Enhancements to the Central Bank’s Administrative Sanctions Procedure - Remarks by Seána Cunningham, Director of Enforcement & Anti-Money Laundering

It is a pleasure to be here this morning to discuss the Central Bank’s recently launched consultation on enhancements to the Central Bank’s Administrative Sanctions Procedure or ASP, one of our key enforcement processes.

I would like to thank the Law Society and its members for hosting this event for us and indeed to thank you all for your interest in attending this morning.

As you are aware, since the enactment of the Central Bank (Individual Accountability Framework) Act, 2023 (IAF Act), the Central Bank has been advancing the implementation of the Individual Accountability Framework (IAF). In April, we published revised regulations and guidance on enhancements to Fitness & Probity investigations, suspensions and prohibitions. We have also published the main IAF consultation on the Senior Executive Accountability Regime (SEAR), the conduct standards and Fitness & Probity certification, which recently closed for submissions.

Today I’m going to speak to you about the key enhancements to the ASP and the related proposed ASP Guidelines, which are the subject of this consultation. The ASP consultation arises out of legislative changes introduced under the IAF Act and our review of our experience in operating the ASP in recent years and international best practice. The IAF Act introduced new procedures and additional safeguards into the ASP, including increased court oversight. In developing the ASP Guidelines we have had regard to the legislative amendments under the IAF Act.

We have sought to further enhance the process through the introduction of amendments and policy changes in the ASP Guidelines that we believe:

• will support the efficient and effective operation of the ASP;
• will provide greater clarity for firms and individuals involved in investigations and inquiries; and
• will provide further guidance for decision-makers on procedural issues.

Our objective is to ensure that the ASP guidelines are practical and clear and that they will support a smooth transition to the operation of the enhanced ASP procedures and processes.

We have highlighted in our consultation paper what key changes have been made to the ASP. We are seeking your feedback on whether our proposed ASP Guidelines are clear and your views on the key policy considerations underlying some of our proposals.

Financial regulation

Before I outline some of the key ASP enhancements, I think it is important to ground our discussion this morning in the objectives of financial regulation. Financial regulation is designed to ensure that the financial system operates effectively and efficiently, which is vital to the stability of the economy and the protection of consumers and businesses. This is why there is significant public interest in effective financial regulation and the role that enforcement plays in supporting these objectives.

Guided by the principles of proportionality and fairness, enforcement powers are needed to support the objectives of financial regulation. Enforcement powers are strategically deployed by financial regulators to combat emerging risks and misconduct and operate as an important line of defence for the financial system.  Administrative sanctioning powers, like the ASP, are commonly used by financial regulators internationally and are recognised as an important element in ensuring that the objectives of financial regulation are achieved. 

In the Central Bank we take a targeted and proportionate approach to the use of our enforcement powers. We consider how our regulatory objectives are best achieved, including through our supervisory engagements and guidance and the use of our broad range of supervisory tools. This means that we take enforcement action only in cases where such significant action is merited, following a consideration of all of the facts of the case, including the seriousness of the suspected breach, the harm or potential harm involved, our supervisory  priorities and the particular context arising in any sector of financial services.

Enhancements to the ASP

Moving to the ASP Guidelines, the composite guidelines being consulted on will cover all of the key parts of the ASP – investigations, inquiries, sanctions, settlement, court confirmation and appeals. You will see that in drafting the ASP Guidelines we have revisited and consolidated our existing published guidance documents – the ASP Outline 2018, the Inquiry Guidelines 2014 and the ASP Sanctions Guidance 2019, into one consolidated guidance document.  We hope that this consolidation will act in ease of all persons seeking to understand the ASP process and how it operates in practice. 

Whilst there are a number of enhancements to the process, I think that it is important to note that much about the ASP will remain the same. The operation of the ASP will continue to include the following:

1. the forensic investigation by the Central Bank of suspected breaches of financial services obligations by firms and individuals;
2. the function of holding inquiries;
3. the power to determine and impose sanctions;
4. court confirmation of sanctions imposed and appeals; and
5. the discretion to settle and resolve cases by agreement with the Central Bank

I will now highlight some of the more significant enhancements to each part of the process.

