Pandemic Planning – It’s not one size fits all

Pandemic Planning – It’s not one size fits all

As the world battles with the spread of the coronavirus, the importance of pandemic planning for financial service organisations including superannuation funds cannot be understated.

The IQ Group recently held an internal discussion on pandemic planning. We discussed the key advisery players for superannuation funds and administrators – Federal Government, State Governments, World Health Organisation and in particular the Australian Prudential Regulation Authority (APRA).

These organisations provide important advice and direction to help organisations manage through the pandemic. While Governments provide directions for the nation and individual States, APRA’s focus is specifically on financial services organisations including RSE licensees.

What should superannuation funds be doing?

· considering publicly available information on pandemic risks, health and hygiene measures as well as tools for pandemic business continuity planning

· execute their pandemic plan

· establish an internal pandemic planning group

· communicate regularly with employees, suppliers and APRA (APRA expect to be informed of any significant impacts on operations, customers and financial condition)

According to APRA. effective pandemic planning generally requires a cross-disciplinary approach involving, for example human resources, business continuity management, security areas, business units and risk management functions within the organisation.

Organisations should have:

· Identified their highest critical business functions

· Co-ordinate between locations and be flexible – different locations may have different needs

· Assessed potential financial impacts

· Assessed potential staffing impacts

· Investigated alternative working arrangements and processing arrangements

We have already seen a significant number of financial services employees shift to working from home, which helps protect employees health, keep the organisation running, and is in line with the advice from the Federal and State Governments.

From our discussion it became clear that it is not the case of one size fits all – organisations need to be adaptable and continuously review and update their plans to cope with radiply changing circumstances.

In addition to various publications from Australia’s Governments (Federal and State), APRA has Prudential Practice Guide – CPG 233 – Pandemic Planning (May 2013) and the Association of Superannuation Funds of Australia (ASFA) has a Best Practice Paper on Pandemic Planning (Updated March 2020). These documents are a useful tool for trustees to navigate through this situation.

If you need help understanding pandemic planning and the available resources, please email IQ Group at:

David Hodges

Senior Business Analyst

Temporary new early release of super – what you need to know

Temporary new early release of super – what you need to know

All Australians are concerned about the future, and the reality or possibility of financial hardship as a result of this pandemic.  While the Government has announced programs to help people, like the JobKeeper initiative that might benefit 6 million Australians, many people may be taking advantage of another Government announcement – to take some of their own money out of super.

It’s been estimated that up to $56 billion might be cashed out of super over the next 6 months – although the Government’s own estimate is $27 billion.  This is at least 2% of the money in APRA regulated super funds, and perhaps quite a bit more.

The mechanism to allow this is an addition to the compassionate grounds early release of super on the basis of financial hardship caused by coronavirus.  This means a release can be authorised by the ATO – rather than other financial hardship releases which have to be approved by a super fund (applying specified criteria).

This has been legislated as a temporary provision that will be available over two periods to 24 September.  However, as many hundreds of thousands – perhaps even a couple of million members – will take advantage of this temporary opportunity, funds and administrators are scrambling to change what is generally a manual procedure for a small number of applications into an automated process for possibly millions.

It’s going to be very important that the industry get this right.  If there are delays of many weeks or even months in processing these claims, there will be Government and community outrage.

There have already been more than 400,000 expressions of interest registered with the ATO.  The first applications can be made on 20 April – a fortnight before the JobKeeper allowance becomes available

The key elements of the new early release provisions include:

  • People eligible for early release must have, since 1 January 2020:
    • Been made redundant
    • Had their hour reduced by 20% of more
  • Up to $10,000 can be withdrawn by 30 June.
  • Up to a further $10,000 can be withdrawn between 1 July and 24 September
  • Applicants make a self-assessment to ATO and are encouraged to use myGov
  • While a phone service will also be available, it won’t be possible to submit paper forms
  • The ATO will assess the claims and send successful determinations to super funds
  • They’ll send a daily electronic file and the fund will pay members directly, using the bank account the ATO provides
  • It’s up to the fund to decide if they verify the bank account but AUSTRAC has given funds an exemption from the AML/CTF rules to allow them to accept the details provided by the ATO
  • However, unless AUSTRAC rules say you are required to accept the ATO determination (which they don’t) a fund may still be liable

