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Central Bank Calls for Enhanced Regulatory Tools to Curb Corporate Offences

AUTHOR(S): Claire McLoughlin, Karen Reynolds
PRACTICE AREA GROUP: Regulatory and Investigations, Corporate Offences, Fraud and White Collar Crime
DATE: 19.01.2018

The Central Bank of Ireland (“Central Bank”) has published its response to the Law Reform Commission’s (“LRC”) Issues Paper on “Regulatory Enforcement and Corporate Offences” (which can be found here).  The Central Bank’s proposals aim to ensure that the Central Bank “has a well -stocked enforcement toolbox” which, according to Ms Derville Rowland, the Central Bank’s Director General of Financial Conduct, is “vital to ensuring the Central Bank can safeguard stability and protect consumers…”

The Central Bank’s recommendations include:

  • Reforms strengthening the accountability of senior personnel in regulated entities. This would require senior managers to submit a statement of their responsibilities that clearly defines the matters for which they are accountable. The recommendations are largely modelled on the UK’s Financial Conduct Authority’s Senior Managers and Certification regime which currently applies to most banks, and will be applied shortly to fund managers and administrators, regulated in the UK.
  • The extension of the period for which individuals can be suspended from senior positions in regulated firms as part of the fitness and probity regime. Currently a person can be suspended for up to six months whilst an investigation is ongoing. The Central Bank would like to see this period extended, in recognition of the intricacies of investigating in the financial sector.
  • Strengthening the current legislative framework to include a criminal offence of “egregious recklessness” by senior personnel in charge of financial firms that fail. This is similar to the position which pertains in the UK under the Financial Services (Banking Reform) Act 2013, whereby senior management of financial institutions which fail may face up to seven years imprisonment and/or a fine if the failure of the institution can be attributed to their action or inaction.
  • Embedding certain core common standards within a legislative framework. These standards would be used to guide how regulated entities and senior personnel working within them conduct themselves. The Central Bank suggests that such core standards might include the requirement on entities and individuals to conduct themselves with honesty, integrity and ensure they have the necessary competence and capability to conduct their business.
  • Support for the creation of a dedicated division within an existing criminal agency to investigate white collar crime. The aim of such reforms would be to facilitate more effective investigations into white collar offences and subsequent prosecutions.

The Central Bank’s detailed proposals can be found here.

Comment

If implemented, the Central Bank’s recommendations would bring the regulatory regime in Ireland more into line with that which currently exists in the UK and other regulated jurisdictions.  Traditionally, the Central Bank’s focus has been on investigating the regulated entity, rather than pursuing individuals. These proposals, however, seem to be indicative of a new approach by the Central Bank, involving an increased regulatory focus on individuals in approved roles, in line with international trends.  The Central Bank’s proposals serve to highlight the need for individuals in controlled positions to act appropriately and to have a clear understanding of their roles and duties.

Should you require further information in relation to the material referred to in this update, please contact Karen Reynolds, Claire McLoughlin, or your usual Matheson contact.

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