17th June 2020

Due diligence on-site visits by Fund Service Providers in the context of COVID-19.

Statement issued by the Central Bank of Ireland on 16th June 2020.

“Recognising the challenges that fund administrators, depositaries and fund management companies (‘Fund Service Providers’) are currently faced with and the uncertain timeline around a return to full operations including on-site working arrangements, the Central Bank is setting out its expectations as regards due diligence arrangements and periodic on-site visits to outsourcing service providers and delegates.

Fund Service Providers are reminded of the importance of maintaining strong ongoing oversight of any outsourcing / delegation arrangements. As part of their ongoing oversight, Fund Service Providers should take into account the location of the relevant service provider(s) and ensure controls are in place to identify and address the material challenges facing such location(s) during the current COVID-19 crisis.

In addition, it remains a matter for the relevant Fund Service Provider to ensure that they are satisfied with the due diligence arrangements in place pertaining to their delegates. Nevertheless, the Central Bank considers that whilst the relevant COVID-19 related travel restrictions are in place, due diligence monitoring may be carried out remotely using the technology available to, insofar as possible, achieve the same result.

Fund Service Providers should conduct a risk assessment to identify aspects of the outsourcing relationship where appropriate due diligence may be difficult or unfeasible to achieve remotely. Where a risk is identified following this assessment, firms should consider what other steps can be taken to mitigate the risk until an onsite review is completed having regard to the scale and materiality of the outsourced activity. Firms should also put a plan in place to carry out an on-site visit when appropriate taking into account travel and other legal restrictions.

Fund Service Providers should ensure proactive engagement with Central Bank supervisors on these matters. This may include informing supervisors if a delay is likely to persist for an extended period of time beyond the typical process for completing on-site visits, setting out the reasons for the delay, why they believe the delay is reasonable in the circumstances and any mitigating actions which have been taken.”