• A number of recent changes to taxation, anti-money laundering and financial services laws may have an impact on product disclosure statements, application forms and other disclosure documentation (including information memorandums) for financial products.
  • Financial services providers should review their disclosure documents and application forms to ensure compliance.
  • Taxation changes relating to FATCA and anti-money laundering law changes may require financial services providers to implement additional compliance processes and procedures. 

Summary of new legal obligations

FATCA changes

In order to comply with the Foreign Account Tax Compliance Act (FATCA) and the recently implemented Intergovernmental Agreement between Australian and US to cooperate on cross border taxation issues (Intergovernmental Agreement), Australian fund managers will need to obtain sufficient information on any US tax resident investors and submit reports on income derived by its US tax resident investors to the Australian Tax Office on an annual basis. Australian fund managers with US sourced income may also need to register with the Internal Revenue Service (IRS) to avoid FATCA withholding being charged on US sourced income. FATCA changes are effective from 1 July 2014, however a transition until 31 December 2014 is allowed for due diligence on existing investors.

MySuper Fee Template changes

Pursuant to changes made to the Corporations Regulations 2001 (Cth) (Corporations Regulations) by the Superannuation Legislation Amendment (MySuper Measures) Regulations 2013 (MySuper Changes), the Fees and Costs template and other minor changes to the consumer advisory warning and worked example of fees and costs in Product Disclosure Statements for Superannuation Products and Managed Investment Products needs to be updated for any PDSs given from 1 July 2014.

Anti-Money Laundering changes

Recent changes have also been made to the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth) (AML Act) and the Anti-Money Laundering and Counter Terrorism Financing Act 2006 Rules (AML Rules) which implement a number of measures including, amongst other things, requirements for reporting entities to take reasonable steps to identify and verify the beneficial owners of customers who are companies, trusts, partnerships, incorporated/unincorporated associations, registered cooperatives and government bodies as well as enhanced due diligence on politically exposed persons. Beneficial holders are generally persons who ultimately have direct or indirect control or ownership over the entity which is the customer for AML purpose. These changes take effect from 1 June 2014. However, AUSTRAC has stated that it will adopt a “supervisory approach” under which civil penalties will not apply until 1 January 2016 provided that certain steps are taken to comply. 

How do these obligations apply to disclosure of your financial products?

Click here to view table.

Other considerations

In addition to disclosure changes, the recent changes to financial services laws, anti-money laundering laws and the implementation of FATCA also have other implication for financial services providers.  Financial services providers will need to review and update their systems to ensure compliance at the earliest available opportunity.