ICLG

The International Comparative Legal Guide to: Fintech 2019

3rd Edition A practical cross-border insight into fintech law

Published by Global Legal Group, with contributions from:

A&L Goodbody Gilbert + Tobin QUORUS GmbH AEI Legal LLC Gleiss Lutz Schoenherr Anderson Mōri & Tomotsune Goldfarb Seligman & Co. Shearman & Sterling LLP Anjarwalla & Khanna Gorriceta Africa Cauton & Saavedra Shearn Delamore & Co. Appleby Gorrissen Federspiel Silk Legal Co., Ltd. BAHR GVZH Advocates Slaughter and May Bär & Karrer Hajji & Associés Stanford Law School BBA Hudson Gavin Martin The Blockchain Boutique BonelliErede Kim & Chang Traple Konarski Podrecki & Partners Bonn Steichen & Partners König Rebholz Zechberger Attorneys at Law Triay & Triay Bredin Prat Lee and Li, Attorneys-at-Law Trilegal De Brauw Blackstone Westbroek Llinks Law Offices Udo Udoma & Belo-Osagie Democritos Aristidou LLC Lloreda Camacho & Co Uría Menéndez ENSafrica Mannheimer Swartling Uría Menéndez – Proença de Carvalho Erciyas Law Office Mattos Filho, Veiga Filho, Marrey Jr e Vodanovic Legal Evris Law Firm Quiroga Advogados Walalangi & Partners (in association FINREG PARTNERS McMillan LLP with Nishimura & Asahi) Galicia Abogados, S.C. PFR Attorneys-at-law Walkers Bermuda The International Comparative Legal Guide to: Fintech 2019

General Chapters:

1 Artificial Intelligence in Fintech – Rob Sumroy & Ben Kingsley, Slaughter and May 1

2 Cross-Border Financing of Fintech: A Comparison of Venture and Growth Fintech Financing Trends in Europe and the United States – Jonathan Cardenas, Stanford Law School 7

Contributing Editors Country Question and Answer Chapters: Rob Sumroy and Ben Kingsley, Slaughter and May 3 Australia Gilbert + Tobin: Peter Reeves 14

Publisher 4 Austria PFR Attorneys-at-law: Bernd Fletzberger 21 Rory Smith Sales Director 5 Bermuda Walkers Bermuda: Natalie Neto & Rachel Nightingale 26 Florjan Osmani 6 Brazil Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados: Account Director Larissa Lancha Alves de Oliveira Arruy & Fabio Ferreira Kujawski 31 Oliver Smith 7 Canada McMillan LLP: Pat Forgione & Anthony Pallotta 37 Senior Editors Caroline Collingwood 8 Cayman Islands Appleby: Peter Colegate & Anna-Lise Wisdom 44 Rachel Williams Sub Editor 9 China Llinks Law Offices: David Pan & Xun Yang 49 Amy Norton 10 Colombia Lloreda Camacho & Co: Santiago Gutierrez & Juan Sebastián Peredo 55 Group Consulting Editor Alan Falach 11 Cyprus Democritos Aristidou LLC: Christiana Aristidou 60 Published by 12 FINREG PARTNERS: Ondřej Mikula & Jan Šovar 67 Global Legal Group Ltd. 59 Tanner Street 13 Denmark Gorrissen Federspiel: Morten Nybom Bethe & Tue Goldschmieding 72 London SE1 3PL, UK Tel: +44 20 7367 0720 14 France Bredin Prat: Bena Mara & Vincent Langenbach 78 Fax: +44 20 7407 5255 Email: [email protected] 15 Germany Gleiss Lutz: Dr. Stefan Weidert & Dr. Martin Viciano Gofferje 85 URL: www.glgroup.co.uk 16 Gibraltar Triay & Triay: Javi Triay & Jay Gomez 91 GLG Cover Design F&F Studio Design 17 Hong Kong Slaughter and May: Benita Yu & Jason Webber 97

GLG Cover Image Source 18 Iceland BBA: Stefán Reykjalín & Baldvin Björn Haraldsson 105 iStockphoto Printed by 19 India Trilegal: Kosturi Ghosh & Adhunika Premkumar 112 Stephens & George 20 Indonesia Walalangi & Partners (in association with Nishimura & Asahi): Print Group May 2019 Luky I. Walalangi & Hans Adiputra Kurniawan 119

Copyright © 2019 21 Ireland A&L Goodbody: Claire Morrissey & Peter Walker 124 Global Legal Group Ltd. All rights reserved 22 Israel Goldfarb Seligman & Co.: Ariel Rosenberg & Sharon Gazit 134 No photocopying 23 BonelliErede: Federico Vezzani & Tommaso Faelli 140 ISBN 978-1-912509-70-6 ISSN 2399-9578 24 Japan Anderson Mōri & Tomotsune: Ken Kawai & Kei Sasaki 146

25 Kenya Anjarwalla & Khanna: Sonal Sejpal & Dominic Rebelo 152 Strategic Partners 26 Korea Kim & Chang: Jung Min Lee & Samuel Yim 157

27 Liechtenstein König Rebholz Zechberger Attorneys at Law: Dr. Helene Rebholz & MMag. Degenhard Angerer 164

28 Luxembourg Bonn Steichen & Partners: Pierre-Alexandre Degehet 169

29 Malaysia Shearn Delamore & Co.: Timothy Siaw & Christina Kow 174

PEFC Certified 30 Malta GVZH Advocates: Dr. Andrew J. Zammit & Dr. Kurt Hyzler 181

This product is from sustainably 31 Mexico Galicia Abogados, S.C.: Claudio Kurc & Arturo Portilla 186 managed forests and controlled sources

PEFC/16-33-254 www.pefc.org 32 Morocco Hajji & Associés: Nihma Elgachbour & Ayoub Berdai 192

33 Netherlands De Brauw Blackstone Westbroek: Björn Schep & Willem Röell 197

34 New Zealand Hudson Gavin Martin / The Blockchain Boutique: Andrew Dentice & Rachel Paris 204

Continued Overleaf

Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720

Disclaimer This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.

