Financial Services Regulation and Compliance - General Cross Sectoral March 2023

Domestic

Central Bank (Individual Accountability Framework) Act 2023 (No. 5)

On 9 March 2023, the President of Ireland signed the Central Bank (Individual Accountability Framework) Bill 2022 (IAF Bill), and it has accordingly become law.

We now await publication of, and commencement orders in respect of, the Central Bank (Individual Accountability Framework) Act 2023 (IAF Act).

It is expected that all sections of the IAF Act will be commenced as soon as possible, with the exception of sections 3 – 6 and section 10. These sections address the Senior Executive Accountability Regime (SEAR), the conduct standards and the fitness and probity 'certification requirement' respectively, and are expected to commence following completion of the Central Bank of Ireland's (CBI) public consultation on these matters. The Minister for Justice indicated that the IAF Act will be fully implemented in the current year.

CP-153 - Enhanced governance, performance and accountability in financial services - Regulation and Guidance under the Central Bank (Individual Accountability Framework) Act 2023

On 13 March 2023, the CBI published the consultation paper which included draft regulations and guidance under the Central Bank (Individual Accountability Framework) Act 2023. The consultation paper, draft regulations and guidance seek to provide clarity in terms of the CBI's expectations for the implementation of, and seeks stakeholder feedback with respect to, the Senior Executive Accountability Regime (SEAR), the conduct standards and certain enhancements to the fitness and probity (F&P) regime.

The consultation sets out 18 questions and invites feedback from interested stakeholders including the public, regulated firms, staff, consultancies, representative bodes and service providers. The consultation will remain open for three months from 13 March 2023 to 13 June 2023.

Changes to CBI's fitness & probity application process, effective 24 April 2023

On 7 March 2023, the CBI published a document outlining the changes to the F&P application process. The document outlines the CBI portal is being enhanced for the facilitation of submission of applications to become a pre-approval controlled function (PCF). Applications will no longer be submitted via the online reporting system, but will be submitted via the Central Bank Portal. The changes will go live from 24 April 2023.

Fitness and probity - individual questionnaire application draft guidance

On 31 March 2023, the CBI published draft guidance for regulated financial service providers (RFSPs) and applicant firms in relation to submitting individual questionnaires (IQs) through the CBI's portal for persons who are proposed to hold pre-approval controlled functions (PCFs). This is technical guidance (rather than regulatory), and seeks to assist firms with the practical and technical steps involved in submitting IQs through the Central Bank Portal.

CBI publishes Consumer Protection Outlook Report 2023

On 13 March 2023, the CBI published the Consumer Protection Outlook Report 2023. The report outlines five key drivers of consumer risk for consumers of financial services in Ireland. The five key risk drivers identified include:

  • the changing operational landscape
  • poor business practices and weak business processes
  • ineffective disclosures to consumers
  • technology driven risk consumer protection
  • the impact of shifting business models

The CBI noted that they believe sustained concrete action by regulated firms on the five key drivers of consumer risk would make a material positive difference for consumers of financial services.

CBI publishes regulatory and supervisory priorities for 2023

On 15 March 2023, the CBI set out its regulatory and supervisory priority for 2023. The Deputy Governor of Financial Regulation, Sharon Donnery noted that the macro-financial environment continues to be very challenging and will be central to the CBI's regulatory focus this year. The CBI set out that some of the core areas of focus for the CBI will include:

  • continuing to remain vigilant in assessing and managing the financial and operational resilience of firms
  • enhancing the CBI's regulatory and supervisory approaches to mitigate risks from the changing financial system
  • supervising how firms are supporting borrowers to manage the challenges of the current economic environment (including issues related to affordability and arrears)
  • consulting and engaging on the review of the Consumer Protection Code and the Individual Accountability Framework
  • continuing vigilance of the financial system, supervising firms compliance with AML/CFT obligations, detecting and sanctioning market abuse, and enforcing financial sanctions (working closely with An Garda Síochána and other relevant bodies in all these areas)
  • implementing new EU regulations on digital operational resilience (DORA) and markets in crypto assets (MiCA), as well as contributing to the development of other regulations, such as the review of the Payment Services Directive (PSD2)

The CBI notes that these priorities are aligned with the CBI's vision of a resilient and trustworthy financial system, which sustainably services the needs of the economy and its customers and where firms and individuals adhere to a culture of fairness and high standards.

European

EBA publishes consultation paper amendments to guidelines on risk-based anti-money laundering and countering the financing of terrorism (AML/CFT) supervision , and the steps to be taken when conducting supervision on a risk-sensitive basis under Article 48(10) of Directive (EU) 2015/849 (The Risk Based Supervision Guidelines)

On 29 March 2023, the EBA launched a public consultation on amendments to its guidelines on risk-based anti-money laundering and countering the financing of terrorism (AML/CFT) supervision. The proposed changes extend the scope of these guidelines to AML/CFT supervisors of crypto-asset service providers (CASPs). The consultation runs until 29 June 2023.

The EBA noted that as crypto-assets services is a cross-border activity, by its nature, it is important that the same standards apply where CASPs operate in the single market. The EBA is, therefore, proposing to amend its guidelines on risk-based AML/CFT Supervision to clarify how they apply to AML/CFT supervisors of CASPs.

Specific AML/CFT guidance for CASPs will be delivered through the forthcoming amendments to the EBA's risk factors guidelines, the amendments to the guidelines to prevent the abuse of fund transfers for ML/TF purposes, and new guidelines on policies and procedures for compliance with restrictive measures.

ECB and the ESAs call for enhanced climate-related disclosure for structured finance products

On 13 March 2023, the ESAs with the ECB published a joint statement on climate-related disclosure for structured finance products. The statement encourages the development of disclosure standards for securitized assets through harmonised climate-related data requirements.

At present, there is a lack of climate-related data on the assets underlying structured finance products. This poses an obstacle for the classification of products and services under the EU Taxonomy Regulation and Sustainable Finance Disclosure Regulation (SFDR) and hinders the proper assessment and management of climate-related risks. The Statement sets out the joint efforts of the ECB and the ESAs to facilitate access to climate-related data with a view to improving sustainability-related transparency in securitisations and to promote consistent and harmonised requirements for similar instruments.

The European Commission has adopted its tenth package of sanctions against Russia

The EU has adopted its tenth package of sanctions against Russia (see European Commission press release), with immediate effect. The package contains new listings, trade and financial sanctions, including further export bans and import bans. It steps up enforcement and anti-circumvention measures, including a new reporting obligation on Russian Central Bank assets and reporting obligations on frozen assets (including for dealings before listings) and assets which should be frozen. There is an obligation to report more detailed information to NCAs, which in turn report it to the Commission. This enhanced reporting obligation applies from 26 April 2023. 

For more information on these topics please contact any member of A&L Goodbody's Financial Regulation team.

Date published: 13 April 2023