2025 is shaping up to be another challenging year for the financial services sector on the risk and regulatory front with new regulations commencing and a strong enforcement posture. With so much happening it can be difficult for organisations to know where to focus. To help Boards and management teams prepare, we call out 5 key areas which the sector can expect to be tested on in 2025.
Member service failures in superannuation
Both the Australian Securities and Investment Commission (ASIC) and Australian Prudential Regulation Authority (APRA) will be keeping a close watch on how superannuation funds deliver core services to their members and how they demonstrate their actions are in members' best financial interests. ASIC's recent enforcement actions include claims for poor claims handling, inadequate complaints processes and issues with the management of member accounts and contributions.
APRA has put the super sector on notice that it is intensifying its supervision of funds' expenditure and whether they can demonstrate that their spending is in the best financial interests of members. APRA will also maintain pressure on funds to provide members with meaningful retirement income product options and retirement support. Funds that are falling behind in the implementation of the Retirement Income Covenant should expect to hear from APRA.
Insurers failing to deal with customers fairly and in good faith
Insurance is the second sector which features strongly in the regulator's enforcement and supervisory priorities. ASIC will continue to challenge insurers who fail to deal fairly and in good faith with customers, be that through pricing irregularities, claims handling, treatment of vulnerable customers or the prompt resolution of complaints. Reducing the cost of insurance and improving the timeliness of claims handling also remain supervisory priorities for APRA.
Oversight of third parties
If there was still any doubt, ASIC and APRA made it clear in 2024 that financial services organisations cannot just address risk within their corporate perimeter – they must also understand and manage risk of the third parties they rely on. The new prudential standard CPS 230 underscores the need to effectively oversee material service providers and both ASIC and APRA have reminded firms that whenever they outsource activities they still remain responsible for the way those activities are performed and any decisions taken. Inadequate oversight of outsourced service providers has been a theme of recent ASIC enforcement actions and we can expect this to continue in 2025.
Governance culture and accountability
2025 will see ASIC and APRA maintain a strong focus on how governance practices and culture contribute to major compliance failures. Governance failures and directors duties remains an enduring ASIC enforcement priority and Boards should expect to have their approach to oversight scrutinised if their companies breach key compliance obligations. The commencement of the Financial Accountability Regime plus APRA's review of the prudential governance standards will ensure governance, culture and accountability continue to be key topics for discussion in 2025.
Systemic compliance failures
While insurance and superannuation feature prominently in the regulator's priorities for 2025 this does not come at the expense of strong oversight of the rest of the financial services sector. Systemic compliance failures that cause widespread consumer harm will continue to attract enforcement attention from ASIC regardless of what part of the sector is involved. Where systemic compliance breaches occur organisations should also expect APRA to test them on the effectiveness of their risk management arrangements and whether their organisational culture promotes strong compliance and risk management behaviours.
Led by some of Australia’s most respected risk and legal practitioners, our Risk and Regulatory team work with clients to assess, manage and leverage risks, understand obligations and implement new regulation in a way that is practical, sustainable and strategically aligned.
