The Malta Financial Services Authority’s role is to protect consumers of financial services and ensure market integrity – and it does this by making sure that all market participants comply with applicable rules and regulations, therefore ensuring fair competition and a level playing field.
MFSA seeks to ensure that a licensed entity complies with the applicable regulations, from the proverbial cradle to the grave.
MFSA’s Head of Enforcement Edward Grech explained that the lifecycle of a licensed entity starts with a thorough authorisation process.
“During the authorisation process, the potential licensee goes through a due diligence process. This scrutiny of all applicants aims to ensure that they have competence and integrity – of course, this process is conducted in line with applicable legislation and in consideration of the MFSA’s risk appetite.
“If an applicant is granted authorisation, then that licensed entity becomes subject to the MFSA’s supervisory oversight, including routine off-site and on-site supervision with a risk-based model, as well as other supervisory efforts that are outside the set schedule.”
When a licensed entity is found to have weaknesses in adhering to applicable requirements, then the MFSA requires that it addresses such weaknesses in a timely manner. If it fails to do so, then the MFSA may proceed to consider taking enforcement action, which may involve administrative penalties or even in more serious cases disqualifications of authorised individuals and the revocation of a licence.
Such supervisory engagement – from authorisation to supervisory oversight, and if necessary, enforcement action – is aimed towards ensuring consumer protection.
“We keep the public informed about the enforcement actions we take through public notices issued on the MFSA website. Additionally, our Supervisory and Enforcement Effectiveness Dashboard gives an overview of the extent of MFSA’s supervisory engagements and Enforcement action taken.”
The MFSA also ensures that consumers are protected from scams which, Grech confirmed, with the increased use of technology have become more complex.
“Scams are schemes designed to trick people out of their money – with the more popular ones being websites cloning other legitimate websites of authorised entities, and scams linked to forex and cryptocurrencies. Scams operate across borders and worldwide – and have become increasingly sophisticated and manipulative.
“Through dedicated sections on our website, we keep the public informed with explanations on how to detect common types of scams as well as by listing the latest scam warnings issued. Such warnings are also circulated through newspapers and social media to alert a wider audience. The extent of action taken by the MFSA depends on whether the entity is licensed in Malta or not. If it is not licensed by the MFSA and does not have a local presence, action taken is usually limited to the issuing of a warning.
“In the unfortunate event that investors lose money when dealing with locally licensed entities, they may seek compensation through the Office of the Arbiter of Financial Services. However, investors incurring such losses when dealing with unlicensed persons or entities through suspected fraud, would need to report the matter to the Malta Police Force.”
Asked if scams have increased during the coronavirus pandemic, Grech said the MFSA has seen an upward trend.
“This has also been observed in other jurisdictions – more people spending time online due to COVID-19 restrictions may have been a contributing factor to this rise,” Grech explained.
“Everyone should be careful of such scams. Whenever in doubt, people should always check whether the entity is licensed by the MFSA, by keying in the name of the entity in the Financial Services Register available on the MFSA website, and if still in doubt, we encourage them to contact the MFSA. And as always, the usual mantra applies – if it’s too good to be true, then it probably is.”