Fitness and Probity Update - CBI Issues Notice of Intention to Amend the List of Pre-Approval Controlled Functions

The proposed amendments to the list of PCFs are:

1. expanding PCF-16 to include branch managers in non-EEA countries;

2. introducing stand-alone PCF in respect of Independent Non-Executive Directors;

3. introducing stand-alone PCF in respect of the Head of Anti-Money Laundering and Counter Terrorist Financing; and

4. removing PCF-31 Head of Investment.

The CBI considers the amendments to the list of PCFs warranted on the basis of its supervisory experience and in view of the changing structure of, and landscape surrounding, the Irish financial services industry. The proposed amendments to the list of PCFs will be applicable to all Irish regulated financial service providers (“RFSPs”) other than credit unions, save for the removal of PCF-31 Head of Investment which will only be relevant for investment firms.

Expanding PCF-16 to include branch managers in non-EEA countries

The CBI explains that the expansion of PCF-16 reflects the changing structure of Irish financial services, including inter alia, the effects of Brexit. The consequence of the proposed amendment will be to introduce the pre-approval requirement of Section 23 of the Central Bank Reform Act 2010 to all branch managers of RFSPs with branches outside Ireland.

No action will be required from RFSPs within which an individual holds an existing PCF-16 designation. However, RFSPs now captured by the expansion of PCF-16 will be required to review their fitness and probity assessment under Section 21 of the Central Bank Reform Act 2010 in respect of individuals in situ and submit confirmation of such an assessment to the CBI.

Introducing stand-alone PCF in respect of Independent Non-Executive Directors

The CBI emphasises that Independent Non-Executive Directors are an integral component of the board of an RFSP and a fundamental safeguard within an RFSP’s governance framework. The CBI intends to split the existing PCF-2 Non-Executive Director into (a) PCF-2A Non-Executive Director and (b) PCF-2B Independent Non-Executive Director to reflect the distinction between these functions.

The CBI confirms that all PCFs will be re-designated as PCF-2A. RFSPs will be required to notify the CBI which individuals should be designated as PCF-2B and confirm that the RFSP has undertaken the relevant due diligence to assess independence.

Introducing stand-alone PCF in respect of the Head of Anti-Money Laundering and Counter Terrorist Financing

Anti-money laundering and counter terrorist financing currently sits within PCF-15 Head of Compliance with responsibility for Anti-Money Laundering and Counter Terrorist Financing Legislation. The CBI wishes to introduce a stand-alone PCF-52 for Head of Anti-Money Laundering and Counter Terrorist Financing to reflect the increasing importance of the role and the number of appointments of individuals to carry out this role in its own right.

All individuals currently designated as PCF-15 Head of Compliance with responsibility for Anti-Money Laundering and Counter Terrorist Financing Legislation will have this designation end-dated. RFSPs will be required to notify the CBI of the appropriate PCF designation(s) of an individual, i.e., either PCF-12 Head of Compliance or new PCF-52 Head of Anti-Money Laundering and Counter Terrorist Financing, or both.

Where an RFSP does not re-designate an individual as PCF-52, the CBI states that an RFSP should review its functions and determine whether any would meet the Head of Anti-Money Laundering and Counter Terrorist Financing role. Where it is determined by the RFSP that this role does exist, the RFSP will be required to review their fitness and probity assessment under Section 21 of the Central Bank Reform Act 2010 in respect of individuals in situ and submit confirmation of such an assessment to the CBI.

Removing PCF-31 Head of Investment

The removal of PCF-31 Head of Investment tidies-up duplication with PCF-30 Chief Investment Officer on the list of PCFs. This removal will only be relevant for investment firms.

No action is required from RFSPs - all individuals who are PCF-31 will automatically be re-designated as a PCF-30.

Next Steps

The CBI has invited comments from stakeholders on the proposed amendments to be submitted no later than 20 October 2021.

Once finalised, the amendments to the list of PCFs will be prescribed in regulations issued by the CBI amending the Central Bank Reform Act 2010 (Sections 20 and 22) Regulations 2011. Once these regulations come into effect the in-situ process will commence and a period of 6 weeks will be provided to submit any in-situ confirmations. The CBI confirms that the full application process will apply to any new appointment to the amended PCFs after the regulations come into effect.