Compliance in Practice: What an Australian ADI Must Actually Do

Translating Australian regulatory policy into day-to-day banking requires an integrated operating model. Start with governance: boards and senior executives must meet fit-and-proper standards, hold clearly delineated responsibilities, and ensure risk oversight is effective and documented. Board committees—risk, audit, and remuneration—need charters aligned to prudential standards and the Financial Accountability Regime, with management information systems that surface issues early.

Enterprise risk management is structured under prudential standards that require a three-lines-of-defence model, clear risk appetite statements, and controls across credit, market, liquidity, and operational risk. Stress testing links macro scenarios to capital planning, informing buffers above minimums. Liquidity management centers on LCR and NSFR, high-quality liquid asset portfolios, intraday liquidity controls, and tested contingency funding plans. Treasury must align funding tenor, pricing, and hedging to regulatory horizons and tolerance limits.

Information security and operational resilience feature prominently. Banks must maintain security governance, protect critical assets, monitor threats, and manage incidents with defined recovery time objectives. Third-party and outsourcing oversight ensures critical services are identified, contracts embed control expectations, and exit plans are workable. Change management, cloud adoption, and data lineage programs need to demonstrate that availability, integrity, and confidentiality are preserved end-to-end.

Credit origination processes embody responsible lending and design & distribution obligations. Affordability assessment, verification, and serviceability buffers are codified in policy and enforced in systems. Product governance sets target markets, distribution controls, and monitoring triggers for poor outcomes. Remediation frameworks provide customer redress, supported by complaints analytics and root-cause elimination. Models that influence credit decisions must be validated, with bias testing and performance monitoring documented.

AML/CTF compliance spans customer due diligence, politically exposed person screening, transaction monitoring, suspicious matter reporting, and international funds transfer reporting. Governance here intersects with technology: name screening accuracy, alert triage, case workflows, and auditability are examined by AUSTRAC and internal audit. Cross-border correspondent banking adds enhanced due diligence and data exchange obligations, while sanctions compliance overlays dynamic geopolitical risk.

Financial and regulatory reporting is a discipline in itself. APRA data collections require accurate, timely, and reconciled submissions. Capital adequacy calculations, risk-weighted asset models, and provisioning must be transparent and reviewable. Internal audit and assurance functions validate end-to-end control effectiveness, with findings tracked to closure and reported to the board. Training programs ensure staff understand obligations—from conduct and privacy to cyber hygiene and fraud prevention.

Customer trust is further supported by the deposit guarantee framework, which obliges operational readiness to identify eligible accounts swiftly during a stress event. Resolution planning and recovery plans map options for recapitalization, asset sales, and operational continuity, aligning with supervisory expectations.

In short, being an ADI in Australia demands a fused approach to governance, risk, technology, and customer fairness. Compliance is not a bolt-on: it is embedded in how products are designed, priced, funded, and serviced, with documentation and assurance connecting policy to practice.