Navigating the complex world of remediation: Past lessons learned to get the future right.

In the wake of a post-Royal Commission era, where financial misconduct and regulatory breaches in the Australian financial services industry took centre stage, it’s disheartening to note that some organisations have even now not yet fully embraced the lessons learned from their past compliance challenges.

Notable examples of these challenges are found within the Australian financial sector, where  Regulators including Australian Securities and Investments Commission (ASIC) have overseen a staggering A$5.6 billion in financial services remediation over the past six years.

This remediation effort alone has impacted an estimated seven million current and past customers.

In December 31, 2022, ASIC reported that this comprehensive remediation initiative included A$4.7 billion in remediation paid or offered by six of Australia’s largest financial services institutions. This compensation was related to fees-for-no-service misconduct, non-compliant advice, the sale of “junk” insurance by insurers,  as well as the failure to deliver on price discount promises and poor sales practices. These revelations underline the persistent challenges faced by the industry, despite increased regulatory scrutiny and significant public and political outcry.

The surge in remediation claims,  which followed the conclusion of the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry in 2019, underscores the urgency and importance of addressing both historical and future compliance and remediation issues in the financial sector.

The regulatory landscape continues to evolve, with ongoing legal class actions against major financial institutions, suggesting  the potential of further remediation payments may be on the horizon.

Embracing regulatory guidance

In September 2022, ASIC responded to the need for efficient remediation by publishing updated and expanded regulatory guidance, Regulatory Guide 277 Consumer Remediation (RG 277). This guide is applicable to Australian credit licensees and Australian Financial Services (AFS) licensees, including superannuation trustees. It emphasizes the legal obligation of organisations to operate efficiently, honestly, and fairly.

The guidance is significant in nature as it places the onus on the industry to get on with fair and timely remediations – returning the money  owed to wronged consumers. ASIC’s guidance is designed to empower financial institutions to achieve the right remediation outcomes independently. The guidance explicitly allows the use of assumptions to help firms address knowledge gaps and accelerate remediation programs in a way that does not disadvantage consumers.

Firms will need to continue to ensure that past mistakes don’t catch up to them in the future, and ensure that  remediation efforts are proactive rather than reactive, which has previously caused other issues in ongoing remediation programs .

The importance of proactive remediation

Proactive remediation is not just an industry buzzword; it’s a critical necessity. In many cases, consumers of financial products or services may not be aware of or have a reasonable way of knowing that they have suffered a loss.

Often, the root cause of remediation issues is identified from customer complaints or through the post-sale recognition of poor product design by the business.

Reactive remediation, driven by customer complaints or regulatory enforcement actions, often results in higher costs. Proactive remediation, on the other hand, allows institutions to address issues before they become widespread, ultimately reducing the financial impact of compliance breaches.

Proactive remediation also demonstrates a commitment to customer welfare. When customers see that an institution is actively working to correct issues and prevent future ones, it builds trust and loyalty. It can also help institutions can position themselves as industry leaders in compliance and customer satisfaction. This can give them a significant competitive edge in the market.

Implementing proactive remediation isn’t always straightforward. It requires a combination of advanced technology, data analytics, regulatory expertise, and a proactive organisational culture, with the right talent at the forefront of this all. This is where Momenta Group can make a substantial difference.

Momenta Group’s role in remediation

In this environment, it is crucial for institutions to adopt a proactive approach to remediation and compliance. Momenta Group Global recognises the need for expertise and support in addressing these challenges. We offer a comprehensive suite of staffing solutions, including the availability of experienced and qualified contingent, fixed-term, and permanent staff, designed to assist institutions in managing their compliance and remediation needs efficiently.

One of the critical aspects that Momenta brings to the table is our deep expertise in regulatory compliance. Our associates comprise professionals with a profound understanding of financial regulations, ensuring that institutions can navigate complex regulatory requirements effectively.  Data quality and accessibility issues are common challenges faced by many, and our associates are well-equipped to address them effectively.

While some organisations may still be grappling with the lessons learned from past compliance failures, Momenta is committed to successfully helping them navigate the evolving current and future regulatory landscape.

If your organisation is facing compliance and remediation challenges or is seeking to stay ahead of compliance requirements, Momenta Group Global will  partner with you on this journey.

Together, we can ensure that your organisation thrives in a rapidly changing financial services industry while prioritizing compliance and customer trust.