For those who have lost their jobs as a result of the pandemic induced downturn in the economy this is likely to make a significant difference in their ability to support themselves and their families.  It does however come at a cost!  Members will be crystallising losses in superannuation investments, selling after significant falls in the value of shares and other assets and a loss of future superannuation earnings.

For superannuation funds this will require a new benefit payment type to administration systems in a very short period.  It will require them to mobilise resources when many are working at home, depleted due to illness and offshore processing centres are not available.  Funds will be under pressure to maintain service levels at a moment that matters for members.

Further, superannuation funds will need to readjust their portfolios to ensure they have the necessary liquidity for a significant loss of funds from the superannuation system.

Finally, it will be an important time for funds to ensure their members and employers understand what the fund is doing and what the options are available to members to get through a tough period.

IQ Group’s first online Q&A session during the coronavirus pandemic

Yesterday, IQ Group held a lunch time client forum. This was the company’s first online Q&A session during the coronavirus pandemic, and it ran successfully. Customers had the opportunity to ask their questions and IQ Group’s Head of Industry Insights, David Haynes, provided in-depth responses.

If you would like to find out more about the temporary new early release of superannuation changes, please contact IQ Group at:

Peter McDonald

Principal Consultant & Team Lead



Financial Crime: What you need to know

Financial Crime: What you need to know

The prevention and management of financial crime is a fundamental responsibility of superannuation trustees, to safeguard members entitlements and assist the Federal Government agency AUSTRAC (Australian Transactions and Analysis Centre) with the detection and management of money laundering and terrorism financing.

The National Financial Crime Discussion group meets 4 times per year and organised by the Association of Superannuation Funds of Australia (ASFA). Joe Strati and I recently attended the first meeting for 2020. Due to the new social distancing measures to prevent coronavirus, attendees were given the opportunity to attend this meeting online.

Over the last few years, Joe and I have been helping the NAB (National Australia Bank) with their financial crime management program. The discussion group provides industry participants the opportunity to discuss all things financial crime, and includes expert speakers from the industry.

The group highlighted that two of Australia’s big banks have recently had potential contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF Act). One of the issues involved the international transfer of money that was used for child slavery – a significant issue throughout the world and one that we would like to see stopped.

Coronavirus pandemic – compliance with AML/CTF Act

The importance of compliance with the AML/CTF Act cannot be understated. This is going to become even more important with the increased early release of super as a result of the coronavirus pandemic, and associated economic and social uncertainty.

The group noted some key activities that superannuation funds should be doing all the time, not just some of the time.

These include:

· AML/CTF Program should be up to date and relevant;

· Risk Assessments including Control Effectiveness should be updated as processes or circumstances change;

· Enhanced Customer Due Diligence and Ongoing Customer Due Diligence should be aligned;

· Record-Keeping should be in accordance with the law (very easy for AUSTRAC to verify whether this is the case);

· Funds should be aware what to do if they have an issue with AUSTRAC;

· Section 47 compliance report should be considered throughout the year and not just before it is due;

· Board reporting should ensure that the Board is aware of AML/CTF activities within the organistaion and any changes to the AML Program; and

· Board Management Oversight should be a standing agenda item.

The general theme of these recommendations is that documentation is up to date, relevant, considered, and that the Board is aware of the AML/CTF activities and any issues within their organisation.

If you need help understanding financial crime and the compliance standards, and particularly now with the new early release of superannuation, please email IQ Group at:

David Hodges

Senior Consultant

Opportunities Blockchain can create for funds

Opportunities Blockchain can create for funds

The application of Blockchain and Distributed Ledger Technology (DLT) in Superannuation.


