There is an important distinction under Australian law between services that constitute the provision of banking services and services that constitute the provision of financial services. While there is often a degree of overlap in the services that regulated entities provide, the distinction is relevant for determining the nature and scope of any licenses or authorizations that may be required.
Any entity that wishes to carry on a "banking business" within Australia is required to be authorized by APRA as an ADI.
As defined in s 5(1) of the Banking Act, "banking business" means both the taking of money on deposit (other than as part payment for identified goods or services) and the making of advances of money or other financial activities prescribed by regulations. Both elements, or at least the intention to provide both elements, are necessary to establish a banking business.
The Banking Regulations 1966 (Cth) expanded the definition of "banking business" to include, in certain circumstances, the provision of a purchased payment facility and the activities of credit card acquiring and issuing.
Other banking activities include the acceptance and discounting of local bills of exchange, as well as foreign exchange dealings both in bills of exchange and in other financial instruments — though the lending of funds is typically characterized as a bank's principal business.
Any person or entity that is carrying out a financial services business in Australia is required to hold an Australian Financial Services Licence (AFSL), which covers the provision of those financial services unless a relevant exemption applies. ASIC is the body responsible for issuing AFSLs and supervising the conduct of AFSL holders.
"Financial services" is defined in the Corporations Act and includes providing financial product advice, dealing in a financial product, making a market for a financial product, operating a registered managed investment scheme (i.e., collective investment vehicle), providing a custodial or depository service, and providing traditional trustee company services. "Financial product" is also defined within the Corporations Act as a facility through which a person makes a financial investment, manages financial risk or makes non-cash payments. Specific examples of things that will be deemed to be financial products for the purposes of the Corporations Act include securities, interests in a managed investment scheme, derivatives, debentures, bonds, foreign exchange contracts and margin lending facilities. ASIC has also released guidance through its updated information sheet (INFO 225) to provide greater clarity regarding its position with respect to initial coin offerings and crypto-assets compliance. A detailed case-by-case analysis is required to determine whether/how a specific crypto-asset may be regulated.
Any person or entity that is carrying out activities relating to a type of credit or consumer lease to which the National Credit Code applies and that is an activity specified in the National Consumer Credit Protection Act 2010 (Cth) must obtain an Australian Credit Licence (ACL).
It is important to note that the National Credit Code only applies to circumstances where a debtor is a natural person or a strata corporation.
The registration requirements administered by AUSTRAC for AML/CTF purposes need to be considered separately to the question of whether or not a proposed service or product constitutes a banking business, a financial service or product, or a credit activity requiring licensing. Following the passage of the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017 in December 2017, the application of Australia's AML/CTF requirements were significantly expanded to also capture, among other activities, digital currency exchange service providers. Care needs to be taken in this area as AUSTRAC registration may still be required even if the activities are not otherwise regulated.
There have been significant changes to the Australian AML/CTF framework in 2021, including important updates to the tipping off provisions relevant to multinational entities, new provisions for reliance on KYC carried out by third parties (including a safe harbor provision), and changes to the correspondent banking provisions (amongst other things).