The Central Bank has just published a new guidance document (ASP Sanctions Guidance) on its approach to deciding the appropriate sanction to be imposed on regulated firms and individuals.

New Guidance

To date, the public statements issued by the Central Bank following settlement with a firm or individual gives an insight into the factors considered and weighed by the Central Bank in calculating the fine imposed. Those factors are also outlined in the Central Bank’s “Outline of the Administrative Sanctions Procedure”. The new Guidance published by the Central Bank now provides further detail regarding the Central Bank’s approach to deciding on the sanction it will impose when a regulated firm or individual is found to have committed a prescribed contravention.

Factors

The factors that are considered by the Central Bank in sanctioning a regulated entity or individual fall under four broad headings:

• The Nature, Seriousness and Impact of the Contravention
• The Conduct of the Regulated Entity after the Contravention
• The Previous Record of the Regulated Entity
• Other General Considerations

The new Guidance provides additional detail on the meaning and weight that may be attached to these factors and where they sit on the scale of seriousness for sanctioning purposes. For example, contraventions involving proven dishonesty, that occur over a longer period or with greater frequency and involve widespread loss or detriment to consumers will be viewed as more serious by the Central Bank.

The largest section of the new Guidance is dedicated to the conduct of a regulated entity after a contravention (or potential contravention) has been identified and explains what the Central Bank will view as aggravating, mitigating or neutral factors in assessing a firm’s conduct post-breach (including during an investigation by the Central Bank under the ASP).

The key themes relate to self-reporting, co-operation and remediation and the key message for firms and individuals seems to be that whilst failure to report, co-operate or remediate adequately will be viewed as aggravating, in order for firms and individuals to get credit, it is not enough to do the bare minimum – firms and individuals must achieve an “exemplary” level of reporting/co-operation/remediation.

Self-Reporting

Failure to report in full will ordinarily be treated as an aggravating factor. Even if a firm self-reports, however, this may not be viewed as a mitigating factor. The new Guidance indicates that to get credit for self-reporting, it is necessary to go “above and beyond [a] basic level of reporting” towards “exemplary self-reporting” which, for example, may involve immediate reporting of all known relevant information and adopting an “attitude of constructive engagement and a willingness to facilitate the Central Bank’s investigation in whatever way possible”.

Co-Operation

Failure to cooperate adequately or at all will be treated as an aggravating factor (and may be a criminal offence). The new Guidance indicates that in order to get credit for co-operation as a mitigating factor, there must be evidence of “exemplary cooperation” which may involve, for example, providing responses to correspondence which “go above and beyond the basic provision of information and/or documentation”, engaging constructively with the investigation and seeking to facilitate the Central Bank’s understanding of the business and its structure, roles, responsibilities and governance structures and the factual matters under investigation, volunteering additional information and proactively identifying methodologies for document identification which save time, cost and resources. The new Guidance also indicates that the Central Bank will view the disclosure of the output of any pre-existing internal investigation and/or third party review on a proactive and voluntary basis as an example of exemplary co-operation.

At the launch of the new Guidance, Derville Rowland, the Central Bank of Ireland’s Director General, Financial Conduct, said that “.. cooperation with the regulator is a basic expectation of ours in the context of engagement with firms – whether in a supervisory or enforcement context – and that the lack of cooperation can have a considerable bearing on subsequent sanctions.”

Remediation

Failure to remediate adequately or at all will be treated as an aggravating factor. Providing “expected remediation” will ordinarily be treated as a neutral factor. In order to be viewed as a mitigating factor, the remediation must be “exemplary” and amongst the examples given of “exemplary remediation” are the putting in place of an appropriate plan to redress and compensate those adversely affected by the contravention which pays redress and compensation “over and above the minimum expected by the Central Bank” and engaging an independent third party to investigate and report on the contraventions and any individual wrongdoing, including wrongdoing at the most senior levels of the organisation.

The new Guidance also indicates that the Central Bank will view early admissions by a regulated entity as a mitigating factor, provided they are “full, frank and made at the earliest opportunity”.

Conclusion

While the new Guidance is welcome and somewhat helpful in providing greater detail than has been available to date on the Central Bank’s approach to deciding the appropriate sanction to be imposed on regulated firms and individuals, some important issues have not been addressed in the new Guidance. Perhaps most notably, the new Guidance does not include information on how the Central Bank calculates the quantum of the penalty to be applied. This contrasts with the position taken by some of the Central Bank’s peers, including the UK Financial Conduct Authority. It is hoped that as the ASP process matures further, additional detail on this aspect of the process will be provided.