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Fintech Market Overview

This article does not constitute legal advice.

Cross-border payments in Australia

Fintech Software

ASIC has entered into a number of cooperation agreements with overseas regulators that aim to further understand the approach of fintech businesses in other jurisdictions, in an attempt to better align the treatment of these businesses across jurisdictions. These cross-border agreements facilitate the referral and sharing of information on fintech market trends, encourage referrals of fintech companies and share insights from proof of concepts and innovation competitions. A number of these agreements aim to further understand the approach to regulation of fintech businesses in other jurisdictions to better align the treatment of these businesses across jurisdictions.1

Comparable regulator exemption. It has generally been common in Australia for foreign financial services providers (FFSPs) to provide financial services to wholesale clients by relying on ASIC's 'passport' exemption from the requirement to hold an AFSL. In March 2020, the passport relief was repealed (subject to a 24-month transitional period) and replaced with a new regime that required FFSPs to apply for a foreign AFSL (i.e., a modified form of an AFSL). However, in 2021 the Australian government announced that it would consider options to restore a modified version of the passport exemption. After an initial consultation period, the Treasury released draft legislation (the Draft FFSP Bill) that seeks to implement a 'comparable regulator exemption'. This is based on the previous passport exemption, with modified conditions and an expanded list of approved jurisdictions. The consultation period for the Draft FFSP Bill concluded on 12 January 2022 and at the time of writing has not been passed into law.1

Professional investor exemption. Australia has an AFSL exemption that captures FFSPs providing certain financial services to professional investors from outside Australia. The Draft FFSP Bill proposes to enhance this exemption by expanding the scope of financial services to all financial services; however, this will be subject to certain conditions regarding the FFSP's physical operations. The consultation period for the Draft FFSP Bill concluded on 12 January 2022 and at the time of writing has not been passed into law.1

Limited connection relief' is available to an FFSP that is not carrying on business in Australia but is deemed to be carrying on a financial services business in Australia only because it engages in conduct that is inducing, or intended to induce, a person in Australia to use its financial services and provides financial services only to wholesale clients in Australia. However, ASIC announced that limited connection relief will be discontinued and is expected to expire on 31 March 2023. The Draft FFSP Bill does not propose to continue the relief.1

Australian presence. Foreign businesses, including fintechs, wishing to access Australian customers must register with ASIC to carry on a business in Australia. Registration can involve either establishing a local presence (i.e., registering a branch office) or incorporating an Australian subsidiary. Generally, the greater the level of system, repetition or continuity associated with an entity's business activities in Australia, the greater the likelihood registration will be required.1

Marketing foreign financial services. An offshore provider can generally address requests for information, pitch and issue products to an Australian customer if the customer makes the first approach (there has been no conduct to induce the investor, or that could have been taken to have that effect) and the service is provided from outside Australia. If the unsolicited approach relates to credit activities that are regulated under the National Credit Act, the provider is required to hold an ACL irrespective of the unsolicited approach.1

Australia does not have foreign exchange or currency-control restrictions on the inward or outward flow of currency. However, there are cash-reporting obligations to AUSTRAC. To control tax evasion, money laundering and organised crime, AUSTRAC must receive reports of transfers of A$10,000 or more (or the foreign currency equivalent) and reports of suspicious transactions from reporting entities (e.g., banks, building societies and credit unions). Unless an exemption applies, reporting entities must also submit an annual AML/CTF compliance report to AUSTRAC, which collects information about the appropriateness of a reporting entity's money laundering and terrorism financing risk assessments and of its AML/CTF compliance programme.1

Fintech in Australia

Fintech in other countries

Notes
  1. https://thelawreviews.co.uk/title/the-financial-technology-law-review/australia
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