WWW.ICLG.COM The International Comparative Legal Guide to: Fintech 2019

Country Question and Answer Chapters:

35 Nigeria Udo Udoma & Belo-Osagie: Yinka Edu & Tolulope Osindero 210

36 Norway BAHR: Markus Nilssen & Vanessa Kalvenes 216

37 Peru Vodanovic Legal: Ljubica Vodanovic & Alejandra Huachaca 223

38 Philippines Gorriceta Africa Cauton & Saavedra: Mark S. Gorriceta 229

39 Traple Konarski Podrecki & Partners: Jan Byrski, PhD, Habil. & Karol 234

40 Portugal Uría Menéndez – Proença de Carvalho: Pedro Ferreira Malaquias & Hélder Frias 242

41 Russia QUORUS GmbH: Maxim Mezentsev & Nikita Iovenko 250

42 Singapore AEI Legal LLC: Andrea Chee & Law Zhi Tian 258

43 Schoenherr: Jurij Lampič 265

44 South Africa ENSafrica: Angela Itzikowitz & Ina Meiring 271

45 Spain Uría Menéndez: Leticia López-Lapuente & Isabel Aguilar Alonso 278

46 Sweden Mannheimer Swartling: Anders Bergsten & Martin Pekkari 286

47 Switzerland Bär & Karrer: Dr. Daniel Flühmann & Dr. Peter Ch. Hsu 292

48 Taiwan Lee and Li, Attorneys-at-Law: Robin Chang & K. J. Li 300

49 Thailand Silk Legal Co., Ltd.: Dr. Jason Corbett & Don Sornumpol 306

50 Turkey Erciyas Law Office: Nihat Erciyas & Miraç Arda Erciyas 311

51 Evris Law Firm: Sergii Papernyk & Alexander Molotai 317

52 United Kingdom Slaughter and May: Rob Sumroy & Ben Kingsley 322

53 USA Shearman & Sterling LLP: Reena Agrawal Sahni & Eli Kozminsky 329

EDITORIAL

Welcome to the third edition of The International Comparative Legal Guide to: Fintech. This guide provides corporate counsel and international practitioners with a comprehensive worldwide legal analysis of the laws and regulations of fintech. It is divided into two main sections: Two general chapters. These chapters provide an overview of artificial intelligence in fintech, and of the recent trends and challenges in the financing of cross-border fintech start-ups. Country question and answer chapters. These provide a broad overview of common issues in fintech laws and regulations in 51 jurisdictions. All chapters are written by leading fintech lawyers and industry specialists and we are extremely grateful for their excellent contributions. Special thanks are reserved for the contributing editors Rob Sumroy and Ben Kingsley of Slaughter and May for their invaluable assistance. Global Legal Group hopes that you find this guide practical and interesting. The International Comparative Legal Guide series is also available online at www.iclg.com.

Alan Falach LL.M. Group Consulting Editor Global Legal Group [email protected] Chapter 3 Australia

Gilbert + Tobin Peter Reeves

1 The Fintech Landscape such as managing supply chains, making cross-border payments, trading derivatives, managing assets and digital currency exchanges. Notably, the Australian Securities Exchange (ASX) is progressing 1.1 Please describe the types of fintech businesses that with its plans to adopt a blockchain-based technology for its clearing are active in your jurisdiction and any notable fintech and settlement process to replace its current system. The ASX is innovation trends of the past year within particular currently conducting internal analysis and testing of the technology sub-sectors (e.g. payments, asset management, peer- which is set to conclude at the end of August 2020, with the to-peer lending or investment, insurance and implementation of the new system scheduled for March 2021. blockchain applications).

Australia has seen a continued proliferation of active fintech 1.2 Are there any types of fintech business that are at present prohibited or restricted in your jurisdiction businesses over the past year. (for example cryptocurrency-based businesses)? Investments in insurance technology have grown, with companies and fintechs increasing their focus on forging cross-sector alliances At the time of writing, there have not been any prohibitions or in order to embed their offerings into other value propositions. The restrictions on specific fintech business types. Cryptocurrency-based increase in partnerships and alliances between insurance fintechs businesses are permitted in Australia, provided such businesses and incumbents with established customer bases will be particularly comply with applicable laws (including financial services and effective for insurance start-ups to fuel expansion. consumer laws). The growing cost of compliance has pushed many companies to invest in regulatory technology, or regtech, particularly in areas including artificial intelligence (AI), customer due diligence (e.g., 2 Funding For Fintech ‘know-your-customer’) and data breach monitoring (e.g., ‘know- your-data’). 2.1 Broadly, what types of funding are available for new In May 2018, the Australian Prudential Regulation Authority (APRA) and growing businesses in your jurisdiction (covering granted its first restricted authorised deposit-taking institution (ADI) both equity and debt)? licence, which is designed to facilitate new businesses entering the banking industry. Equity Funding There has also been a steady increase in Australian consumers’ Businesses can raise equity using traditional private and public preference of electronic payment methods over cash payments and, fundraising methods (e.g., private placement; initial public offering; subsequently, a rise in the establishment of non-cash payment seed and venture capital strategies), through grants and initiatives platforms and solutions aimed at maximising cost and time offered by Government and State/Territory agencies, and through efficiencies and improving consumer experience. The New crowdfunding. Payments Platform (NPP) was launched in Australia in February In late 2017, a regulatory framework was introduced for crowd- 2018 as the result of industry-wide collaboration between Australia’s sourced equity funding (CSEF) by public companies from retail largest banks and financial institutions as well as Australia’s central investors. While reducing the regulatory barriers to investing in bank, the Reserve Bank of Australia (RBA). The NPP is a payments small and start-up businesses, the framework also created certain infrastructure that enables Australian consumers, businesses and licensing and disclosure obligations for CSEF intermediaries (i.e., government agencies to make real-time, data-rich payments between persons listing CSEF offers for public companies). accounts with participating financial institutions. Over time, the Under the CSEF framework, there are exemptions for persons NPP is expected to replace a significant portion of direct payments operating markets and clearing and settlement facilities from the made between consumers’ bank accounts, particularly those which licensing regimes that would otherwise be applicable to those are time-critical or benefit from additional data capabilities. facilities. These additional exemptions provide a means by which a Further, there has been sustained attention on blockchain technology, person operating a platform for secondary trading can seek an and a growth in interest in the technology by established businesses. exemption with tailored conditions from more onerous licensing Fintech businesses have begun moving beyond the proof-of-concept requirements. stage to formalising actual use cases for distributed ledger technology

