Instruction No. 0.5 IGR/2020 on Sanctions Applicable to Credit Institutions

Islamic Republic of Mauritania

Governor

CENTRAL BANK OF MAURITANIA

VISA: DAJC Nouakchott, June 30, 2020

Instruction No. 0.5 IGR/2020 On Sanctions Applicable to Credit Institutions

[Contact Information] +222 45 25 22 06 +222 45 25 28 88 Fax: +222 45 25 27 59 info@bcm.mr www.bcm.mr BP 623, Nouakchott, Mauritania

The Governor of the Central Bank of Mauritania,

Having regard to Law No. 73 of May 30, 1973 establishing the Central Bank of Mauritania; Having regard to Law No. 2018-034 of August 8, 2018 on the statutes of the Central Bank of Mauritania; Having regard to Law No. 2018-037 of August 20, 2018 on the National Payment System; Having regard to Law No. 2018-036 bis of August 16, 2018 on the regulation of credit institutions; Having regard to Law No. 2004-042 of July 25, 2004 fixing the regime applicable to financial relations with foreign countries and their statistical recording; Having regard to Decree No. 08-2020/PR of January 21, 2020 appointing the Governor of the Central Bank of Mauritania; Having regard to Instruction No. 18/GR/2008 regulating sanctions applicable to banking institutions, statutory auditors, and external auditors; Having regard to the deliberations of the Prudential Resolution and Financial Stability Council dated June 29, 2020;

Decides:

Article 1: The purpose of this Instruction is to define the disciplinary sanctions applicable to credit institutions, as well as to their directors and senior management, in accordance with the law on the statutes of the Central Bank and other specific laws governing banking and financial entities.

Article 2: In the event of non-compliance with the legal and/or regulatory provisions governing the exercise of banking and financial activities, the Central Bank may decide to impose one or more of the following sanctions:

• a written warning to comply with legislative provisions within a specified timeframe;
• the payment of one or more fines or penalties;
• the temporary suspension of certain operations;
• the prohibition of carrying out certain operations and all other limitations in the exercise of activity;
• the suspension of all dividend payments;
• the temporary suspension of one or more directors or senior managers;
• the appointment of an interim administrator;
• partial withdrawal of authorization;
• total withdrawal of authorization.

The nature of the sanctions imposed takes into account the seriousness of the irregularities or breaches identified, the risk of failure of the credit institution, the potential consequences for the protection of depositors, and the financial stability of the market.

In its decision, the Central Bank will take into account aggravating circumstances such as late, partial, or inaccurate submission of information, repetition of the offense, delays in implementing injunctions or corrective measures requested by the Central Bank of Mauritania, or failure to comply with commitments contained in program contracts.

Article 3: Disciplinary proceedings are conducted without prejudice to the opening of judicial proceedings, which may be initiated by competent courts against the credit institution, its directors, or senior management under Article 124 of Law No. 2018-036 bis of August 16, 2018 on the regulation of credit institutions, hereinafter referred to as "the banking law".

Disciplinary sanctions are cumulative with criminal sanctions provided for in Articles 121 to 123 of the banking law.

Article 4: Excluding pecuniary sanctions provided for in point 2) of Article 120 of the banking law, sanctions are imposed within the framework of disciplinary proceedings.

Article 5: The opening of disciplinary proceedings is notified by simple letter, or by any other appropriate means, addressed or delivered to the legal representatives of the credit institution. The letter indicates the grievances and/or facts likely to justify a sanction decision. The legal representatives of the credit institution are informed that they may review the file regarding the grievances and facts justifying the opening of the disciplinary proceedings and obtain a copy.

Article 6: The legal representatives of the credit institution must submit or deliver in writing to the Central Bank their observations in response within a period not exceeding ten working days following the date of notification of the opening of the disciplinary proceedings. They shall be received, upon request, by the Governor of the Central Bank or his representative for any explanations they wish to provide.

Article 7: The legal representatives of the credit institution, accompanied by their advisors, are summoned in writing for a hearing before the Governor of the Central Bank and the heads of Banking Supervision in cases where the seriousness of the infractions could lead to the temporary suspension of one or more directors or senior managers, the appointment of an interim administrator, or the partial or total withdrawal of authorization.

