Shoring up AI Governance: How Songlines Control Closes Critical Gaps Identified in ASIC's REP 798

In October 2024, the Australian Securities and Investments Commission (ASIC) published one of the most significant regulatory warnings in the history of Australian financial services technology governance. Report 798 — Beware the Gap reviewed 23 AFS and credit licensees and found a consistent and dangerous pattern: the pace of AI adoption was outrunning the governance and risk management frameworks designed to control it.

"Potential harms [from unmanaged AI] include bias and discrimination, provision of false information, exploitation of consumer vulnerabilities and behavioural biases, and the erosion of consumer trust."
— ASIC REP 798, Executive Summary

These are not theoretical risks. They are the direct consequences of deploying AI without adequate governance — consequences that expose consumers to harm and expose licensees to regulatory enforcement, reputational damage, and director liability.

Eighteen months on, the regulatory environment has intensified. ASIC's 2026 Key Issues Outlook identifies "advanced technology harming consumers (including agentic AI)" as a priority concern. In April 2026, APRA issued a formal letter to all regulated entities calling for "a step-change in AI-related risk management and governance."

The governance gap ASIC identified in 2024 is now a governance chasm — and regulators are actively closing in on organisations that have not addressed it. Songlines Control® was built specifically to close that gap. This paper maps each of ASIC's findings to the specific capabilities Songlines Control provides.

What ASIC Found: Eight Findings, Four Structural Failures

ASIC's review of 624 AI use cases across 23 licensees produced eight findings that can be grouped into four interconnected structural governance failures.

Gap 1: No Inventory, No Visibility (ASIC Findings 1 & 6)

Many licensees could not readily identify all AI use cases operating within their organisation. ASIC noted that "a lack of an AI inventory, or the recording of models in several dispersed model registers" meant that boards and senior management did not have clear visibility of their AI use.

"Licensees and their boards may not have clear visibility of their AI use."
— ASIC REP 798, Finding 6

Without a complete, real-time inventory of every AI model in use — including third-party models — it is impossible to govern what you cannot see. For board directors, this is not merely an operational inconvenience. Under the Corporations Act 2001, directors have a duty to exercise reasonable care and diligence.

Gap 2: Governance Lagging Deployment (ASIC Finding 7)

ASIC's central case study described a licensee that deployed a credit scoring model with "limited understanding" of the third-party platform used, "incomplete model documentation," and "poor governance." This is the governance gap in its most dangerous form: AI deployed in production, affecting consumer outcomes, with no controls in place.

The governance gap described by ASIC is structurally impossible in a Songlines Control deployment. The platform enforces a policy-first architecture: AI requests are evaluated against the organisation's governance policies before they are routed to any model. A request that would violate a policy is blocked, modified, or escalated for human review — it does not reach the model.

Gap 3: Risk Assessed Through a Business Lens, Not a Consumer Lens (ASIC Finding 5)

ASIC found that many licensees assessed AI risks from the perspective of business efficiency rather than consumer harm. Algorithmic bias was rarely proactively identified or tested for. Transparency and contestability — the ability of consumers to know AI was being used and to challenge its outputs — were described as "relatively immature."

Songlines Control shifts this dynamic by making consumer-protective controls technical rather than procedural. The platform's immutable audit trail records, for every AI request: the timestamp, request ID, model used, workflow attribution, user attribution, token counts, cost, latency, status, policy decision, and IP address. Records are cryptographically signed and cannot be altered after the fact. This is the evidentiary foundation that ASIC's transparency and contestability requirements demand.

Gap 4: Third-Party Model Risk — The Invisible Threat (ASIC Finding 8)

30% of all AI use cases in ASIC's review used models developed by third parties. Yet many licensees did not have robust third-party management procedures. In some cases, licensees could not even identify the AI technique used because "vendors are hesitant to provide details beyond standard marketing literature."

The consequences are direct and serious. When a third-party AI model produces a biased output, the licensee is legally responsible for that outcome. ASIC is explicit: "existing obligations apply to their use of AI." The defence "we didn't know how the vendor's model operated" is not available to a licensee.

The Songlines Control platform's governance layer is provider-agnostic. Whether a model is Azure OpenAI, Anthropic Claude, AWS Bedrock, Google Vertex AI, or a sovereign on-premises deployment, every request passes through the same policy enforcement engine, generates the same telemetry, and contributes to the same audit trail. The licensee does not need to understand the internal operation of a third-party model to govern how it is used — they govern the inputs, outputs, and routing decisions at the infrastructure layer.

What Does IRAP Alignment Mean for Financial Services Organisations?

IRAP — the Information Security Registered Assessors Program — is an Australian Government initiative administered by the Australian Signals Directorate (ASD). For a financial services organisation, deploying an IRAP-aligned AI governance platform like Songlines Control means:

• Demonstrable security assurance: Independent, third-party evidence that security controls are in place and effective.
• Data sovereignty protection: Ensures that sensitive customer data never leaves Australian jurisdiction, addressing Privacy Act and APRA CPS 234 requirements.
• Regulatory credibility: Demonstrates alignment with the same security framework that Australia's most security-conscious institutions use.

Getting Started

Songlines Control® is available now on the Microsoft Azure Marketplace with a 14-day free trial. Both plans include Australian data residency (Azure Australia East), IRAP-aligned documentation, and an exportable compliance evidence pack designed for ASIC and APRA regulatory examinations.

For enterprise deployments, IRAP assessments, board-level briefings on AI governance obligations, or co-sell enquiries through Microsoft's financial services vertical, contact sales@cetusai.com.au.