Regulated entities can expect increased levels of enforcement activity as the Central Bank of Ireland has made it clear in its recently published Enforcement Strategy that it will not tolerate breaches of regulatory obligations.
The Strategy published on 21 December 2010, sets out the enforcement regime for 2011-2012 of the newly established Enforcement Directorate (the Directorate). The Strategy comes in the wake of the recently introduced Central Bank Reform Act 2010 under which a unitary organisation was created with responsibility for both central banking and financial regulation in Ireland. With this new regulatory model now firmly in place, the Directorate, led by Mr Peter Oakes, is responsible for ensuring that the new regime is supported by a credible threat of enforcement.
The Strategy identifies two broad categories of enforcement actions – Pre-defined and Reactive. In the context of the former, the enforcement effort will be focused on “priority areas” which have been identified by the Central Bank’s Supervisory Division as being of the highest importance and concern. Reactive enforcement will entail taking enforcement action where serious concern arises in cases which fall outside the pre-defined priority areas. The priority areas that have been identified for 2011 are as follows:
- Governance and Risk Management, including the operation of Risk Committees;
- Systems and Controls, including accounting, auditing and other internal controls;
- Controls around charging issues, including the prevention of, follow up and resolution of charging errors;
- Compliance with the Mortgage Arrears Code;
- Compliance with Client Money Requirements/Client Assets; and
- Timeliness and accuracy of information received by the Central Bank from regulated entities.
As part of its Strategy, the Central Bank intends to utilise the wide range of regulatory tools available to it for the purposes of enforcement, such as the imposition of formal sanctions, conditions or directions, where appropriate. In addition to these traditional tools, it should be noted that new legislative initiatives have provided the Central Bank with additional regulatory powers in the areas of fitness and probity, anti-money laundering and counter-terrorist financing.
The Central Bank’s message on enforcement is crystal clear. Regulated entities should be in no doubt that increased enforcement activity is guaranteed and more robust sanctions extremely likely.