Insolvency compliance program 2020–21

In the 2020-21 financial year, AFSA will focus on the following five areas in its compliance program. These areas have been identified following an evaluation of information and data available to AFSA, as well as through consultation with the profession.

Support and protect the financially vulnerable

Why this is important

When people are financially distressed, they may not be in a position to make the most appropriate decision for their circumstances. It is important they can speak to someone they can trust. 

How we will achieve this

We will support and protect the financially vulnerable by:

  • Ensuring that the right information is accessible at the right time through AFSA website content, the use of media releases, campaigns, practice statements, and social media. 
  • Disrupting untrustworthy advice that risks the integrity and security of the personal insolvency system.
  • Better understanding what people go through when they are in financial difficulty with a view to improving the guidance we provide. 
  • Scrutinising bankruptcy and debt agreement applications for indicators of potential undue hardship and contacting applicants to discuss their circumstances.
  • Connecting people with other agencies for a more holistic approach.  

Implications of COVID-19

  • Using data, information and environmental scanning, we will ensure the guidance and information we provide is directed at those hit hardest by the pandemic.

What do we mean by ‘untrustworthy advice’?

In short, dodgy advice. For example:

An advisor charging a fee for service to a debtor (the person who owes money) to place a fraudulent mortgage over a property, in an attempt to prevent that asset (often a house) from being available to creditors (those who are owed money).  

This is just one example, for more information visit afsa.gov.au/untrustworthyadvice

Fair pay for necessary work

Why this is important

When a person enters into a formal insolvency appointment, the insolvency practitioner (IP) has a priority to be paid for the services they provide. IP remuneration also has a direct impact on both creditors and the person who has become bankrupt in terms of potential returns and bankruptcy discharge.  IPs have an entitlement to reasonable remuneration for necessary work that is carried out properly, which is why it is important to achieve the right balance for all parties.  

How we will achieve this

We will achieve this by:

  • Continuing to be firm and fair in the use of our regulatory powers in appropriate cases to address overcharging and over-servicing by IPs.
  • Using data to be proactive in offering IPs the option of using Official Receiver notices to support the efficient administration of estates.
  • Promoting a professional culture through an agreed Statement of Principles focused on trust, competence, impartiality, compliance, respect and ethics. 
  • Influencing behavioural change in the way IPs charge time to administrations.

Implications of COVID-19

  • We will endeavour to ensure that the COVID-19 crisis is not inappropriately used as a reason for delays in administrations, investigations or increased service fees.

Everyone plays a part

Why this is important

A collaborative form of regulation will place us in the best position to address risks and potential harms in the industry.

How we will achieve this

We will achieve this by:

  • Continuing to foster engagement with all stakeholders, to share information and gather facts and intelligence.
  • Being intelligence-led and risk-based in addressing identified harms.
  • Leveraging all our regulatory and non-regulatory tools to ensure our capabilities are focused, efficient and effective.
  • Collaborating with other regulatory agencies in a holistic approach to disrupt bad behaviours.
  • Enhancing the role of the Official Trustee in administering matters that serve the public interest.
  • Undertaking a creditor engagement campaign, which includes:
    • Assisting creditors through increased transparency and accessible information
    • Improved tip-off process
    • Greater contact with Petitioning Creditors to obtain the most recent contact details and any other relevant information about the person who has gone bankrupt to support improved Statement of Affairs filing rates
    • PPSR awareness campaign so creditors are aware of options to secure their debt – and to act appropriately to ensure it does not expire
  • Listen to all stakeholders to advance and improve the way we undertake our work
  • Improving our service design and digital offers to improve upfront compliance by making the system easier to navigate.

Implications of COVID-19

  • Multi-disciplinary working groups are assembled and disassembled as required to address threats and harms caused by the pandemic, including through updating published information.

Professional conduct and competence          

Why this is important

Those in financial difficulty rely on insolvency practitioners to provide high quality services and trusted advice. They also expect to be treated with courtesy and respect.

How we will achieve this

We will achieve this by:

  • Requiring practitioners to confirm that monies they hold in trust for others are protected and secure.
  • Providing enduring resources including information sheets, webinars, practice statements and newsletter articles to address frequently asked questions from IPs.
  • Encouraging self-regulation and breach reporting under industry Codes of Professional Practice.
  • Monitoring new standards for IPs introduced under law reform.
  • Providing guidance for practitioner registration applicants to better understand the required standards to be a registered practitioner.

Implications of COVID-19

  • Reasonably and appropriately maintain regulatory oversight in monitoring law reform and new standards, particularly those attributed to the COVID-19 pandemic. 

Consequences for non-compliance

Why this is important

The community, and in particular those who suffer financial loss due to the fraudulence or incompetence of others, expect those responsible will be held to account and that strong regulatory action is taken. 

How we will achieve this

We will achieve this by:

  • Co-operating with other regulators and utilising the full range of the Inspector-General and Official Receiver powers to address non-compliance.
  • Being intelligence-led and risk-based in targeting alleged breaches of the legislation or regulations. We will take any necessary and appropriate enforcement and prosecution action against those who recklessly or intentionally seek to defeat or defraud their statutory obligations or misuse the PPSR, including debtors, bankrupts, IPs and anyone providing untrustworthy advice. 
  • Publishing and publicising enforcement outcomes that are in the public interest.

Implications of COVID-19

  • We will focus on areas of the greatest potential harm, particularly debtors who have been severely affected by the pandemic and are being targeted and treated unfairly by those providing untrustworthy advice.
  • Due to the potential of increased financial hardship, closely monitor trust monies for compliance and any misuse.

Want to know more?

For more information visit www.afsa.gov.au to review our practice statements and regulatory processes.

We welcome your feedback in the AFSA sandpit.