Financial Crime World

Fit and Proper Assessments: A Guide to Conducting Fitness and Probity Assessments

In the wake of the Central Bank (Individual Accountability Framework) Act 2023, financial institutions in Ireland are expected to conduct fit and proper assessments for their fitness and probity assessments, which will be conducted in accordance with the Suitability Guidelines. These assessments are crucial in ensuring that individuals holding positions of influence within financial institutions are suitable to do so.

Individual Accountability Framework

The Central Bank (Individual Accountability Framework) Act 2023 introduces significant changes to the regulation and supervision of regulated financial service providers (RFSPs) and certain individuals, including chief officers and principal contractors. The framework aims to improve accountability and trust in the financial sector by creating a culture of responsibility and ensuring that individuals are held accountable for their actions.

Senior Executive Accountability Regime

The Senior Executive Accountability Regime (SEAR) is designed to improve governance, performance, and accountability within RFSPs. SEAR places obligations on relevant RFSPs and senior individuals within them to set out clearly where responsibility and decision-making lies for their business.

Fitness and Probity Regime

As part of the introduction of the new Individual Accountability Framework, enhancements have been made to the Fitness and Probity (F&P) Regime. Included amongst the changes is the introduction of an obligation on RFSPs to proactively certify that staff performing chief officer or principal contractor roles comply with certain standards.

Conduct Standards

The IAF Act introduces Common Conduct Standards, which apply to individuals in all RFSPs who are performing chief functions (CFs). These standards include:

  • Acting with honesty and integrity
  • Acting in the best interests of customers

Senior executives will also have Additional Conduct Standards related to running their part of the business.

Administrative Sanctions Procedure

The IAF Act introduces changes to strengthen and enhance the Central Bank’s Administrative Sanctions Procedure (ASP). These changes aim to ensure that the ASP reflects and supports the legislative changes introduced in connection with the Individual Accountability Framework.

Recommendations for Financial Institutions

In light of these changes, we recommend that financial institutions in Ireland:

  • Conduct thorough fit and proper assessments for all individuals holding positions of influence within their organizations.
  • Ensure compliance with the new Individual Accountability Framework, including SEAR and F&P Regime requirements.
  • Implement robust certification processes to ensure staff performing CF or PCF roles meet the required standards.
  • Develop and maintain effective conduct policies and procedures that reflect the new Common Conduct Standards.

By implementing these recommendations, financial institutions in Ireland can demonstrate their commitment to transparency, accountability, and responsible business practices.