Elderfield targets financial sector crime

The prosecution rate of white collar crimes in this country is below the level that is expected by the public.

Matthew Elderfield, the deputy governor of the Central Bank, called for a shake-up of the enforcement agencies and procedures, with more targeting of individual company directors.

“Just as the impetus for our internationally lauded Criminal Assets Bureau came from the tragic circumstances surrounding Dublin’s gangland problem in the 1990s, so too should the recent financial crisis provide a catalyst and opportunity for Ireland to create a truly effective system to assist in the fight against white collar crime, bringing with it individual responsibility for the actions of persons who hold senior positions in financial institutions,” Mr Elderfield said at a conference in Galway yesterday.

The Irish regulatory authorities shipped a considerable amount of criticism in the aftermath of the financial crisis. Mr Elderfield acknowledged there were shortcomings in the regulation and supervision of domestic and international financial sector firms.

While there has been a lot of progress over the past three years in the enforcement strategy for firms, there is more to be made in taking action against individuals for breaches of financial regulation or other cases of financial crimes, he said.

“We do have some substantial cases against individuals in the pipeline, but they are taking a long time. Similarly on the criminal front, despite the efforts of the gardaí, DPP, and ODCE [Office of the Director of Corporate Enforcement], we are still some way from the start of criminal proceedings, never mind their successful conclusion, of cases arising from the financial crisis.”

Taken all together, this lack of progress undermines the public confidence in the enforcement system and weakens the threat and impact of deterrence to head off the next scandal or crisis, Mr Elderfield added.

He did not mention any cases.

The State must look at how enforcement agencies are resourced and how they interact with each other. The Central Bank could learn a lesson from the UK Financial Services Authority, which includes in its legislation presumptive liability for bank directors in the case of a bank that fails and requires public support.

Mr Elderfield asked: “Should there be a general offence — either civil or criminal — for reckless trading of a financial services company? What other adjustments to the legislative framework might result in more effective enforcement action against individuals in cases of financial white collar crime?

“These matters require close scrutiny and careful debate, and not all should necessarily make it to the statute book. But it is important that these issues are examined systematically in a thoughtful and considered way as part of a broader, strategic initiative to strengthen Ireland’s enforcement capability and effectiveness.”

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