New Central Bank Guidelines on Administrative Sanctions

The Enforcement Directorate of the Central Bank of Ireland today published a new guide to sanctions imposed under the Administrative Sanctions Procedure (ASP).

The new guidance seeks to supplement previous guidelines relating to the ASP and the associated Inquiry process and outlines the factors taken into account in assessing appropriate sanctions. This marks a step in the right direction in terms of transparency in how the Central Bank approaches sanctioning.

In the guidance, the Central Bank has placed a notable emphasis on the need for deterrence, stating that credible deterrence is of "paramount importance to the Central Bank in the exercise of its enforcement function." In this regard, the guidance also calls out that, "notwithstanding the presence in certain cases of a number of factors which may appear to mitigate the conduct to be sanctioned, a significant sanction may be merited to fulfill the Central Bank's mandate."

This clarification is welcome. This is particularly the case given the Central Bank's power to impose financial sanctions on firms of up to 10% of turnover in the last financial year. 

The additional detail on the sanctioning factors set out in the guidance does not expressly set out how the calculation of any monetary penalty is made. However, the guidance does clearly link turnover, as a potentially relevant factor, with determining the impact of a monetary penalty and therefore its deterrent effect.  An examination of early resolutions under the ASP published by the Central Bank shows that the need to have an appropriate deterrent impact is frequently articulated as a key 'Penalty Decision Factor'. Notably, the level of a Firm's cooperation with the Central Bank during an investigation is also listed as relevant in a large number of these statements. These two factors are therefore key aspects in determining monetary penalties.

Of particular interest to regulated firms will be the articulation of what the Central Bank considers to be cooperation.  The guidance provides additional detail on this issue. Regulated firms must be open and cooperative with the Central Bank and therefore a certain level of cooperation is stated to be penalty "neutral". Mitigating cooperation, which could reduce a sanction, is stated to include:

• Providing responses to correspondence which go above and beyond the basic provision of information or documentation
• Constructive engagement and facilitating the Central Bank's understanding of the business and the facts under investigation
• Proactive and voluntary furnishing of additional information to assist the investigation
• Proactively identifying documents which facilitate in saving time, costs and resources
• Providing the Central Bank with output of any pre-existing internal investigation or third party review
• Engaging with the investigation and seeking to assist the Central Bank wherever possible and aiding in time, cost and resource savings
• Establishing previously unknown facts, identifying previously undetected issues and bringing them to the attention of the Central Bank and/or providing information about individuals potentially involved in the contravention(s)

While the guidance acknowledges the constitutional rights of regulated entities, including the privilege against self-incrimination, it articulates in more detail than before what voluntary or other steps could result in a positive impact for firms under investigation in terms of potential sanctions.

A&L Goodbody is at the forefront of advising clients involved in the Administrative Sanctions Procedure as well as during inspections and themed reviews, and can provide guidance and support on all aspects of your regulatory engagements.

For more information please contact Sinead Prunty, Knowledge Lawyer – Financial Regulation, or Dario Dagostino, Partner, Financial Regulation or any member of our Regulatory Risk & Investigations team.

Date published: 14 November 2019