In recent decades, financial crime has entered common parlance – and fills column inches with reporting on fraud, terrorist financing, and corruption.
With the rise of technology, financial crime is becoming increasingly complex in all its forms – from electronic crime and money laundering to evasion of sanctions, insider dealing and market abuse. This rise – and complexity – has become of concern to governments worldwide.
Financial crime can be divided into two types. The first is where activities generate wealth (otherwise known as the proceeds of crime) in a dishonest manner – for example, acquiring someone else’s property through deceit. The second is where a benefit that has already been obtained dishonestly is protected, such as the case of money laundering. With terrorist financing, money or other property may have been obtained by honest means but is used to fund terrorism, for example sending money overseas to fund terrorist groups.
In both types – and in all forms – financial crime posits a threat to the development and stability of an economy.
Recently the Malta Financial Services Authority (MFSA) issued its Supervisory Priorities for 2021, identified following consideration of the market environment, regulatory developments, the Union Strategic Supervisory Priorities and past supervisory experience. These are governance and culture; financial crime compliance; retail investor protection; cross-border operations; cybersecurity; and financial soundness. The priorities outline the themes on which the MFSA’s supervisory focus is to be expected throughout the year.
The Financial Crime Compliance function performs two key roles. As an agent of the Financial Intelligence Analysis Unit (FIAU), the MFSA acts on behalf of, and jointly with, the FIAU in conducting AML/CFT supervision of MFSA authorised entities. This model is replicated with the Sanctions Monitoring Board with whom the MFSA collaborates to ensure that licence holders comply with applicable global sanctions legislation and regulation.
Increased efficiency and effectiveness in detecting, reporting and ultimately curbing financial crime had already been set as an MFSA priority for 2020. Having established a dedicated FCC function in 2019, the MFSA now has a central source of AML/CFT expertise, and an FIAU contact point, which prudential and conduct supervisors can liaise with. Given that the fight against financial crime is key to safeguarding the integrity, prosperity, innovation and trust in the Maltese financial services sector, financial crime compliance was retained as a cross-sectoral priority for 2021.
In line with the MFSA AML and CFT Strategy, the Authority has integrated AML and CFT into the whole spectrum of its supervisory work. In this respect, the Supervisory Directorate has introduced procedures whereby the FCC function provides input to the various sectoral functions, from an AML/CFT point of view. This incudes applications for authorisation, the introduction of an AML/CFT element to all supervisory interactions, updated risk rating systems to include AML/CFT metrics, and enhanced training on anti-financial crime.
Apart from continuing its positive collaboration with the FIAU, the Authority shall persist in building on work performed in 2020 in monitoring the compliance of regulated persons with AML/CFT obligations. Furthermore, the FCC function will issue periodic publications to update the industry of developments concerning AML/CFT and the current status of the AML regime within the industry itself.
The MFSA will be monitoring the priorities set and respond to extraneous unforeseeable events.
For more information visit https://www.mfsa.mt/wp-content/uploads/2020/12/MFSA-Supervision-Priorities-2021.pdf.