ASP Investigations

Dealing first with ASP investigations, the IAF Act placed the investigation phase of the ASP on an express statutory footing for the first time. However, much of the process will look familiar to legal practitioners in this area as the legislation was modelled on our existing investigative procedures with some changes in terminology. Notices of Investigation (formerly Investigation Letters) will set out the breaches of financial services legislation under investigation. Investigations will be run by Responsible Authorised Officers who will gather and analyse relevant information and documents for the purposes of the preparation of an investigation report. One of the key enhancements is that investigation reports will be shared by the Responsible Authorised Officer with investigation subjects at the completion of an investigation and prior to any decision on whether or not to hold an inquiry. Investigation subjects will be able to make submissions in response to the report and there will be engagement on disclosure. Our aim in drafting the guidance on ASP investigations was to provide sufficient clarity to investigation subjects and practitioners about our investigative procedures and to set out our expectations around their engagement with an investigation.

ASP Inquiries

There have been a number of procedural changes to the inquiry process. The Regulatory Decisions Panel, from which inquiry members are appointed, has now been designated as a panel established by the Minister for Finance to further enhance the independence of inquiry members. The ASP Guidelines outline a number of procedural enhancements and provide greater detail and clarity on the inquiry process, which are based on our experience of the operation of Inquiries over the last decade. The guidelines set out the roles of the various participants at an inquiry hearing and provide that Enforcement or its legal representatives will now present the case at inquiry by leading evidence, examining witnesses and making submissions.

Sanctions

Turning now to sanctions, we have reviewed, updated and consolidated our sanctioning factors and associated guidance in order to address the new statutory sanctioning factors for individuals introduced by the IAF Act and to reflect our experience of operating the original 2019 ASP Sanctions Guidance. As part of our review, we have taken the opportunity in the ASP Guidelines to provide further guidance in relation to both our general approach to the determination of sanctions and to publish, for the first time, some guidance on our approach to the determination of monetary penalties for firms and individuals. Our hope is that by giving further guidance in relation to our approach to the determination of sanctions we will assist investigation and inquiry subjects, legal practitioners and decision makers in their understanding of the ASP sanctioning process.

ASP Settlements

Most of our cases under the ASP to date have been resolved by way of settlement and it is perhaps the part of the ASP process with which firms and legal practitioners are most familiar.

Resolving cases by way of settlement is an efficient and effective way of concluding enforcement cases and in many cases will constitute the best use of finite public resources by avoiding the additional costs, time commitment and administrative burden of full inquiries. The IAF Act provides for three distinct settlement processes - (i) Undisputed Facts Settlement, (ii) Investigation Report Settlement, and (iii) No Admissions Settlement. In practice, this means that there will be different statutory procedures for settlement depending on the stage of the ASP process and whether the settlement involves admissions or not.

We will continue to operate a settlement scheme for admissions settlements, where the settlement occurs prior to an inquiry. Discounts of up to 30% may be available for an Undisputed Facts Settlement that occurs prior to completing an investigation and of up to 10% for an Investigation Report Settlement that occurs prior to an inquiry. Settlement scheme discounts will apply to monetary penalties only and not to any other sanction, such as disqualifications.

In line with our existing policy, we will continue to require admissions from firms and individuals for the purposes of settlement in almost all cases. Admissions serve a key purpose in securing some of the Central Bank’s enforcement objectives of accountability, transparency, public trust and deterrence. No admissions settlements may be considered, but only on an exceptional basis and by reference to the non-exhaustive suitability factors set out in the ASP Guidelines.

All sanctions imposed via Undisputed Facts Settlements and Investigation Report settlements will be subject to High Court confirmation for the first time. We will continue to publish public statements immediately following the conclusion of a settlement, noting in the statement that the sanction is subject to confirmation by the High Court.

Conclusion

I would like to conclude by reiterating my earlier remarks about the Central Bank’s approach to enforcement in the context of financial regulation. The Central Bank’s mission is to serve the public interest by maintaining monetary and financial stability whilst ensuring that the financial system operates in the best interests of consumers and the wider economy. In support of these objectives, our approach to enforcement is and will continue to be based on the following key concepts:

• Proportionality;
• Targeted deployment of the appropriate powers;
• Rigorous focus on effective regulatory outcomes.

Whilst enforcement is an important component of financial regulation in the Central Bank, it is just one such component. We take a holistic approach to the assessment of the most appropriate regulatory response to a particular issue or case and will choose the most appropriate and proportionate tool to achieve our objectives. 

When we do pursue enforcement action, we seek to adopt an approach that is effective and fair and we believe that the proposed ASP enhancements will support us in that goal. In order to finalise the ASP Guidelines we are keen to receive feedback to the Consultation Paper from all of our stakeholders, including everyone here today.

Following receipt and review of feedback to the Consultation Paper we intend to publish the final ASP Guidelines and related feedback statement.

I hope you have found the outline I have provided to you today informative. We look forward to hearing your views and taking your questions.

Thank you.