In the ever-evolving realm of financial services, regulatory compliance is more than a mandatory checkbox; it’s a strategic imperative. To empower you on this journey, we are excited to unveil our latest resource, the “Individual Accountability Regime (IAF) Report 2023,” written by our Head of Investments, Azariah Nukajam. This comprehensive report takes you on a guided tour of the IAF, highlighting its key components, the impact of similar governance and oversight regimes around the world, and what the introduction of the IAF regime means for Irish regulated financial services businesses.
Understanding the Individual Accountability Framework
The IAF is designed to achieve better outcomes for consumers and the financial system’s ongoing stability and integrity. It revolves around three pivotal components that impact regulated financial service providers:
- Senior Executive Accountability Regime (SEAR): SEAR seeks to enhance individual accountability, particularly among senior executives. Its primary aim is to nurture a culture of ownership, responsibility, and transparency in decision-making. SEAR lays the foundation for a robust IAF framework and positions your organisation for success.
- Conduct Standards: These standards are the bedrock of ethical behaviour. They encompass principles such as acting with honesty, integrity, skill, care, diligence, and in the best interests of customers. Conduct Standards apply to individuals across all regulated firms, setting a high bar for conduct and ethics.
- Enhanced Fitness and Probity (F&P) Regime: This regime further clarifies firms’ obligations to proactively assess fitness and propriety of the staff that they appoint. It requires firms to certify that individuals carrying out specified functions are fit and proper. It streamlines the process of assessing fitness and probity, reducing ambiguity and ensuring compliance with the latest requirements.
The IAF also guides the way in improvements to the Administrative Sanctions Procedure (ASP), giving the regulator greater enforcement scope and powers; a key tool for preserving market integrity and consumer protection.
How the Individual Accountability Framework is Applied: A Global Perspective
Across the globe, although there is a growing alignment of individual accountability regimes, notably, in some jurisdictions the introduction of these regimes has led to a noticeable improvement in standards of conduct. This shift towards a culture emphasising responsibility, transparency, and ethical behaviour has yielded tangible results, contributing to a reduction in enforcement actions in those areas. However, the effectiveness of these regimes is not uniform across the board. In some regions, their adoption has been somewhat superficial, resulting in less impactful outcomes. In essence, while the basic principles are similar, the success of these regimes depends on how well they are embraced and integrated into the local financial landscape.
The Implementation Journey: A High-Level Outline
The IAF applies proportionally to both in-scope firms and individuals, depending on the material risk their actions and operations pose to market integrity and consumer protection. The core components of the regime, along with the accompanying guidance from the Central Bank, offer a strong foundation for firms embarking on the path to compliance.
The report outlines a high-level roadmap to guide you through the implementation process and includes:
- Setting up an Implementation Team/Focus Group
- Undertaking a Data Gathering Exercise
- Preparing an Implementation Roadmap
- Developing a Project Plan
- Delivering the Implementation Plan and Contingency Plan
- Delivering training across the business
Our Experience and Services
We have extensive experience in assisting clients with the implementation of individual accountability regimes, especially the SMCR upon which the IAF is closely modelled. We are supporting clients by offering a range of services and programme accelerators to help firms meet their obligations on time:
- SEAR toolkit
- Responsibilities mapping support
- Fit and proper assessments
- Senior executive training and workshops, including Duty of Responsibility
- Conduct breach escalation, management, internal and external reporting support
- Development of a compliance monitoring program
The IAF is a transformative shift in the financial services landscape, and navigating it requires expertise and strategy. Our report, combined with our services, positions you for success in the evolving regulatory environment.
Time to Act
The IAF compliance deadline of 31 December 2023 is rapidly approaching. To access the full IAF report, please click below and get in touch with Azariah if you have any questions or would like to discuss further.