Financial services have been an important pillar of the Maltese economy for the past three decades. However, it is now opportune to take a fresh look at the sector and the Malta Financial Services Authority has an important role to play in this respect.
Since the financial crisis of 2008, regulation of providers of financial services has gone into overdrive. The fact that Malta is part of the European System of Financial Supervision (ESFS) means that Malta is at the forefront of these initiatives.
Regulators and the industry alike have had to adapt to a high-intensity influx of wide-ranging regulation, be it resolution, cybersecurity, open payments, anti-money laundering, sustainable finance, crypto assets and data protection, without mentioning intervening factors, such as Brexit.
This past decade has been challenging. Keeping up with this ever-changing landscape requires a new approach to regulation. An effective financial services regulator needs to have a strong horizon-scanning function to anticipate developments at a European level and identify upcoming trends. It’s also not just about preparing the regulator for the incoming changes but also the industry.
This has, in fact, been one of the lessons learnt by the MFSA with the introduction of the ‘effectiveness’ assessment in the Moneyval evaluation process: it is not just about the implementation of a law or a standard but also about how the industry is effectively implementing such.
An effective financial services regulator needs to be one that understands the challenges faced by the industry and supports it with outreach, educational initiatives and regulatory certainty.
The MFSA has undergone a process of capacity building over the past couple of years, investing in resources to raise the bar and ensure that the financial services sector in Malta can be safe and reputable. In this manner, Malta can once more count on the sector as a strong pillar of the Maltese economy.
Ensuring that AML/CFT was at the very top of the MFSA’s agenda was, in fact, one of our foremost priorities in 2020. Albeit painful in the short term, a stronger culture of compliance is how we will be able to establish ourselves as a strong and reputable regional player in the financial sector.
The MFSA has undergone a process of capacity building over the past couple of years- Christopher Buttigieg
Furthermore, the MFSA increased its inspections to 338 prudential visits (up from 202 in 2019), 184 of which included an assessment of AML/CFT compliance. It also conducted an additional 81 AML/CFT inspections that were performed by the MFSA as agents of the Financial Intelligence Analysis Unit and the Sanctions Monitoring Board, up from 25 in 2019.
Safeguarding Malta’s reputation and ensuring the industry’s sustainability was our strategy when it came to the VFA Framework. By opting for stringent regulation, Malta avoided the trap of attracting an unsustainable amount of cryptocurrency business that could have brought about negative consequences to Malta’s economy, and its reputation, and, instead, focused on onboarding serious operators who showed the highest level of compliance understanding.
This approach was meticulous and the MFSA now boasts a compliance framework that is largely ready for the implementation of the recent European Commission proposal for a Regulation on Markets in Crypto-Assets (MiCA), with one licensed operator, an additional 12 having an in-principle approval, two registered White Papers and 19 VFA agents with a number of applications in the pipeline.
Reputation is crucial for the future of the financial services sector in Malta. Whilst this road is long, the MFSA will continue working hard to improve Malta’s reputation by guiding firms to be compliant and, therefore, supporting their future growth, while keeping the door firmly shut for bad actors.
Christopher Buttigieg is CEO Ad Interim, MFSA
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