML/CTF category of an item 54 reporting entity,” the FAAA said.

“The arrangements between AFSLs and product providers are equally unique. Under the Corporations Act, product providers are required to conduct due diligence on the advice AFSL prior to permitting the distribution of their financial products through the AFSL’s advisers. The product provider/AFSL/adviser distribution channel is heavily regulated under corporations and financial services law,” it said.

“The advice AFSL / product provider relationship also operates under AUSTRAC’s existing guidance on reliance. We are concerned that the application of the proposed outsourcing guidance to these relationships will create confusion and potentially duplicate existing obligations for reporting entities (advice AFSLs).”

The FAAA has suggested to AUSTRAC that its existing guidance ought to be sufficient.