14 WWW.ICLG.COM ICLG TO: FINTECH 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London © Published andreproduced with kindpermission byGlobal Legal Group Ltd, London funding forblockchainorcryptocurrency-relatedprojects,where Over thepasttwoyears,ICOshavebecomeapopularmethodof Initial CoinOfferings (ICOs)andSecurityToken Offerings (STOs) finance companiesinrelationtodebtfinance. however, businessescanapproachfinancialinstitutions,suppliersand less commonthanequityfinancinginthe Australian fintechsector; previously indicateditintendstoconsultonthis.Debtfinancingis to debtfunding,andthe Australian Government( There havebeencallstoextendtheexistingcrowdfundingframework Debt Funding and intermediariesseekingtoprovideCSEFservices,respectively. and 262toassistcompaniesseekingraisefundsthroughCSEF Australia’s corporateregulator, hasreleasedRegulatoryGuides261 The Australian SecuritiesandInvestmentsCommission( would otherwiseapplytotheirfundraisingactivities. are alsoanumberofconcessionsmadewithrespecttorestrictionsthat imposed onproprietarycompaniesengagingincrowdfunding,there companies. While therearearangeofreportingrequirements which furtherextendedtheCSEFregimetoalsoapplyproprietary Funding forProprietary Companies) Act 2018 On 19October2018,the Gilbert +Tobin ICLG TO: FINTECH2019 economies, toinvestors inotherPassportmembereconomies. Itaims collective investmentschemes( initiative designedtofacilitatethe offer ofinterestsin certain Region FundsPassport( Region FundsPassport)Bill2018 In 2018,theGovernmentpassed Vehicles Asia RegionFundsPassportandCorporateCollectiveInvestment such offerings. there ispotentialmisleadinganddeceptiveconductassociatedwith Consumer Commission( received adelegationofpowerfromthe Australian Competitionand relation totheoffer ofservicesorproducts.InMay2018, ASIC includes ageneralprohibitiononmisleadingordeceptiveconductin and STOs willbesubjecttothe Regardless ofwhetheratokenconstitutesfinancialproduct,ICOs applicable toanoffer ofregulatedproducts. applicable licensing,registrationanddisclosurerequirements represented inadigitalform)andthereforecomplywithall companies willknowinglyoffer financialproducts(usually regulatory frameworkbymeansofanSTO. This iswhere a growingtrendforofferors topre-emptivelystepintothe rounds willbeconsideredanoffering ofafinancialproduct,thereis Given thelikelihoodthatmanycryptocurrency-relatedfunding case wheretherelevanttokensconstitutefinancialproducts. exchange mayrequirean Australian marketlicence( services licence( a marketmakermayalsoberequiredtoholdan Australian financial facilities). A companyparticipatinginacryptocurrencyexchangeas investment schemes,securities,derivativesornon-cashpayment tokens representfinancialproducts(e.g.,interestsinmanaged trigger licensing,registrationanddisclosurerequirementsifthe tokens offered intheICO. Tokens offered duringtheICOmay on theICO’s structure,operation,andtherightsattachedto Generally, ASIC hasindicatedthatthelegalstatusofanICOdepends Australia oroverseas. regardless ofwhethertheICOwascreatedandoffered from to ICOs.EntitiesshouldnotethattheCorporations Act mayapply application ofthe updated its token issuersoffer tokens in returnforfunds.InMay2018, ASIC

INFO 225Initialcoinofferings

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2.2 lead tonewfinancingopportunitiesforfintechbusinesses. laws. However, theenactmentofPassportandCCIV may the far-reaching potentialchangestocorporate,partnershipandtax There areconcernsthatthereformswilladdextracomplexity, given marketed toforeigninvestors(includingthroughthePassport). recognised investmentvehiclewhichwillbeabletomorereadily Asia-Pacific region. The CCIV willprovideaninternationally limited partnershipinvestmentvehiclesarethenormthroughout that isunfamiliartomanyoffshore economieswherecorporateand The Australian fundsmarketisdominatedbyunittrusts,astructure making Australian fundsmoreaccessibletoforeigninvestors. a companystructure.ItisintendedtocomplementthePassportby fund managerstopursueoverseasinvestmentopportunitiesthrough creates anewtypeofinvestmentvehicle,whichwillallow Australian Collective Investment Vehicle ( implementation arebeingenteredintoinrelationtotheCorporate At thetimeofwriting,finalstagesconsultationand hurdles. to economiesinthe Asia-Pacific regionbyreducingregulatory to provide Australian fundmanagersandoperatorswithgreateraccess (b) (a) for: by fintechs.ClaimantsundertheR&D Tax Incentivemaybeeligible which includescertainsoftwareR&Dactivitiescommonlyconducted available forentitiesincurringeligibleexpenditureonR&Dactivities, The Research&Development(R&D) Tax Incentiveprogrammeis Incentives forfintechs non-refundable taxoffset fornewcapitalinvestedintheESVCLP. resident andnon-residentinvestors,plusinvestorsobtaina10% ESVCLPs, theincometaxexemptionfor VCLPs isextendedtoboth treatment ofthefundmanager’s carriedinterestinthe VCLP. For made ondisposaloftheinvestmentby VCLP, andconcessional (limited partners)ontheirshareofanyrevenueorcapitalgains For VCLPs, benefitsincludetaxexemptionsforforeigninvestors (2) (1) Incentives forinvestors