What is Blockchain?

Blockchain is a shared or distributed ledger technology (DLT). The digital information “blocks” are distributed in a “chain” across a network of computers, rather than at a single source.  When a block stores new data it is added to the chain.

Transactions on the blockchain network are approved by a network of thousands or even millions of computers and cannot be altered once they are made part of blockchain. Almost all human involvement in the verification process is removed, reducing the possibility of human error and the records are more accurate. An advantage of blockchain is that if a single computer on the network contains an error, the error would only be within one copy of the chain.

Blockchain is an example of a DLT, however not all DLTs are blockchains.  Distributed ledger technology is currently at the forefront of some of the most significant financial market innovation in Australia.

Why use Blockchain in Superannuation?

Several potential benefits of blockchain and DLT identified for the financial services sector include:

  1. Reduction in costs –

Investments have a high volume of transactions requiring data to be verified by multiple parties.  By using a distributed ledger, trades can happen faster, more efficiently and more cost effectively. Currently stock trading can take three days or more for the settlement and clearing process.  This results in money and shares to be frozen during that time.  ASIC is closely monitoring the transition in Australian market infrastructure taking place right now as the Australian Securities Exchange (ASX) implements a new DLT-based clearing and settlement system.

  1. Increased accuracy –

Current superannuation ledger systems are often siloed and can contain multiple versions of the ‘same’ data.  Blockchain can reduce the complexity of data and number of interfaces.  It also enables transaction approval on the blockchain network with almost no human involvement in the verification process, reducing the possibility of human error.

  1. Operational efficiency –

Blockchain can reduce the complexity of data and the number of interfaces so the administrative operations have the potential to be faster, more accurate and transparent.  The introduction of blockchain can also supersede numerous existing superannuation ledgers, allowing organisations to consolidate their systems.

Anti-money laundering (AML) and know your customer (KYC) practices are also potential areas that may gain significant benefit through the introduction of distributed ledger technology.  Currently, financial institutions must perform a multi-step process for each new customer. KYC costs can be reduced, and efficiency improved through cross-institution client verification.  This will also allow for increased monitoring and more effective analysis.

  1. Minimise fraud –

Superannuation fraud is one of the main categories of fraud perpetrated in Australia.  The ability to verify identity for financial transactions is key, and distributed ledgers offer enhanced methods for proving identity, as well as the possibility of digitising personal documents.

  1. Reducing external threats –

Cyber-attack, fraud and compromised data risks are significantly reduced when a ledger is distributed across multiple parties. Successful falsifying of records requires falsifying the entire chain – a near impossible task.

Why hasn’t DLT progressed further in the industry?

As noted above, Australia’s $3.0 trillion (at the end of the December 2019) superannuation system has potentially a lot to gain from adopting distributed ledger technologies (DLT).  While much of the industry is well advanced in their consideration of DLT, there is some uncertainty regarding how to best apply blockchain applications to realise benefits.

In a speech at the China Financial Summit 2019, ASIC Commissioner Cathie Armour stated that the Australian government is demonstrating “ its strong support for the development of a varied and sustainable fintech sector in Australia.”  The Commissioner also noted that the Senate established a Select Committee on Financial Technology and Regulatory Technology which will inquire into:

  • the size and scope of the opportunity for Australian consumers and business arising from financial technology (fintech) and regulatory technology (regtech)
  • barriers to the uptake of new technologies in the financial sector;
  • the progress of fintech facilitation reform and the benchmarking of comparable global regimes
  • current regtech practices and the opportunities for the regtech industry to strengthen compliance but also reduce costs
  • the effectiveness of current initiatives in promoting a positive environment for fintech and regtech start-ups, and
  • any related matters.

When the report is released towards the end of the year, we will have a clearer understanding of how the government and the sector may approach these opportunities.  Adoption has not completely stalled however, and ASIC is closely monitoring ASX’s transition to a DLT clearing and settlement system.

