In financial services, risk compliance refers to the systems, controls, and compliance infrastructure AFSLs use to identify, manage, and meet legal and regulatory obligations. Examples include breach reporting, AML/CTF controls, advice file reviews, complaints handling, and conflicts management.
Expanded Answer
Risk compliance in an AFS context focuses on aligning business activities with regulatory obligations while managing the risk of non-compliance. Common examples include maintaining breach and incident reporting processes, implementing AML/CTF programs, managing conflicts of interest, and operating effective internal dispute resolution systems. These activities reflect ASIC’s expectation that licensees have adequate compliance systems, risk management frameworks, and supporting compliance infrastructure in place.
In practice, this extends to day-to-day controls and oversight embedded within that infrastructure. Examples include advice file reviews to assess best interests compliance, monitoring authorised representatives, maintaining training and competency frameworks, and ensuring accurate and timely regulatory reporting. It also includes privacy and data protection controls, cybersecurity measures, and governance processes such as board reporting, risk registers, and compliance attestations. These elements form an integrated compliance infrastructure that supports consistent execution and oversight rather than isolated controls.
Risk increases where controls and infrastructure are undocumented, inconsistently applied, or disconnected from actual business practices. ASIC generally focuses on whether systems are effective in operation, not just documented. For further context, see What does a defensible compliance framework look like for AFSL and credit licensees?, Understanding risk management: a practical guide for licensees and advice professionals, and Managing licensee obligations in complye: integrated controls and attestations.
Why it matters
Weak risk compliance or a fragmented compliance infrastructure increases the likelihood of breaches, client harm, and regulatory action. ASIC scrutiny often focuses on whether licensees can demonstrate effective, working systems and controls across the business.
Practical guidance
- Map key obligations to specific controls and supporting compliance infrastructure such as systems, registers, and reporting frameworks
- Test controls regularly through reviews, audits, and data analysis
- Document how risks are identified, escalated, and remediated across the business
Further reading