Instruction No. 23/GR/2023 Amending and Supplementing Instruction 05/GR/2020 on Sanctions Applicable to Credit Institutions

Islamic Republic of Mauritania
The Governor

Nouakchott, 21 DEC 2023

Instruction No. 23/GR/2023 Amending and Supplementing Instruction 05/GR/2020 on Sanctions Applicable to Credit Institutions

The Governor of the Central Bank of Mauritania

• Having regard to Law No. 73.118 of 30 May 1973 establishing the Central Bank of Mauritania;
• Having regard to Law No. 2018-034 of 8 August 2018 on the statutes of the Central Bank of Mauritania;
• Having regard to Law No. 2018-036 bis of 16 August 2018 regulating credit institutions:
• Having regard to Law No. 2019-017 on the fight against money laundering and terrorist financing
• Having regard to Law No. 2018-037 bis of 20 August 2018 on the National Payment System.
• Having regard to Law No. 2004-042 of 25 July 2004 setting the regime applicable to financial relations with foreign countries and their statistical registration;
• Having regard to Law No. 2021-014 of 5 July 2021 on electronic payment services and means
• Having regard to Decree 041/2022 dated 31 March 2022 appointing the Governor of the Central Bank of Mauritania
• Having regard to Instruction 05/GR/2020 of 30 June 2020 on sanctions applicable to credit institutions.
• Having regard to the deliberations of the Prudential Resolution and Financial Stability Council of 24 November 2023

Decides:

Article 1: The purpose of this instruction is to amend and supplement certain provisions of Instruction 05/GR/2020 on sanctions applicable to credit institutions.

Article 2: The annex entitled "Indications on the Calculation of Monetary Sanctions" forms an integral part of this instruction. It details the methods for calculating the monetary sanction for certain infractions, without prejudice to the increases provided for by this instruction.

Article 3: Notwithstanding other disciplinary measures provided for by current laws and regulations, the penalty coefficient for a credit institution increases based on the number of regulatory ratios and standards not met. Non-compliance with a single ratio results in a coefficient of 1.0, non-compliance with two ratios is associated with a coefficient of 2.0, and so on. These coefficients are used to calculate the total amount of the monetary sanction imposed on the credit institution.

Article 4: Articles No. 14, 16, and 20 of Instruction 05/GR/2020 on sanctions applicable to credit institutions are amended and supplemented as follows:

« Article 14: The amount of monetary sanctions is determined based on the nature and degree of severity of the infractions and/or breaches identified, the financial benefits derived from the relevant operations, or the risks associated with them. Monetary sanctions are classified into four categories, with the first category being the least severe and the fourth the most stringent:

The first category includes sanctions applicable to infractions resulting from the failure to complete administrative formalities.

The second category includes sanctions applicable to infractions and/or breaches resulting from non-compliance with legislative or regulatory provisions, but which are not of a nature to affect the financial soundness of the credit institution, particularly regarding accounting, financial and prudential information, internal control, governance, infractions related to anti-money laundering and terrorist financing regulations, and the exercise of banking and foreign exchange activities.

The third category includes sanctions applicable to infractions and/or breaches resulting from non-compliance with legislative or regulatory provisions that are considered particularly severe and/or that pose high risks to the credit institution, depositors, or financial stability. Infractions to prudential regulations notably fall into this category.

The fourth category concerns enforcement measures taken in application of the provisions of Article 87 of the banking law. »

« Article 16: The amounts of sanctions for categories 2) and 3) are doubled and then tripled in case of recidivism or persistent breach of the infraction. This situation arises when a credit institution, after having been subject to an initial monetary sanction, fails to implement the injunctions or measures required by the Central Bank within the regularization period set for it. These increases are added to the aforementioned penalty coefficients. For the number of recidivisms, the progression of the increase continues by doubling, tripling, quadrupling, and so on, depending on the number of recidivisms.»

« Article 20: Each infraction repeated after the expiration of the regularization period indicated by the Central Bank is considered a new infraction. »

Article 5: The annex of Instruction 05/GR/2020 on the classification of infractions and sanctions is partially amended as follows:

o Exceeding the maximum authorized level of net foreign exchange positions by currency (or globally only in case of no currency-by-currency exceedance): the daily penalty is 10% of the excess amount,

o Delays in submitting a legal or regulatory document: A penalty of 500,000 MRU is imposed for each working day of delay in submitting a required legal or regulatory document,

o Doubling of the penalty after 3 days of delay: If the delay persists beyond 3 working days, the daily penalty is doubled. This means that the initial financial sanction of 500,000 MRU per day is then multiplied by 2 for each additional working day beyond the three-day period.

