Issuance of the Regulation on the Extraordinary Fund for financial fraud protection

The Central Bank of the Republic of San Marino announces the issuance of the "Regulation on the Extraordinary Fund for Protection from Financial Fraud," on this day, which will come into effect on February 28, 2022, in compliance with the deadline set by Article 7 of Delegated Decree No. 9 of January 24, 2022.

This measure has been adopted pursuant to the regulatory delegation provided in Article 7 of Delegated Decree No. 168, December 17, 2018, as amended, in line with the guidelines previously expressed by the legislator in ratifying the most recent legislation, specifically with regard to the procedures for the reimbursement of amounts to the beneficiaries of S.M.I. S.p.A. in compulsory liquidation.

In the regulatory context, the provisions have been broadened to encompass a more general scope, extending to other types of financial frauds that also represent unjust financial losses for clients of entities under compulsory administrative liquidation. These provisions also fall within the protective framework set out in Article 2 of D.D. 168/2018 and D.D. 9/2022. Specifically, the provisions address the following:

• Identification of the categories of excluded individuals;

• Limitation of the protection to natural persons and their heirs only;

• Determination of the maximum total compensation per individual;

• Suspension effects of any ongoing judicial proceedings on the payment of compensation;

• Deadline of June 30th for the submission of compensation claims.

• Maximum timeframes for processing indemnity claims submitted to the Fund Management Body at the Central Bank, subject to suspension in cases of incomplete submissions, and the deadlines for responding to requests for additional documentation made by the Liquidation Commissioners to the claimants.

• The annual schedule for the allocation of the Fund, which handles the funds already earmarked in the public budget (referred to as the "financial ceiling").

• The requirement to obtain, as a prerequisite for indemnity payments, authorization for expenditure from the State Congress, alongside its legal validity, following the submission of the detailed and nominative allocation plan to the Secretariat of State for Finance and Budget and the Public Finance Directorate, specifying each beneficiary’s entitlement.

• The Fund's use, as a means of payment for compensation, of drafts and receipts in accordance with the operational standards of the State Treasury;

• The automatic participation of entitled parties in future distributions of the Fund, for any portion of the compensation recognized but not immediately payable, based on the self-replenishment mechanism of the financial ceiling as outlined in Article 6, paragraph 2, of D.D. 168/2018.

The fundamental provisions outlined above are complemented by more detailed guidelines aimed at providing the Fund’s Management Body with sufficiently precise application criteria, ensuring as objective and documentary an approach as possible. This is necessary due to the lack of investigative tools, powers, and judicial expertise typically available for fraud detection and the associated unjust financial loss. The Body is tasked with making decisions swiftly, within a 60-day timeframe.

Annex A has thus been adjusted to align with the Regulation’s contents, stipulating (as previously communicated) that any applications submitted to the Central Bank prior to the finalization of the regulatory framework must be resubmitted, although with the option to reference, for simplicity's sake, the documentation already provided and identified.