AFSL Compliance: Why Your Business Needs a Provider

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Any corporation that provides financial services in Australia is required to have an Australian Financial Services Licence (AFSL), unless an exemption applies. The AFSL regime (regulated  by the Australian Securities and Investments Commission – or ASIC) governs the provision of financial services and requires the companies that provide those services to do so efficiently, honestly and fairly.

In this article, we uncover why your business needs an AFSL compliance provider, main benefits from this provider, main risks your business might face of being not compliant with the board requirements and how to choose the right AFSL compliance provider for your business.

Know the Basics

What is AFSL?

An Australian Financial Services Licence (AFSL) is a licence granted by the ASIC under the Corporations Act 2001 that allows a business to carry out financial services such as giving financial product advice, dealing in financial products, operating a registered scheme, issuing derivatives and market making. 

Why Compliance Matters

AFSL Compliance can help your company build trust, integrity and recognition within the financial services industry. For instance, an organisation consistently demonstrates credibility and trustworthiness by adhering to regulations introduced to protect clients by mitigating potential risks caused by a breach of client rights. An AFSL holder may be able to offer  financial services such as securities, foreign exchange, managed investment schemes, etc. 

The Role of a Compliance Provider

Expertise and Experience

An AFSL compliance provider has deep knowledge and experience of complicated regulatory regimes, including ASIC requirements. They are likely to have a better understanding of these standards than a generalist and can give advice to help align your functions with all your obligations. Dealing with compliance matters on a daily basis, an AFSL compliance provider understands the application of the regulations in practice, reducing the likelihood of misapplication and non-compliance. 

Time and Resource Efficiency

It can be time-consuming and labour-intensive to keep up with AFSL compliance by doing things in-house but, by partnering with a provider, you can focus on your core business activities and leave complex adherence issues to experts. This centralises information and makes operations more streamlined while allowing staff to focus on core business objectives. You need to be mindful that while you can outsource a function, you cannot outsource an obligation.

Risk Mitigation

Failure to follow AFSL requirements could lead to fines, lawsuits and reputational damage. With the help of a provider, you will have systems in place to sustain adherence, perform regular audits and stay updated on regulatory changes, which is an ongoing area of maintenance and attention.

Benefits of Compliance Providers

Customised Solutions

Compliance providers will devise a program based on your business’ unique needs and risk profile. They examine the particulars of your operations to develop strategies that suit your context and resources. 

Continuous Monitoring and Support

Regulatory environments are highly volatile, with frequent updates and new requirements. An AFSL provider stays up to date with the latest compliance matters that may impact best practices. This helps your business adapt to changes and maintain best practices. 

Improved Operational Efficiency

Effective compliance management leads to more efficient operations. By helping establish and enforce guidelines and procedures, automating systems, and reducing administrative burdens, compliance solutions enhance productivity and operational efficiency.

Risks of Non-Compliance

Legal Consequences

The actions available on a finding of non-compliance include substantial fines and penalties, suspending or cancelling licences, ‘enforceable undertakings’ and civil or criminal action by ASIC. Such findings can be financially costly and can damage your reputation.

Choosing the Right Provider

Assessing Expertise and Track Record

Trust is paramount when selecting your AFSL compliance provider. Take the time to investigate their credentials and experience. Ensure they have a strong track record in the Australian financial services industry (AFSI).

Evaluating Service Offerings

Different providers offer differing levels of service. Evaluate whether their services offer all or most of the elements you need for your business. Evaluate the breadth of services offered, the extent of customisation, and the degree to which providers offer ongoing services (as in, ‘set it and forget it’ versus ‘we recommend and will support you through continued quarterly recommendations’). Ideally, you would choose a comprehensive service package that offers all elements of adherence support.

Partnering with an AFSL compliance provider offers multiple benefits, including expertise, efficiency, risk mitigation, and safer operations. Your company can gain additional credibility, and position itself for a successful, longstanding tenure in the Australian financial market by maintaining AFSL compliance.

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