enterprise investmentorventurecapitalinvestment? your jurisdiction,e.g.taxincentiveschemesfor small/medium-sized businessesmoregenerally, in investment intech/fintechbusinesses,or Are thereanyspecialincentiveschemesfor eligible expenditure over AUD 100million. eligible expenditurebelow AUD 100 millionand30%for Other businesses turnover) Small businesses(lessthan AUD 20millionaggregated investments. favourable taxtreatmentforeligibleventurecapital capital limitedpartnerships( capital limitedpartnerships( Fintech investmentvehiclesmaybestructuredasventure Eligible venture capitallimited partnerships the investment. year taxexemptiononanycapitalgainsarisingdisposalof carried forwardfromtheprioryear’s investment)anda10- (capped at AUD 200,000perinvestor, includinganyoffsets generally qualifyfora20%non-refundabletaxoffset Investments oflessthan30%theequityinanESICwould with lowincomeandexpenses. ( start-ups knownasEarlyStageInnovationCompanies Incentives areavailableforeligibleinvestmentsmadein Early stageinnovationcompanyincentives ESICs

), whicharegenerallynewlyincorporatedentities : a43.5%refundabletaxoffset.

: a38.5%non-refundabletaxoffset for CCIV VCLPs ) scheme. The CCIV scheme

ESVCLPs WWW.ICLG.COM ) orearlystageventure

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15 Australia 16 Australia © Published andreproduced with kindpermission byGlobal Legal Group Ltd, London that engageorcontract withconsumers.Obligations includea The licence orotherwisebeexempt. other, theentitymustholdaclearingandsettlement ( parties transactinginfinancialproducts tomeetobligationseach entity operatesaclearingandsettlement mechanismwhichenables products areregularlymadeandaccepted(e.g.,anexchange).If operate afacilitythroughwhichoffers tobuyandsellfinancial Fintech businessesmayalsoneedtoholdan AML wherethey to relyonanexemption. requirement toholdan Australian creditlicence( generally constituteconsumercreditactivitiesandtriggerthe exemption. Similarly, engaginginpeer-to-peer lending activitieswill triggering therequirementtoholdan AFSL orbe entitled torelyonan (including robo-advice),tradingplatform,andcrowdfunding payment service(e.g.,non-cashfacility),advisorybusiness will generallycaptureanyinvestmentorwealthmanagementbusiness, definitions of business in Australia orengageinconsumercreditactivities. The Licensing obligationsapplytoentitiesthatcarryonafinancialservices money launderingandcounter-terrorism financingrequirements. and disclosureobligations,consumerlawrequirementsanti- includes financialservicesandconsumercreditlicensing,registration Broadly, theregulatoryframeworkthatappliestofintechbusinesses 3.1 of thebiggestexitsbyafintechstart-upin Australia. and monitorscustomerinteraction. The transactionrepresentedone platform whichenablesinstitutionstolaunchnewdigitalproducts services tofinancialinstitutions,offering asoftware-as-a-service is aleading Australian-based providerofcustomeracquisition banking softwarecompany, Temenos, for AUD 339million. Avoka In 2018, Avoka Technologies ( 2.4 which mayresultinthestreamliningoflistingrequirements. At thetimeofwriting, ASX isundertakingaconsultationprocess requires particularfinancialthresholdstobemet). the entitysatisfyingeitherprofittestorassets(which security holderseachholdingthevalueofatleast AUD 2,000,and Briefly, theseincludetheentityhavingatleast300non-affiliated The ASX setsout20conditionstobesatisfiedinitsListingRules. 2.3 changes areyettobeenacted. expenditure. At thetimeofwriting,lawsestablishingthese eligible R&Dexpenditureasapercentageoftotalbusiness available tolarge businesses,basedontheproportionoftheir an “incrementalintensitythreshold”thatwillincreasethetaxoffset 2018. The majorchangeisexpectedtoincludetheintroductionof programme wereannouncedaspartoftheFederalBudgeton8May It shouldbenotedthatsignificantchangestotheR&D Tax Incentive Gilbert +Tobin WWW.ICLG.COM 3 Australian ConsumerLaw business toIPOinyourjurisdiction? In brief,whatconditionsneedtobesatisfiedfora and thetypeoffintechactivitiesthatareregulated. for fintechbusinessesoperatinginyourjurisdiction, Please brieflydescribetheregulatoryframework(s) Fintech Regulation jurisdiction? IPO) bythefoundersoffintechbusinessesinyour Have therebeenanynotableexits(saleofbusinessor financial service

