Changes to CBI’s list of PCFs - deadline for impacted PCF roles

The Central Bank of Ireland (CBI) updated the list of Pre-Approval Controlled Functions (PCFs) under the Fitness & Probity Regime. Regulated Financial Service Providers (RFSPs), which include regulated funds, will need to assess the changes and meet the deadline for impacted in–situ roles by 3 June 2022.

Effective 5 April 2022, the CBI is:

  • Splitting the PCF-2 Non-Executive Director role into:
    • PCF-2A Non-Executive Director
    • PCF-2B Independent Non-Executive Director
  • Introducing a stand-alone PCF role in respect of:
    • PCF-52 Head of Anti-Money Laundering and Counter Terrorist Financing Compliance (as an AML-specific compliance role)
  • Discontinuing the PCF-15 Head of Compliance with responsibility for Anti-Money Laundering and Counter Terrorist Financing Legislation role.
  • Amalgamating the PCF-31 Head of Investment role with PCF-30 Chief Investment Officer. Holders of PCF-31 roles will be automatically re-designated as PCF-30.
  • Retitling the PCF-3 to PCF-7 roles from Chairman to Chair.
  • Expanding the PCF-16 branch managers of branches established outside the State role to include managers of non-EEA branches.

New appointments for these roles after 5 April 2022 must submit PCF applications via the normal process. The CBI has an in-situ process, detailed below, for persons performing the roles before 5 April 2022.

Independent Non-Executive Directors 

This revision was introduced in the interest of greater clarity and for record-keeping purposes only and will not result in any additional requirements regarding the appointment of Independent Non-Executive Directors.

Action required by 3 June 2022

  • All individuals currently occupying PCF-2 Non-Executive Director will be re-designated as PCF-2A Non-Executive Director (unless called out as an PCF-2B Independent Non-Executive Director – see below). 
  • RFSPs must submit confirmation of any PCF-2B Independent Non-Executive Director designations to the CBI by 3 June 2022, as detailed below.

For PCF-2B Independent Non-Executive Directors who were in place on 5 April 2022, due diligence is not required. The RFSP must upload the completed in-situ return via ONR and confirm: 

  • names and identification details of the PCFs
  • that due diligence is not required

Independence 

As regards the criteria for assessing director independence, the CBI has confirmed that the definition and criteria provided within the various sectoral requirements, codes and guidelines is appropriate for use. The Irish Funds Corporate Governance Code for Collective Investment Schemes and Management Companies recommends that the Board comprise a majority of non-executive directors, with at least one independent director and gives guidance on the question of independence. A separate Corporate Governance Code is in place for Fund Service Providers, with a slightly different emphasis in terms of independence. The CBI notes that in some sectors multiple definitions and criteria apply and where a conflict arises, the stricter of the obligations or standards should be met to ensure compliance with both sets of obligations.

Anti-Money Laundering and Counter Terrorist Financing roles
 

  • The CBI is of the view that the PCF-52 role is necessary to introduce an AML-specific compliance role. The change to PCF AML function is:
    • PCF-15 Head of Compliance with responsibility for Anti-Money Laundering and Counter Terrorist Financing Legislation will be discontinued 
    • PCF-52 Head of Anti-Money Laundering and Counter Terrorist Financing Compliance introduced from 5 April 2022
  • RFSPs are not required to create a new PCF role to comply with the obligations under the Fitness and Probity Regime where one did not previously exist. This amendment does not, in and of itself, result in any additional or changed requirements regarding the appointment of separate individuals to PCF-12 (Head of Compliance) and PCF-52 Head of Anti-Money Laundering and Counter Terrorist Financing Compliance.
  • An individual can occupy more than one PCF role so that an individual could be listed as PCF-12 and PCF-52. Again, it will be the responsibility of the RFSP to determine if a position represents both PCF roles. In such circumstances, with respect to individuals in-situ, the in-situ process for each PCF applies, and for new appointments (post 5 April 2022), the individual must be approved by the CBI for each PCF role.

No action is required from RFSPs where an individual holds an existing PCF-12 designation. As such, this change does not result in additional or changed requirements. 

Action required by 3 June 2022

For in-situ PCF-15 Head of Compliance with responsibility for Anti-Money Laundering and Counter Terrorist Financing Legislation roles, the designation will be end dated and RFSPs will be required to notify the CBI of the appropriate PCF designations(s) of the individual by 3 June 2022. 

Where an RFSP determines that it is appropriate for an individual designated as PCF-15 to be re-designated as PCF-52, RFSPs must notify the CBI accordingly. 

In all other cases, an RFSP should review its functions and determine whether any person would meet the Head of Anti-Money Laundering and Counter Terrorist Financing Compliance role. 

Where the RFSP determines that this role does exist, the RFSP will be required to review their assessment under Section 21 of the Central Bank Reform Act 2010 in respect of individuals in-situ and submit confirmation of such an assessment to the CBI. Merely being a money laundering reporting officer (MLRO) will not automatically make that person the PCF-52 Head of Anti-Money Laundering and Counter Terrorist Financing Compliance. It will depend on what functions they actually undertake and whether the entity requires a PCF-52 Head of Anti-Money Laundering and Counter Terrorist Financing Compliance, in light if the nature, scale and complexity of its operations. See review of CBI Guidance below.

For PCF-12 and /or PCF-52, where the individual held PCF-15 on 5 April 2022, due diligence is not required. In this case the RFSP must upload the completed in-situ return via ONR and confirm: 

  • names and identification details of the PCFs
  • that due diligence is not required

CBI Guidelines

The CBI AML Guidelines refer to a position of "Compliance Officer". This is similar in all material respects to the PCF-52 Head of AML/CTF Compliance (which title is not used in the CBI AML Guidelines). Firms (and Funds are included here) are only required to have such a Compliance Officer if they are directed to appoint one by the CBI. However, the CBI expect a Firm to appoint one. Where appropriate, having regard to the nature, scale and complexity of the Firm’s activities. As such, there is no absolute obligation to have a PCF-52 Head of AML/CTF Compliance unless so directed by the CBI. Externally managed funds that have an MLRO could determine that such person is not a PCF-52 as the nature, scale and complexity of their operations does not warrant one. This is a matter for analysis by each fund.

For more information on this topic please contact any member of A&L Goodbody's Asset Management & Investment Funds team.

Date published: 21 April 2022