The Australian Securities and Investments Commission (ASIC) has accepted a variation to an enforceable undertaking provided by National Australia Bank Limited (NAB) relating to its wholesale spot foreign exchange (FX) business.
Under the original EU, NAB was required to develop a program of changes to its existing systems, controls, monitoring, training and supervision of employees within its spot foreign exchange business to prevent, detect and respond to certain types of conduct. The program and its implementation were to then be assessed by an independent expert.
On 29 March 2018, the independent expert reported on NAB's spot foreign exchange program, noting significant deficiencies regarding its: governance, risk management and compliance framework; policies and procedures; risk management practices; and human resource management.
ASIC said the independent expert also concluded that it was unable to complete the expert assessment of the program's effectiveness required by the EU because NAB has made incomplete progress in designing items to be included in the program.
The expert’s report stated that “progress in developing the program has been slow” and that the program “appears to have evolved iteratively during 2017, rather than through a well-defined process”.
“For instance, there appears to have been no comprehensive risk assessment across NAB’s Spot FX business against the EU requirements and relevant regulatory standards and guidance,” the report said.
ASIC said the variation of the EU imposes an additional undertaking on NAB to prepare an updated program that adequately addresses all required components. This updated program will then be subjected to further assessment by the independent expert.
After these new undertakings are satisfied, NAB will be able to progress with the undertakings in the original EU, the regulator said.
Commissioner Cathie Armour said ASIC is “disappointed” with the delay in the development and assessment of a remediation program to address the conduct outlined in the EU.
“However, we are pleased that the process has been sufficiently robust to ensure any ongoing deficiencies have been identified and are being addressed, with oversight by an independent expert,” she said.
“ASIC's ultimate objective is to ensure NAB has effective mechanisms in place to adequately train, monitor and supervise its employees to provide financial services efficiently, honestly and fairly.”