and

appliestoall Australian businesses

Avoka

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3.3 question 4.5. terrorism financing( Australia isinrelationtoanti-moneylaunderingandcounter- Currently, theonlyformalmonitoringofcryptocurrencyactivityin regulatory framework. has revolvedarounditsapplicationtotheestablishedfinancialservices Generally, thepredominantfocusonregulationofcryptocurrencies implemented tospecificallyregulatecryptocurrenciesorcryptoassets. At thetimeofwriting,therearenolawsin Australia thathavebeen 3.2 Analysis Centre( include enrolmentwiththe Australian Transaction Reportsand or credit(consumerbusiness)activitiesin Australia. Obligations AML/CTF Act appliestoanyentitythatengagesinfinancialservices “designated services”withan Australian connection.Generally, the 2006 The contract termsinrelationtotheoffer ofservicesorproducts. misleading representations,unconscionableconductandunfair general prohibitiononmisleadinganddeceptiveconduct,falseor fintech companiesandsharinginsights fromproofsofconceptsand information onfintechmarkettrends, encouragingreferralsof with overseasregulatorsunderwhich thereisacross-sharingof ASIC hasalsoenteredintoanumber ofcooperationagreements with Governmentandregulators. terrorism-financing andimproving thefintechsector’s relationship Innovation Hubtargeted atcombattingmoney-launderingand Australian regulatoryregime. AUSTRAC’s Fintel Alliance hasan established InnovationHubstoassiststart-upsinnavigatingthe enhance regulatoryunderstanding.Both ASIC and AUSTRAC have broadly bystreamliningaccessandoffering informalguidanceto Regulators havealsocommittedtohelpingfintechbusinessesmore products orserviceswhichcanbeprovided. financial productorserviceandcapsonthevalueof there arerestrictionsonhowmanypersonscanbeprovidedwitha exemption. Onceafintechbusinessaccessestheregulatorysandbox, and theproductsservicesthatqualifyforlicensing for boththetypeofbusinesseswhocanenterregulatorysandbox as theregulatorysandbox). There arestricteligibilityrequirements holding an AFSL or ACL byrelyingontheclassorders(referredto financial services,productsandcreditactivitieswithout which details ASIC’s frameworkforfintechbusinessestotestcertain fintech licensingexemptionandreleased In December2016, ASIC madecertainclassordersestablishinga entering themarket. regulators inordertosupporttechnologically-focussedstart-ups delivery. However, furtherconcessionshavebeenmadeby services willberegulatedequally, irrespectiveofthemethod regulatory regimeadoptsatechnology-neutralapproach,whereby fintechs andtechnology-focussedbusinesses. The financialservices Regulators in Australia havebeenreceptivetotheentranceof Anti-money LaunderingandCounter-terrorism Financing Act (Cth)( jurisdiction receptivetofintechinnovationand Are financialregulatorsandpolicy-makersinyour directed atcryptocurrenciesorcryptoassets? Is thereanyregulationinyourjurisdictionspecifically fintechs inyourjurisdiction? Are thereanyregulatory‘sandbox’ optionsfor services markets,andifsohowisthismanifested? technology-driven newentrantstoregulatedfinancial

AML/CTF Act AUSTRAC

AML/CTF

), reportingandcustomerduediligence. ) appliestoentitiesthatprovide ), discussedinfurtherdetail

ICLG TO: FINTECH2019

Regulatory Guide257

Australia

,

© Published andreproduced with kindpermission byGlobal Legal Group Ltd, London type of Australian investorstargeted. presence, thetypesoffinancialproductsandservicesprovided, by theextenttowhichproviderwishesestablishan Australian AML/CTF regime.Broadly, theseregulatoryhurdlesaredetermined rely onanexemptiontosuchrequirements),andcomplyingwiththe or engaginginconsumercreditactivities Australia (orqualifyingto registration anddisclosurerequirementsifprovidingfinancialservices registering abranchoffice), satisfyingapplicablelicensing, in Australia (generallysatisfiedbyincorporatingalocalsubsidiaryor customers includeregisteringwith ASIC inordertocarryonabusiness Regulatory hurdlestoovercomeinorderaccess Australian 3.4 the treatmentofthesebusinessesacrossjurisdictions. fintech businessesinotherjurisdictions,anattempttobetteralign agreements tofurtherunderstandtheapproachregulationof innovation competitions.Itisalsotheintentionofanumberthese Gilbert +Tobin ICLG TO: FINTECH2019 Availability andUse,theGovernment willbeimplementingthe In responsetotheProductivity Commissions’ report onData Consumer datarightandaccess categories ofpersonalinformation. that thePrivacy Act requirestotake stepstosecurecertain individuals. The NDBschemeappliestoagenciesandorganisations information) whichislikelyto result inseriousharmtothose event ofadatabreach(i.e.,unauthorisedaccesstoordisclosure Office ofthe Australian Information Commissioner( Privacy Act arerequiredtonotifyanyaffected individualsandthe 2018. The NDBschememandatesthatentitiesregulatedunderthe The NotifiableDataBreaches( retention anddestructionofpersonalinformation. which imposeobligationsonthecollection,use,disclosure, The Privacy Act includes13 Australian PrivacyPrinciples( regardless ofturnover. to businesses(e.g.,creditprovidersandreportingbodies) least AUD 3million.Insomeinstances,thePrivacy Act willapply private sectororganisations withanaggregategrouprevenueofat handling ofpersonalinformationbyGovernmentagenciesand the In Australia, The Privacy Act 4.1 new regimewillapplyfrom30September2019. requiring FFSPstoapplyforaforeign AFSL. Itisexpectedthatthe limited connectionrelief,andinsteadwillimplementanewregime recently announcedthatitwillberepealingthepassportreliefand relief fromtherequirementtoholdan AFSL. However, ASIC Australia byrelyingon ASIC’s “passport”or“limitedconnection” ( It hasbeencommonforforeignfinancialservicesproviders FFSPs 4 collection/use/transmission ofpersonaldata,andif Does yourjurisdictionregulatethe Non-Financial Regulation Other RegulatoryRegimes/ new customersinyourjurisdiction? outside yourjurisdictionovercomeinordertoaccess fintech productsandservices)whichareestablished businesses (orfinancialservicesoffering What, ifany, regulatoryhurdlesmustfintech in yourjurisdiction? how doesthisapplytofintechbusinessesoperating yes, whatisthelegalbasisforsuchregulationand ) toprovidefinancialserviceswholesaleclientsin