Article 8: Sanction decisions, other than pecuniary sanctions, are adopted by the Prudential Resolution and Financial Stability Council.

Article 9: The reasoned sanction decision is formally notified in writing to the legal representatives of the credit institution. It takes effect upon receipt.

Article 10: By way of exception, and provided that the credit institution has not complied with an injunction or a written formal notice from the Central Bank indicating the sanction incurred, or if it reiterates an offense that the Central Bank has asked it to regularize, the Central Bank may immediately impose, without formally opening disciplinary proceedings, a sanction of warning, temporary suspension of certain operations, prohibition of carrying out certain operations, limitation in the exercise of certain activities, or suspension of all dividend payments. The sanction is formally notified in writing to the legal representatives of the credit institution and takes effect immediately.

Article 11: By way of exception, the Central Bank may, in cases of urgency, decide to appoint an interim administrator immediately upon notification of the opening of disciplinary proceedings, after having summoned and, if necessary, heard the legal representative of the credit institution. Urgency exists when, in accordance with Article 90 of the banking law, any delay in the appointment and effective assumption of duties by the interim administrator is likely to worsen the credit institution's difficulties in a manner that seriously affects the rights of depositors and other creditors and/or financial stability in Mauritania, particularly in the event of a liquidity crisis.

Article 12: Pecuniary sanctions are cumulative with administrative sanctions.

Article 13: Pecuniary sanctions are applied automatically once the offense is detected in regulatory declarations submitted to the Central Bank or in application of provisions relating to mandatory reserves, foreign exchange operations, repatriation, and the clearing house. They are applied after notification of grievances to the credit institution when the offense is detected during inspections.

Article 14: The amount of pecuniary sanctions is determined based on the nature and degree of seriousness of the infractions and/or breaches identified, the financial benefits derived from the operations concerned, or the risks associated with them.

Pecuniary sanctions are classified into four categories:

1. The first category includes sanctions applicable to infractions resulting from the failure to complete administrative formalities. The sanction amount for this category is set between 50,000 MRU and 3,000,000 MRU for banks, and between 10,000 MRU and 300,000 MRU for other credit institutions;
2. The second category includes sanctions applicable to infractions and/or breaches resulting from non-compliance with legislative or regulatory provisions, but which are not likely to affect the financial soundness of the credit institution, particularly regarding accounting, financial, and prudential information, internal control, governance, exercise of banking and foreign exchange activities. The sanction amount for this category is set between 500,000 MRU and 5,000,000 MRU for banks, and between 50,000 MRU and 500,000 MRU for other credit institutions;
3. The third category includes sanctions applicable to infractions and/or breaches resulting from non-compliance with legislative or regulatory provisions that are considered particularly serious and/or that pose high risks to the credit institution, depositors, or financial stability. This category notably includes infractions of prudential regulations. The sanction amount for this category is set between 1,000,000 MRU and 50,000,000 MRU for banks, and between 100,000 MRU and 5,000,000 MRU for other credit institutions;
4. The fourth category concerns penalty payments (astreintes) taken in application of Article 87 of the banking law. The penalty payment is calculated on a calendar daily basis, with the amount set between 30,000 MRU and 100,000 MRU for banks, and between 5,000 and 30,000 for other credit institutions.

Article 15: Within the applicable maximum limits, the amount of Category 1) sanctions is automatically doubled and then tripled in case of recidivism, provided that the credit institution has already been sanctioned by the Central Bank twice for the same offense within the last three months.

Article 16: Within the applicable maximum limits, the amount of sanctions for Categories 2) and 3) is doubled and then tripled in case of recidivism or persistent breach when the credit institution, after having received a first pecuniary sanction, has not implemented the injunctions or measures required by the Central Bank within the regularization period set for it.

Article 17: In the case of aggravating circumstances as defined in the last paragraph of Article 2 of this Instruction, the sanction may be increased up to the maximum limit provided for each category of sanctions.

Article 18: Sanctions for failure to submit mandatory documents, the establishment of mandatory reserves, and non-compliance with provisions applicable to foreign exchange operations, repatriation of export proceeds and service remuneration, and the clearing house may be applied as a fixed or daily penalty until the offense ceases.

