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Financial Accountability Regime (FAR)

FAR is a regulatory framework that holds senior executives and directors of financial institutions, including insurers, accountable for their conduct and responsibilities through registration and accountability obligations.

Detailed Explanation

The Financial Accountability Regime (FAR), which commenced in March 2024, replaced the Banking Executive Accountability Regime (BEAR) and extended accountability requirements to insurance and superannuation sectors. FAR requires certain financial institutions to register accountable persons with APRA, clearly delineate their responsibilities through accountability maps and statements, conduct background checks, and ensure proper notification of breaches. Accountable persons include directors, senior executives, and anyone with significant influence over the institution. The regime aims to improve governance, risk management, and culture by making individuals directly responsible for their areas of oversight. Key obligations include: a duty to conduct business in a proper manner with due skill, care, and diligence; a duty to take reasonable steps to prevent breaches; and a duty to cooperate with regulators. Penalties for failing to meet FAR obligations include substantial civil and criminal penalties, disqualification from the industry, and potential imprisonment. FAR creates a clear line of accountability from frontline practices to executive leadership.

Common Misconceptions

•FAR does not apply to all insurance companies - it covers APRA-regulated insurers, which excludes some smaller or specialty insurers
•FAR does not make executives personally liable for every operational error - accountability relates to their defined areas of responsibility and whether they met their obligations
•Registration as an accountable person under FAR is not optional if you meet the criteria - institutions must register qualifying individuals

Real-World Examples

A Chief Risk Officer was held accountable under FAR when systemic claims handling delays were found to result from inadequate oversight of the claims department they supervised
An insurer's accountability map clearly designated the Chief Operating Officer as responsible for complaints handling, making them answerable when APRA identified deficiencies in the process
Following a data breach, the Chief Information Security Officer faced scrutiny under FAR regarding whether they had taken reasonable steps to implement adequate cybersecurity measures

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Related Terms

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ASIC (Australian Securities and Investments Commission)
ASIC is Australia's corporate, markets, and financial services regulator that oversees insurance companies, financial advisers, and ensures compliance with consumer protection laws.
APRA (Australian Prudential Regulation Authority)
APRA is the prudential regulator of Australian deposit-taking institutions, insurance companies, and superannuation funds, ensuring they remain financially sound and can meet obligations to policyholders.

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