Article 6: Without prejudice to other sanctions and disciplinary measures provided for, the refusal to provide documents or information, as well as the deliberate or negligent concealment of information, results in a category 2 sanction. However, if this conduct aims to conceal a particularly deteriorated or compromised financial situation, the sanction is elevated to category 3.

Article 7: Sanctions are notified by the General Directorate responsible for Banking and Financial Supervision, or by Specialized General Directorates, particularly regarding infractions related to mandatory reserves and foreign exchange regulations, after informing the General Directorate responsible for banking supervision.

Article 8: This instruction enters into force as of its signature date. It repeals and replaces any prior contrary provisions.

Mohamed-Lemine DHEHBY
The Governor

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Annex: Indications on the Calculation of Monetary Sanctions

Nature of Infraction	Method of Calculating Monetary Sanction	Penalty Coefficient	Number of Recidivisms
A - Solvency: (Instruction 01/GR/2018 and 03/GR/2019)
● Minimum capital representation standard	● 5% of the amount of the shortfall in net Tier 1 capital.	Non-compliance with a single ratio results in a coefficient of 1.0, non-compliance with two ratios is associated with a coefficient of 2.0, and so on	Amounts are doubled and then tripled in case of recidivism. The progression of the increase continues by doubling, tripling, quadrupling, and so on, depending on the number of recidivisms.
● Non-compliance with the net Tier 1 capital ratio	● 5% of the amount of the shortfall in net Tier 1 capital.
● Non-compliance with the net capital ratio (excluding buffers).	● 5% of the amount of the shortfall in net capital. (non-cumulative penalties; the highest amount shall be retained)
B - Liquidity (Instruction 02/GR/2019)
● Non-compliance with the short-term liquidity ratio (LCR)	● 5% of the amount of the shortfall in high-quality liquid assets.	Non-compliance with a single ratio results in a coefficient of 1.0, non-compliance with two ratios is associated with a coefficient of 2.0, and so on	Amounts are doubled and then tripled in case of recidivism. The progression of the increase continues by doubling, tripling, quadrupling, and so on, depending on the number of recidivisms.
C - Risk Concentration (Instruction 11/GR/2012, 08/GR/2012)
● Non-compliance with the maximum risk concentration coefficient	● 5% of the excess amount relative to the 25% of capital threshold	Non-compliance with a single ratio results in a coefficient of 1.0, non-compliance with two ratios is associated with a coefficient of 2.0, and so on	Amounts are doubled and then tripled in case of recidivism. The progression of the increase continues by doubling, tripling, quadrupling, and so on, depending on the number of recidivisms.
● Exceeding the threshold of 8 times net capital for the cumulative risk amount exceeding 10% of net capital (Article 2 of Instruction 11/GR/2012)	● 5% of the excess amount relative to the threshold
D - Transactions with Related Parties (08/GR/2012)
● Execution of an unauthorized transaction with related parties	● 5% of the transaction amount	Non-compliance with a single ratio results in a coefficient of 1.0, non-compliance with two ratios is associated with a coefficient of 2.0, and so on	Amounts are doubled and then tripled in case of recidivism. The progression of the increase continues by doubling, tripling, quadrupling, and so on, depending on the number of recidivisms.
● Non-compliance with the provisions of Instruction 08/GR/2012 Regulating the relations of credit institutions with related parties	● 5% of the transaction amount
E - Coverage of Fixed Assets by Net Capital (Instruction No. 10/GR/2012)
● Non-compliance with the ratio relating to the balance between net capital and fixed assets	● 5% of the shortfall in net capital to cover fixed assets	Non-compliance with a single ratio results in a coefficient of 1.0, non-compliance with two ratios is associated with a coefficient of 2.0, and so on	Amounts are doubled and then tripled in case of recidivism. The progression of the increase continues by doubling, tripling, quadrupling, and so on, depending on the number of recidivisms.
F - Foreign Exchange Transactions
● Exceeding the maximum authorized level of net foreign exchange positions by currency (or globally only in case of no currency-by-currency exceedance)	● 10% of the excess amount	Non-compliance with a single ratio results in a coefficient of 1.0, non-compliance with two ratios is associated with a coefficient of 2.0, and so on	Amounts are doubled and then tripled in case of recidivism. The progression of the increase continues by doubling, tripling, quadrupling, and so on, depending on the number of recidivisms.
● Execution of an unauthorized foreign currency transaction by the Central Bank (Article 5 of Law 2004-042 of 25 July 2004).	● Five times the amount of the value on which the infraction or attempted infraction was based.