Privacy Act 1988 Privacy Act

NDB (Cth)(

) schemewasintroducedin Privacy Act

) regulatesthe OAIC

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collects personalinformationin Australia. citizen ororganisation) or carriesonabusinessin Australia and is an“Australianlink”(i.e.,wheretheorganisation isan Australian undertaken outside Australia anditsexternalterritorieswherethere The Privacy Act hasextraterritorialoperationandextendstoacts 4.2 EU. practices of Australian businessesoffering goodsandservicesinthe territorial reachandmaysignificantlyimpactthedatahandling General DataProtectionRegulationhasextremelybroadextra- Additionally, itisworthnotingthattheEuropeanUnion( Banking regimeisslatedtocommenceinFebruary2020. aggregated data,andmorepersonalisedofferings. The Open enhancement ofcustomerexperiencebasedonpersonaland intended tofacilitateeasierswappingofserviceproviders, control overtheirbankingdata. These sharingarrangementsare whereby consumerswillbeabletoexercisegreateraccessand applied tothebankingsectorunder“OpenBanking”regime, competition withinthemarket. The CDRframeworkwillfirstbe parties), encouragingtheflowofinformationineconomyand providers (includingbanks,comparisonservices,fintechsorthird customers arighttosharetheirdatawithaccreditedservice national consumerdataright( examined andprovided examplesofgoodpractices identified across of firmsin Australia’s financial market Cyber Resilience–HealthCheckand Report555:Cyberresilience ASIC providesguidanceregarding cybersecurityin resilience, includingreports,articles andpracticeguides. provides anumberofresourcesto helpfirmsimprovetheircyber financial services,products andnewtechnologies. ASIC the rapidinnovationinfintechspaceandinterplaybetween Cyber securityregulationhasbeenakeyfocusofregulatorsgiven 4.4 ■ ■ ■ ■ ■ occurred, including: enforcement powerstouseincaseswhereaprivacybreachhas The Privacy Act confersontheOAICavarietyofinvestigativeand 4.3 information fortheprimarypurposewhichitwascollected. mishandles theinformation. The APP entitymustalsoonlydisclose the APPs, andthe APP entityisaccountableiftheoverseasrecipient overseas recipientshandlepersonalinformationinaccordancewith information, APP entitiesmusttakereasonablestepstoensurethat Under theframeworkforcross-borderdisclosureofpersonal

privacy lawsrestrictinternationaltransfersofdata? established outsideofyourjurisdiction?Dodata Do yourdataprivacylawsapplytoorganisations operating inyourjurisdiction? regulations thatmayapplytofintechbusinesses Does yourjurisdictionhavecybersecuritylawsor and upto AUD 2.1millionforbodiescorporate. seeking civilpenaltiesofupto AUD 420,000forindividuals seeking aninjunction;and enforceable undertakings; access ortheissuanceofanapology; compensation orotherremedies,suchastheprovisionof the powertomakeadeterminationrequiringpaymentof the OAIC’s owninitiative; the powertoinvestigateamatterfollowingcomplaintoron failing tocomplywithyourdataprivacylaws. Please brieflydescribethesanctionsthatapplyfor

CDR

) frameworkwhichwillgive . Inthesereports, ASIC has

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17 Australia 18 Australia © Published andreproduced with kindpermission byGlobal Legal Group Ltd, London misleading representations,unconscionable conductandunfair includes prohibitionsonmisleading anddeceptiveconduct,falseor Competition andConsumerCommission ( Australian ConsumerLaw Fintech businessesarealsosubject totheprohibitionslaidoutin without restrictionsunderthe been grantedafull ADI licencewhichallowsittooperateasan ADI and asofJanuary2019,thefirstRestricted ADI licenseehasnow question 1.1, APRA grantedthefirstRestricted ADI licencein2018 transition toafull ADI licenceorexittheindustry. As statedin their capabilitiesandresources. After twoyears,theymusteither limited rangeofbankingactivitiesfortwoyearswhiletheybuild allows newbusinessesenteringthebankingindustrytoconducta Recently, APRA releasedtheRestricted ADI framework,which services) ormakingadvancesofmoney, mustbelicencedasan ADI. deposits (otherthanaspart-paymentforidentifiedgoodsor An entitythatconductsany“bankingbusiness”,suchastaking 4.6 for uptosevenyears. certain recordsrelatingtocustomeridentificationandtransactions both) forfailingtoregister. Exchangeoperatorsarerequiredtokeep of uptotwoyears’ imprisonmentorafineofupto AUD 105,000(or AML/CTF Act, andmustregisterwith AUSTRAC orfaceapenalty Digital currencyexchangeprovidersalsohaveobligationsunderthe ■ ■ ■ ■ services. Obligationsincludeto: lending businessestypicallyinvolvetheprovisionofdesignated have obligationsunderthe AML/CTF Act asfinancialservices,and services” withan Australian connection.Fintechbusinesswilloften The AML/CTF Act appliestoentitiesthatprovide“designated 4.5 2011Legislation AmendmentAct Australia’s accessionwasreflectedinthepassingof international cybercrimecooperationbetweensignatorystates. constitutes acriminaloffence incyberspaceandstreamlines Cybercrime (theBudapestConvention),whichcodifieswhat Australia hasratifiedtheCouncilofEuropeConventionon governments andbusinessesintheprivatesector. Beyondthis, an evaluationframeworkforCommonwealth,Stateand Territory drafted nationalcybersecurityexerciseprogrammeguidelinesand Australia –thenationalcomputeremergency responseteam–has As partoftheGovernment’s CyberSecurityStrategy, CERT which shouldbeputinplacewherecloudcomputingisreliedupon. and nominatedframeworkssetoutrelevantcompliancemeasures advice shouldtesttheirinformationsecurityarrangementsagainst, also setoutthestandardsandframeworkswhichprovidersofdigital considering theircyberresilience. ASIC’s senior managementoffinancialorganisations shouldaskwhen the financialservicesindustryandquestionsboardmembers Gilbert +Tobin WWW.ICLG.COM to fintechbusinessesoperatinginyourjurisdiction? Are thereanyotherregulatoryregimesthatmayapply instructions. a valueof AUD 10,000ormore,andallinternationalfunds occurrence ofasuspiciousmatter, atransferofcurrencywith report annuallyto AUSTRAC andasrequiredonthe adopt andmaintainan AML/CTF programme;and designated services; conduct duediligenceoncustomerspriortoprovidingany enrol with AUSTRAC; your jurisdiction. requirements thatmayapplytofintechbusinessesin Please describeany AML andotherfinancialcrime

, whichisadministeredbythe Australian

Banking Act 1959 Banking Act (Cth).

