RegSol Blog

First Three Enforcement Actions for the Central Bank for 2019

June 2019

The Central Bank has imposed fines on three firms for varying offences:

  • Permanent TSB were fined €21 Million on 30th May for breaches of Consumer Protection and Code of Practice for Credit Institutions
  • Campbell O’Connor were fined €280,000 on 8th of May for AML/CTF Breaches
  • Bank of Montreal were fined €1,246,189 on 26th of April for breaches of the Central Bank Act, Licencing Conditions and Capital Requirements Regulations

Record Fine for Permanent TSB

Permanent TSB has admitted 42 separate regulatory breaches of the Code of Practice for Credit Institutions 2001, the Consumer Protection Code 2006 and the Consumer Protection Code 2012, the first of which commenced in August 2004. These breaches broadly occurred in four ways:
1)As a result of PTSB’s failure to warn certain customers about the consequences of decisions relating to their mortgage;
2)Incorrect legal interpretation of contractual terms and conditions: PTSB denied certain customers their enduring contractual right to a tracker mortgage as a result of PTSB’s incorrect interpretation of the extent of certain customers’ contractual entitlements.
3)As a result of PTSB’s operational and systems failings;
4)As a result of a decision by PTSB to deny certain customers their correct tracker rate between 2009 and 2010;

As per the Central Bank’s settlement agreement in this matter:
“This fine is the largest imposed to date by the Central Bank under the Administrative Sanctions Procedure. It reflects the gravity with which the Central Bank views PTSB’s failings and the unacceptable harm PTSB caused to their tracker mortgage customers, from extended periods of significant overcharging to the loss of 12 family homes and 19 buy to let properties. In addition to the reprimand and fine, to date PTSB has also been required to pay €54.3m redress and compensation to its impacted customer accounts prior to and as part of the TME(tracker mortgage examination).”

Enforcement proceedings as a result of the Central Bank’s Tracker Mortgage investigations are pending against other lenders and it is worth noting that PTSB’s staggering penalty may not be record breaking for too long. The Central Bank has the power to fine regulated entities up to €10 million or 10% of their turnover; the €21 million fine for PTSB approximated 5 % of its turnover for 2018.

You can read the full Settlement Agreement here.

Campbell O’Connor & Co Fined for Breaches in AML/CTF

On 8 May 2019, the Central Bank of Ireland imposed a fine of €280,000 on Campbell O'Connor & Company for five breaches of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (the "CJA 2010").  The Central Bank determined that the appropriate fine was €400,000, which was reduced by 30% to €280,000 in accordance with the settlement discount scheme provided for in the Central Bank's Administrative Sanctions Procedure. The Central Bank's investigation into the Firm commenced following a themed supervisory inspection which was part of its ongoing engagement with the investment firm sector.

Breaches identified were as follows, mainly under Section 54:
• Failure to conduct appropriate money laundering/terrorist financing ("ML/TF") risk assessment as it relates to terrorist financing and customer and  geographic risk
• Failure to adopt adequate policies and procedures for preventing and detecting ML/TF.
• Failure to monitor and scrutinise customer transactions.
• Failure to provide training to staff on identifying suspicious transactions.
• Failure to ensure that all necessary arrangements were in place with third parties whom the Firm relied on to conduct customer due diligence measures on the Firm's customers.

You can read the full Settlement Agreement here.

Bank of Montreal fined for breach of Banking Licence

On 26 April 2019, the Central Bank reprimanded and imposed a fine on Bank of Montreal Ireland plc for breaching a condition of its banking licence by failing to submit three operational risk returns to the Central Bank, and failing to establish and maintain effective processes and internal controls to ensure compliance with this regulatory reporting condition. The Firm has admitted the breaches in full.

This is the Firm’s second reprimand and fine for deficiencies in regulatory reporting. The Central Bank’s investigation found that the breaches were caused by:
  • the Firm’s failure to establish and maintain effective processes and controls to ensure the submission of operational risk returns;
  • an over-reliance on Bank of Montreal group policies;
  • and  the use of an informal process to comply with its obligation to submit operational risk returns.

The Central Bank determined that the appropriate fine was €1,780,269 which was reduced by 30% to €1,246,189 in accordance with the settlement discount scheme provided for in the Central Bank’s Administrative Sanctions Procedure (“ASP”). Previously, the Central Bank had reprimanded Bank of Montreal in 2014 for three breaches of capital adequacy regulations and fined it  € 650,000.

Since 2006 the Central Bank has imposed fines of more than €70m under its administrative sanctions procedure and has made 127 settlements.

You can read the full settlement agreement here.

Judy De Castro for RegSol