Editorial: Fighting for Malta’s reputation
Slowly but surely greylisting was turned into a positive exercise to improve Malta’s reputation and to close any cracks through which operators could fall or deliberately exploit
The Malta Financial Services Authority recently reported very reassuring news: it carried out 1,345 supervisory actions last year, 300 more than 2023, and three times as many as in 2020, shortly before Malta’s FATF greylisting.
This is by no means a new phenomenon: the increases are part of a systematic plan to improve its supervisory role, which pre-date the greylisting. The 2020 figure was 84% higher than in 2019 and a 149% increase over 2018.
But there is no doubt that the MFSA alone would not have been able to turn the tide of international opinion.
Slowly but surely, the shock of the greylisting was turned into a positive exercise to improve Malta’s reputation and to close any cracks through which operators could fall – or deliberately exploit.
The heart-searching, which involved every single stakeholder from the government, to regulators and providers, is paying off.
In 2024, there were 2,380 authorised entities, 76 more than in 2023, with 287 new applications received. Some sectors are doing better than others, though, and there are still reforms in the pipeline, many of which were identified by the Malta Financial Services Advisory Council – an independent body which brought together all the stakeholders.
But what about the MFSA and its role as a supervisor? There is an impressive fact: its fines more than doubled to over €926,000 last year.
One other important issue which needs to be tackled is individuals failing to meet fit and proper standards. Surely the company submitting names of directors and so on would do due diligence and know whether they are fit and proper or not?
Its annual report says that 134 enforcement actions were taken, with 126 penalties, four directives, two licence cancellations and two reprimands. However, this is only part of the story: the cases that are still open or under investigation, for example. And, of course, there were many – 174 – dealing with late submission of documents or total failure to do so.
The MFSA noted in its annual report that it has “significantly ramped up” its enforcement efforts but it is worrying that the sector seems oblivious to this deterrent. Surely the steady increase in supervision means providers should have realised it means business?
A cursory glance at its website shows numerous fines of around €500. Why is this so frequent and why is it still happening at all?
It is important to rule out the assumption that the MFSA is simply being too regimented – just to prove how much it is doing.
The very fact that 38 cases were closed through settlement indicates that it is also trying to educate as well as reprimand, without letting companies off the hook: indeed, those 38 cases represent €736,000 of the €926,485 total.
One other important issue which needs to be tackled is individuals failing to meet fit and proper standards. Surely the company submitting names of directors and so on would do due diligence and know whether they are fit and proper or not?
And, of course, this means that the companies need to follow any developments on an ongoing basis – including those in court – and take action unilaterally rather than waiting to be told to do so by the MFSA.
And, finally, two licences were cancelled outright, again something that makes you wonder why the shareholders thought that they would get away with it in the first place.
The final issue is the legality of penalties, which has been challenged in court over the years, mostly against the Financial Intelligence Analysis Unit but also hanging heavily over the MFSA. Last year, one of the companies involved said it would go to the European Court of Human Rights. There is definitely a solution once all the legal hurdles have been overcome. The sooner the better.