A survey conducted by Diligex, which studied possible reactions to the new Corporate Services Provider (CSP) regime, found that a material number of warranted professionals and smaller registered CSPs were thinking of exiting the business because they would find it difficult to meet the new regulatory requirements.
Diligex conducted a survey of 64 CSPs in Malta as part of a campaign to raise awareness of the reforms. This number represents nearly 11 per cent of the known CSP universe, according to Malta’s 2019 Moneyval report.
The survey established that many CSPs were concerned by the higher costs associated with complying with the revised regulatory regime. The concerns were particularly expressed by warranted professionals and smaller registered CSPs. A top concern was the cost and availability of Professional Indemnity Insurance (PII), now mandatory for Class B and Class C holders.
In response to the regulatory changes, CSPs were considering three options: avoid, merge or exit. The avoid option was open to CSPs also registered under the Trusts and Trustees Law. Although still required to observe stringent compliance requirements, providers licensed under this law retained their exemption, upon notification. Indeed, several respondents licensed under the Trusts and Trustee Law, were considering surrendering their CSP licence – if they had one.
The merge group were looking to cut their marginal costs by acquiring or entering into partnership with others. This may not be a smooth process, as the survey identified a minority of CSPs who did not trust their competitors’ clients with respect to anti-money laundering due diligence.
A third group, nine per cent, were seriously considering exiting the business. Others, 17 per cent, expressed a low level of confidence that they would continue, even though they would apply for authorisation, and some who were currently registered indicated that they would leave the business.