ACCC Regulatory Guide255 (Cth). ). Broadly, this

Cybercrime

continuous service,althoughtheemployee’s award,employment minimum noticeperiodsdependentontheemployee’s periodof an employeewrittennoticeofthelastdayemployment. There are To terminateanemployee’s employment,anemployerhastogive earnings areguaranteedbywrittenagreementwiththeiremployer. (from 1July2018,thresholdindexedannually),providedtheir do notapplytoemployeesearningoverathresholdof AUD 145,400 top oftheNationalEmploymentStandards.However, modernawards (including professionals)aregovernedbymodernawards,whichsiton minimum termsandconditionsofemploymentformostemployees Fair Work Act 2009 The hiringanddismissalofstaff in Australia isgovernedunderthe 5.1 or throughdelegatedpowers. Australian SecuritiesandInvestmentsCommission Act 2001 enforced by ASIC eitherthroughmirroredprovisionsinthe to financialproductsorservices,manyoftheseprotectionsare contract terms. While the such visas. own eligibilityrequirements.Businesses cannominateorsponsor Affairs ( Migrants requireworkingvisas from theDepartmentofHome 5.3 these provisionsarecontravened. work placediscrimination,withremediesavailabletoemployeesif governing aperson’s workplacerights,freedomofassociationand The Fair Work Act alsohassomegeneralprotectionprovisions information statement. notice ofterminationandredundancypay, andafairwork long serviceleave,sickcompassionatepublicholidays, arrangements, parentalleaveandrelatedentitlements,annualleave, include maximumweeklyhours,requestsforflexibleworking Australia alsohas10NationalEmploymentStandards. These as minimumratesofpayandovertime. set outundermodernawardsandincludetermsconditionssuch Under theFair Work Act, minimumentitlementsforemployeesare 5.2 entitlements suchaspaymentfortimeworkedorannualleave. of termination;however, theemployeemustbepaidalloutstanding For seriousmisconduct,employersdonotneedtoprovideanotice worked untiltheendofnoticeperiod. equal thefullamountemployeewouldhavebeenpaidifthey rather thanworked;however, theamountpaidtoemployeemust set outlongerminimumnoticeperiods.Noticecanbepaid contract, enterpriseagreementorotherregisteredcould 5 businesses? restrictions thatarefrequentlyencounteredby Are thereanyparticularlyonerousrequirementsor the hiringanddismissalofstaffinyourjurisdiction? In broadterms,whatisthelegalframeworkaround Accessing Talent for fintechbusinesses? obtaining permissionforindividualswhowishtowork your jurisdiction?Isthereaspecialroutefor bring employeesfromoutsideyourjurisdictioninto What, ifany, hurdlesmustbusinessesovercometo provided tostaff? What, ifany, mandatoryemploymentbenefits mustbe DOHA

) inordertowork Australia, andeach typehasits (Cth)(

Australian ConsumerLaw

Fair Work Act

ICLG TO: FINTECH2019

). Inrelationtohiring, Australia doesnotapply

(Cth)

© Published andreproduced with kindpermission byGlobal Legal Group Ltd, London months. The STSOL andMLTSSL willbereviewedbytheDOHA everysix ■ ■ confined occupationlists: implement anumberofchanges,includingthemovetotwo sponsored visaforimmigrationto Australia. The new TSS visawill (subclass 482)visa( (Skilled) (subclass457)visawiththe Temporary SkillShortage In March2018,theGovernmentreplaced Temporary Work Australian Stateor Territory Government. must submitanexpressionofinterestandbenominatedby Innovation andInvestmentvisaprogramme.Interestedapplicants launched anentrepreneurvisastreamaspartoftheBusiness As partoftheNationalInnovationandScience Agenda, theDOHA Gilbert +Tobin ICLG TO: FINTECH2019 existing orcompetingrights.In anemploymentcontext,the property generallyownsthatintellectual property, subjecttoany Broadly, the personorbusinessthathasdevelopedintellectual 6.2 whether toabolishtheinnovationpatentsystem. A numberofpatentlawreviewsarecurrentlyunderway, including appearance. design thatisbothnewanddistinctive.Protectionbasedonvisual Design protectionisavailable,foraperiodupto10years,ofany decide whethertoproceedwithapatentapplication. with patentprotection,butdoesgivethepersonfiling12monthsto However, filing thisapplicationalonedoesnotprovidetheapplicant application inthefuture,providingapplicantswithaprioritydate. inexpensive methodofsignallingintentiontofileafullpatent In Australia, provisionalapplicationscanalsobefiledasan requiring thataninventioninvolveinnovativestep. inventions thatdonotmeettheinventivethreshold,instead quick andrelativelyinexpensivepatentsareaimedatprotecting inventions withshortmarketlives,lastinguptoeightyears. These disclosed inthespecification. An innovationpatentistargeted at be clearandtheclaimsmustfullysupportedbyinformation to bemadeorusedinanindustry. The patentspecificationmustalso the inventionbeingnew, involvinganinventivestepandbeingable from thefilingdate. The requirementsforastandardpatentinclude protection andcontroloveraninvention,lastingforupto20years inventions in Australia. A standardpatentprovideslong-term Patent protectionisavailableforcertaintypesofinnovationsand 6.1 permission forindividualswhowishtoworkfintechbusinesses. As atthetimeofwriting,thereisnospecialrouteforobtaining