The Regulator’s focus, regardless of the technology solution, “remains to ensure the Australian financial markets retain their integrity, resilience, and robustness, and operate fairly and effectively”.  In the meantime, funds, administrators and trustees will have the opportunity to explore numerous options blockchain technology offers, which may deliver benefits for their organisations and members. Blockchain technology is certainly a growing area. It will be interesting to see how Blockchain progresses into the future across multiple industries and how the superannuation industry might use it.

If you have any questions about Blockchain, please contact IQ Group at:

Frea Packham – Senior Consultant

Has FAR gone too far?

Has FAR gone too far?

Overall, it’s hard to argue that the Financial Services Industry doesn’t need more accountability. Several of the major findings out of the Royal Commission regarded the professional misconduct of individuals, which can be hard to detect let alone regulate.

BEAR (Bank Executive Accountability Regime) has been in place for a time now, so it makes sense for FAR to come into play. That said, FAR is not only more sweeping, it also has some strengthened effects that some of us might consider going a bit far.

FAR is all about lifting standards of behaviour for executives across financial services – extending BEAR to superannuation and insurance – by making nominated Accountable Persons personally accountable for the activities of their company for which they are responsible. Their responsibilities will have to be identified, with these and any breaches reported to APRA.  Penalties will apply at an individual and corporate level, including circumstances where things haven’t been done.

Increased accountability and transparency are a good thing but there’s been little consideration about the impact on people who may not be as senior – or as well paid – as executives in banks.

Firstly, it’s important to realise that one of the reasons FAR is stronger than BEAR is because of the difficulty of ASIC historically experienced getting convictions for misconduct in the current regulatory environment. Many companies under investigation in the past have been slow to comply in providing requested information or provide poor information upon request. However, an obligation that requires individuals (in addition to entities) to be “cooperative” to FAR allows ASIC to find fault without understanding why a person may not be cooperating.

ASIC can find fault based on perceived cooperation prior to even examining any evidence of misconduct. Thus, a lack of cooperation with someone accusing you of wrongdoing becomes a crime in and of itself, and a regulator who finds no misconduct whatsoever can still charge someone, potentially doing significant harm in the process.

This sort of regulation is banned in many democratic countries due to how they undermine due process. For example, the United States’ Fifth Amendment is a constitutional right that protects an individual from being forced to incriminate themselves and ensures that people are found guilty of actual crimes. These protections prevent the historical use of duress to extract information and confessions because, in practice, this type of power fosters “witch hunts” and abusive regulation. It would hard to argue an individual would not feel extreme fear and duress if ASIC suggested they are not being “cooperative enough” and that in itself is enough to find them guilty of not meeting their obligations whether they’ve done anything wrong or not.

Also, at least with BEAR it’s clear who your executives are, and the people targeted for BEAR were quite specific. FAR has definitions based on job function as to what an ‘accountable executive’ looks like across eleven spheres, including Human Resources. It’s entirely possible in smaller companies that people may be in a position of obligation without knowing it, particularly if their company is negligent in identifying them or telling them that they’ve been identified. With a company unable to provide professional liability insurance for these members, there’s a great deal of individual risk in taking these roles that people may be unprepared for.

While a lot of this has to do with how FAR is implemented – which we really don’t have a strong precedent for as BEAR itself is only a couple of years old – it seems reasonable to assume that the Financial Services Industry will see talent walking away and these roles becoming far more costly to fill.

The impact of this is magnified by the higher penalties proposed for FAR. Maximum penalties could be the greater of either $10.5m or the benefit derived (or detriment avoided) by the entity because of the contravention multiplied by three (where this can be determined by the court); or 10% of the annual turnover of the company (capped at $525m or 2.5m penalty units).   What’s more, it’s suggested that companies will be limited in their capacity to insure their accountable persons against breaches of FAR.

Has FAR gone too far?

Elizabeth Blythe