Author: Ciara A Murphy FS Consulting Director
Fitness and Probity – are you compliant and ready for the enhanced regime?
The topic of fitness and probity has been hot on the agenda of the Central Bank of Ireland (CBI), more recently culminating with two recent ‘Dear CEO’ Fitness & Probity (F&P) letters to the industry in 2019 and 2020. Both these letters highlight compliance issues with a regime introduced over a decade ago.
An enhanced F&P regime is expected to be introduced as part of the Individual Accountability Framework (IAF). The Government is looking to introduce the IAF in the proposed Central Bank (Amendment) Bill 2019, with Heads of Bill expected to be published before the summer recess with pre-legislative scrutiny to follow. It is expected that legislation may not be passed in full until early 2022 with CBI Consultation to follow.
There are a number of areas which firms should consider regarding their compliance with the F&P Standards now and on an ongoing basis:
However, those that pose the most significant challenges to firms relate to due diligence and outsourcing of Pre-approved control function (PCF)/Control function (CF) activities. Firms should ask themselves the question whether the outcome of their due diligence processes truly answers the question as to whether a person continues to be fit and proper in their role on an ongoing basis. With regards to the outsourcing of PCF/CF roles outside of a legal entity, firms should consider assessing their end to end processes from a control function activity perspective. They should also ensure that there is a governance structure in place that provides adequate oversight of such activities.
While SEAR is a regime that firms should be preparing for, the area of F&P is not one to be overlooked. No doubt addressing highlighted issues will present challenges to firms in ensuring they comply with both the ‘letter of the law’ and ‘spirit’ of the current regime and that proposed under the IAF. The Regime can be complex in application and resource intense to remediate where there are gaps identified. Nonetheless it provides firms with the opportunity now to get ahead and prepare, making sure they are compliant with current standards, ready for the enhanced F&P regime, as well as leveraging it in their preparations for SEAR.
To read the full article published in Finance Dublin 21 May, 2021, please click on the link below.