6 inventions areprotectedinyourjurisdiction. Please brieflydescribehowinnovationsand Technology permanent residencyafterthreeyears. as longtheoccupationislisted,withanoptionof with amaximumperiodoffouryearswhichcanberenewed the Medium-Term SkilledOccupationsLists( residency; and for anothertwoyears,withnopathwaytopermanent maximum visaperiodoftwoyearsandtheoptiontore-apply the Short-Term SkilledOccupationsLists( in yourjurisdiction. Please brieflydescribehowownershipofIP operates

TSS visa

), themostcommonformofemployer-

STSOL

MLTSSL ) witha

)

parties. protected contractuallythroughconfidentialityagreementsbetween patented underthe software toberegisteredunderthe the governmentbodyadministeringIP rightsandlegislation,for 1968 Copyright Act (including sourcecode)isautomaticallyprotectedunderthe depend onthetypeofintellectualproperty. As anexample,software Options availabletoprotectorenforceintellectualpropertyrights 6.3 would otherwiseamounttoaninfringement. rights cannotbeassignedbutcreatorscanconsenttoactionsthat in thework(forexample,righttobenamedasauthor).Moral such asliteraryworks(includingsoftware)alsoretainmoralrights Under the such rightstothecompanybywhomtheyareengaged. unless thetermsofengagementcontainaneffective assignmentof intellectual propertyrightsdevelopedinthecourseofengagement, Contractors, advisorsandconsultantsgenerallyownnew contain aneffective assignmentofsuchrightstotheemployee. in thecourseofemployment,unlesstermsemployment employer generallyownsnewintellectualpropertyrightsdeveloped of anotherbusiness. and damages)areavailablewhere theuseofIP infringestherights that infringesexistingbrands,and remedies(typicallyinjunctions in factownsorisentitledtouse.RestrictionsapplytheuseofIP Broadly, abusinesscanonlyexploitormonetiseIP thatthebusiness ■ ■ ■ ■ monetising IP. These are: In Australia, therearegenerallyfourcommonlyusedapproachesto 6.4 successfully grantpatentrightsremainswithIP Australia. as astandardpatentapplicationwithin Australia, butthepowerto Property Organisation. A PCT applicationisautomaticallyregistered Cooperation Treaty( or enforceIP rightsin Australia. Australia isalsoapartytothePatent A standard,innovationorprovisionalpatentcanalsobeheldtoprotect do anytreatiesormulti-jurisdictionalrightsapply)? or areyouabletoenforceotherrights(forexample, jurisdiction, doyouneedtoownlocal/nationalrights In ordertoprotectorenforceIP rightsinyour and licenceagreements. confidentiality, employmentcontracts,assignmentagreements activities tobecarriedoutforspin-offs includeduediligence, technology developedbyaparentcompanytothemarket.IP Spin-off pays fortherighttotradeunderabrandname. system, servicemethodorspecialproductandthefranchisee where thefranchisorownsIP rightsover themarketing Franchising and eachcomeswithconditions. (exclusive licence,non-exclusivelicenceandsolelicence) terms andconditions. There arethreetypesoflicence Licensing another personwithoutimposinganyperformanceobligations. Assignment regarding suchexploitation/monetisation? and arethereanyparticularrulesorrestrictions How doyouexploit/monetiseIP inyourjurisdiction

Copyright Act 1968 Copyright Act : Where aseparatecompanyisestablishedtobring : PermissionisgrantedforIP tobeusedonagreed : An outrightsaleofIP, transferringownershipto : A methodofdistributinggoodsandservices, (Cth). An ownermayalsoapplytoIP Australia, Patents Act 1967 Patents Act

PCT

), administeredbythe World Intellectual

(Cth),creatorsofcopyrightworks (Cth).Softwarecanalsobe Designs Act 2003 Designs Act

WWW.ICLG.COM

Australia

(Cth)or

19 Australia 20 Australia © Published andreproduced with kindpermission byGlobal Legal Group Ltd, London Gilbert +Tobin WWW.ICLG.COM advises acrossarangeofissuesrelevanttothefintechanddigital operating financialservicessectorbusinessesin Australia. Healso market participantsinrelationtoestablishing,structuringand off-shore corporates,financialinstitutions,funds,managersandother Services andFintechpracticesatG+ T. Peteradvisesdomesticand services regulationandfundsmanagement.HeleadstheFinancial group andisanexpertmarket-leadingpractitionerinfinancial Peter ReevesisapartnerinGilbert+ Tobin’s Corporate Advisory comprised ofmarket-leadingpractitionerswhoprovideclientswiththefullsuitefinancialservicesregulatoryandcommerci contracting andbusinessprocessesneedtotransformworkdifferently. We adviseattheinnovativeendofspectrumand excellence, agilityanddeepindustryknowledge.We don’tjustdeliveronthe Gilbert + Tobin’s reputationforexpertadviceextendsacrossabroadrangeofpracticeareasandisbuilt aroundanabilityto become thelegaladviserofchoiceforindustryleaderswhovalueourentrepreneurialcultureanddeterminationtosucceed. With afocusondynamicandevolvingmarketsectors,weworktransactionscasesthatdefinedirectthemarket.Gilb Australia andinternationally, particularlyinthe Asia-Pacific region. Melbourne andPerthoffices, weprovideinnovative,relevantandcommerciallegalsolutionstomajorcorporateGovernmentc Established in1988,Gilbert+ Tobin isaleadingindependentcorporatelawfirmandkeyplayerinthe Australian legalmarke Chambers 2019 solutions, blockchainsolutionsandglobalcrypto-assetstrategies. sectors, includingplatformstructuringandestablishment,payment ranksPeterinBand1forFintech. Sydney NSW2000 200 Barangaroo Avenue, Barangaroo International TowersSydney 35, TowerLevel Two Gilbert + Tobin Peter Reeves URL: Email: Tel: Australia www.gtlaw.com.au [email protected] +61 292634000

status quo –weworkcloselywithourclientstoidentifyhowtheir ICLG TO: FINTECH2019 executewithinnovation,

al advice. t. FromourSydney, ourfintechteamis ert + Tobin has Australia lients across

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