The Irish Central Bank (CBI), in common with other EU regulators, will be focused in 2018 on intensified supervision of anti-money laundering/counter-terrorist finance compliance, data protection, and ensuring banks and other regulated institutions have robust cyber security systems. However, in Ireland another area is emerging. This is the question of individual responsibility for increased regulatory scrutiny by directors and senior managers for regulatory breaches by their institution.
Much of the regulatory law in Ireland contains provisions which make senior officers criminally liable for corporate breaches where they have procured or knowingly permitted their employer to break the law. It is well known, however, that proving officer responsibility is difficult in criminal cases. The proofs are complex. Furthermore, juries are reluctant to convict junior officers where they perceive that individuals higher up the chain of command are escaping liability. Many high-profile prosecutions in Ireland for white-collar crime have collapsed by reason of this dynamic.
Ireland's banking and financial services regulation has a process known as the administrative sanctions procedure (ASP). This allows the CBI to inquire into a regulated institution's conduct, and bring regulatory enforcement proceedings against it and its responsible officers where there has been a regulatory breach. There are very substantial fines and other sanctions if a case is proven. It is intended to be an informal and expeditious process. Most importantly, the standard of proof which the CBI must meet is the civil standard – namely proving the case on the balance of probabilities. This means that the CBI need only prove that it is more probable than not that the person breached the regulations. It is a significantly lower standard than that which applies in criminal cases – proof beyond a reasonable doubt.
After a number of unsuccessful court challenges, the first ASP is now up and running. It relates to the lending practices of the now defunct Irish Nationwide Building Society (INBS). A number of individuals who were officers of INBS before its collapse face charges of alleged irregularities around compliance with INBS' lending practices. Through its special liquidators, INBS had already admitted defaults but the ASP is being contested by the relevant officers.
It remains to be seen whether the ASP will prove to be the informal, expeditious and cost-effective process envisaged by the legislature. However, it is certain that the institution of the ASP in this case signals a focus by the CBI on individual responsibility by senior managers for the regulatory default of their employer. Furthermore, the issue is firmly on the Irish law reform agenda and the CBI is actively participating in that dialogue.