Strategic Policy Briefing: FinTech & Senior Leadership Accountability (Central Bank (IAF) Act)

Executive Summary

Ireland’s Individual Accountability Framework Act 2023 (IAF) and the Senior Executive Accountability Regime (SEAR) marked a major shift in Irish financial regulation. By eliminating the ‘groupthink’ defence, the IAF allows the Central Bank of Ireland to pursue direct enforcement against individual senior executives without first proving corporate culpability.

1. Context & Legislative Background

The IAF Act was enacted to address persistent governance failures, lack of individual accountability and cultural deficiencies highlighted during domestic banking investigations and tracker mortgage scandals. Passed into primary law in March 2023, the framework gives statutory backing to four key regulatory pillars:

INDIVIDUAL ACCOUNTABILITY FRAMEWORK (IAF)

1. Senior Executive Accountability Regime (SEAR) - Explicit responsibility mapping for Pre-Approval Function (PCF) roles.

2. Conduct Standards Framework - Binding Common and Senior Conduct Standards enforced across staff.

3. Fitness & Probity (F&P) Enhancements - Enhanced due diligence & annual firm re-certifications.

4. Administrative Sanctions Regime (ASP) - Direct CBI enforcement against individuals for conduct breaches.

2. Analysis

The legal cornerstone of SEAR is the statutory requirement for senior managers (PCFs) to take “Reasonable Steps” to prevent regulatory breaches within their area of responsibility. Under previous law, the Central Bank was required to establish firm culpability before pursuing an individual manager (the “participation doctrine”). The IAF Act repealed this requirement, establishing direct liability.

A major compliance challenge for fast-growing FinTechs and payment institutions is typically translating agile management structures into rigid ‘Statements of Responsibilities (SoRs)’ and ‘Management Responsibilities Maps (MRMs)’. ‘Dual-hatted’ executives and remote international directors face heightened risk exposure if governance boundaries are not clearly defined.

3. Stakeholder & Industry Positioning

What this means for:

• Regulated FinTechs & Payment Institutions: It means higher governance standards, but concerns centre from recruitment for non-executive directors (NEDs) and key PCF positions due to personal liability risks.

4. Strategic Outlook & 3-Year Horizon

IAF/SEAR IMPLEMENTATION TIMELINE 

July 1 2024 - SEAR active for executive PCFs in regulated institutions.

July 1 2025 - SEAR extension applies to (Independent) Non-Executive Directors.

2026 - 2027 - First formal CBI individual enforcement actions & industry sector sweeps

• 12-Month Horizon: The CBI will execute targeted sector sweeps reviewing ‘Management Responsibilities Maps’ across high-risk FinTechs and payment firms. Firms must continuously maintain up-to-date role documentation.

• 24-Month Horizon: First public administrative sanction decisions under the reformed ASP against individual executives will be published, establishing judicial benchmarks for what constitutes “Reasonable Steps”.

• 36-Month Horizon: The CBI may expand SEAR obligations beyond traditional institutions and payment firms to encompass a wider cohort of crypto-asset service providers (CASPs) operating under MiCA.

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