These penalties are applied and collected automatically. Their amount may be increased in case of aggravating circumstances. The nature and amount of applicable sanctions are indicated in the Annex.

Article 19: In cases where the credit institution fails to comply with the notification of remedial measures to which it must adhere within a specified deadline under penalty of a financial penalty payment, the amount and frequency of the penalty payment are determined taking into account the particular seriousness of the offense and its impact on the financial soundness of the credit institution and financial stability. The amount may be set between 100,000 MRU and 300,000 MRU. The notification may specify a deadline after which the penalty payment may be doubled or tripled.

Article 20: The maximum amount of pecuniary sanctions, calculated cumulatively when the credit institution is subject to multiple sanctions, may not exceed a cap of 50,000,000 MRU.

Article 21: A classification grid of infractions and pecuniary sanctions is provided in the Annex, which forms an integral part of this Instruction. For infractions not identified in this table, the category and amount of applicable sanctions are indicated in the notification of the offense or sanction.

Article 22: The amounts corresponding to pecuniary sanctions are deducted directly from the credit institutions' accounts held at the Central Bank. In the absence of sufficient provisions or if the institution does not hold an account at the Central Bank, collection is carried out at the counters of the Central Bank of Mauritania and, failing payment, by any legal means.

Article 23: In application of Article 126 of the banking law, disciplinary sanctions may be subject to a voluntary appeal to the Central Bank within five working days following the date of their notification. The response is notified to the legal representatives of the credit institution within ten days from receipt of the voluntary appeal.

Article 24: The Central Bank of Mauritania may publish, by any means and in the form it deems appropriate, extracts of disciplinary sanction decisions.

Article 25: This Instruction enters into force as of its signature date. It repeals and replaces all prior contrary provisions, notably Instruction No. 18/GR/2008 regulating sanctions applicable to banking institutions, statutory auditors, and external auditors.

Cheikh El Kebir Moulaye Taher

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Annex: Classification of Infractions and Sanctions

1. Sanctions provided for in Articles 12 to 15 of this Instruction

Infractions subject to Category 1 sanctions	Infractions subject to Category 2 sanctions	Infractions subject to Category 3 sanctions
A - Formation of companies and corporate bodies
• Failure to notify the Central Bank in advance of the opening, closure, or transfer of branches or counters (Article 16 of the banking law)	• Failure to request prior authorization or submission of false documents or false declarations for the appointment of the chairman of the board of directors, the CEO, and deputy CEOs (Article 43 of the banking law)	• Non-compliance with authorization criteria and exercise of unauthorized activities (Article 14 of the banking law)
• Delays in responding to requests for updates regarding elements concerning the bank's legal status, its directors, senior management, and statutory auditors.	• Violation of the prohibition to be a director of more than one credit institution (Article 45 of the banking law)	• False documents or false declarations in authorization requests, capital formation, and origin of funds (Articles 14 and 18 of the banking law)
• Failure to notify the appointment of a director (Article 49 of the banking law)	• Violation of the prohibition preventing the chairman of the board, CEO, and deputy CEOs from exercising management or supervisory functions in a commercial or industrial enterprise (Article 45 of the banking law)	• Irregular formation of capital contributions through direct or indirect financing by shareholders or affiliated persons (Article 10 of the banking law)
• Violation of the prohibition to exercise administrative, management, or supervisory functions in case of criminal conviction (Article 46 of the banking law)	• Failure to request prior authorization (Articles 14 and 15 of the banking law)
• Failure to establish or non-compliance of technical committees (Articles 53 et seq. of the banking law)	• Violation of the prohibition preventing representative offices from carrying out banking operations (Article 30 of the banking law)
• Failure to request prior authorization or submission of false documents or false declarations for the appointment of statutory auditors (Article 66 of the banking law)	• Violation of the prohibition preventing credit institutions from engaging for their own account or for third parties in agricultural, industrial, commercial, real estate, or service activities (Article 20 of the banking law)
• Undeclared exercise of banking activities as an agent, representative, broker, or commission agent (Article 31 of the banking law)	• Violation of the prohibition to grant loans to shareholders, directors, senior management, control and management bodies, and affiliated persons during the first year of activity (Article 21 of the banking law)
• Misuse of the name "Islamic bank" or any appellation not corresponding to the received authorization (Article 4 of the banking law)	• Violation of prohibitions on exercising functions within credit institutions (Article 46 of the banking law)
B - Prudential, accounting, and management standards
• Non-compliance with recommendations other than prudential ones or intended to strengthen the financial structure contained in program contracts (Article 78 of the banking law)	• Non-compliance with prudential standards and remedial measures required (Articles 9, 61 to 64, and 80 of the banking law)
• Non-compliance with rules relating to internal control, risk management, and compliance provided for in current texts (Article 65 of the banking law)	• Non-compliance with prudential measures or measures intended to strengthen the financial structure contained in program contracts (Article 78 of the banking law)
• Lack of prior board authorization for loans and other commitments to affiliated persons or lack of information to statutory auditors (Article 22 of the banking law)	• Distribution of dividends in violation of a limitation or prohibition (Article 120 of the banking law, Instruction 01/GR/2018)
• Non-Sharia compliant operations carried out by Islamic banks (Article 36 of the banking law)
• Failure to take into account or partial consideration of directives aimed at remedying irregularities and deficiencies identified by the external auditor (Article 76 of the banking law)
• Failure to communicate a remediation plan to the Central Bank within the prescribed timeframe (Article 85 of the banking law)	• Absence of implementation or partial implementation of a remediation plan under the required conditions and deadlines (Articles 86 and 88 of the banking law)
• Delays in communicating a legal or regulatory document (Articles 77 and 78 of the banking law)	• Absence of a second statutory auditor (Article 67 of the banking law)	• Absence of statutory auditors (Article 67 of the banking law)
• Late submission of statutory auditors' reports (Article 71 of the banking law)	• Violation of the prohibition preventing the statutory auditor from holding more than two consecutive mandates (Article 69 of the banking law)
• Failure to inform the Central Bank of the dismissal of a statutory auditor (Article 70 of the banking law)
• Actions aimed at opposing inspections by the Central Bank, statutory auditors, or external auditors duly mandated (Articles 72 and 75 of the banking law)	• Refusal of inspections by the Central Bank or duly mandated external auditors (Articles 72 and 75 of the banking law)
• Refusal to communicate documents or information, concealment of information, or communication of knowingly inaccurate information	• Refusal to communicate documents or information, concealment of information, or communication of knowingly inaccurate information aimed at concealing a particularly degraded or compromised financial situation
• Obstruction to access by authorized persons, refusal to communicate information or cooperate, obstruction to information access (Articles 77 and 78 of the banking law)
• Obstruction to inspections of financial companies, parent companies, subsidiaries, branches, or agencies and others (Article 78 of the banking law)
• Obstruction to inspections of intermediaries in banking operations and outsourcing service companies (Article 78 of the banking law)
• Obstruction to inspections of credit institutions in liquidation (Article 105 of the banking law)
• Failure to provide mandatory information to statutory auditors (Article 22 of the banking law)
• Failure to publish or certify financial statements (Article 60 of the banking law)
C - Customer relations
• Refusal to open an account at the request of the Central Bank of Mauritania within the framework of the right to an account (Article 137 of the banking law)
• Non-compliance with legal and regulatory provisions governing customer relations (Articles 138 and 143 of the banking law)
• Failure to consult mandatory risk and payment incident databases (Article 140 of the banking law)
• Non-compliance with information obligations regarding banking terms (Article 142 of the banking law)
• Infringement in the application of the effective global rate
D - Professional secrecy
• Non-compliance with professional secrecy (Article 129 of the banking law)
• Non-compliance with the non-opposability of professional secrecy to the Central Bank, statutory auditors, duly mandated external auditors, persons in charge of combating money laundering and terrorist financing, and the judicial authority (Articles 72, 75, and 129 of the banking law)
E - Mandatory affiliations
• Irregularities in mandatory participation in risk, default, and credit information databases (Articles 139 and 141 of the banking law)
• Failure to pay mandatory contributions to the Deposit and Resolution Guarantee Fund (Article 130 of the banking law)
• Failure to join the professional association (Articles 38 and 145 of the banking law)
F - Sanctions on third parties
• Refusal to communicate by persons in contact with the credit institution (art...