Financial and operational independence of MFSA among recommendations by IMF

The International Monetary Fund (IMF) warned the Maltese authorities on the strain exerted on the Malta Financial Services Authority (MFSA). The IMF outlined nine key policy recommendations in its annual report on Malta. Malta’s GDP, Brexit’s impact on the country, banking system, MFSA’s capacity constraints and deficiencies, implementation of Anti Money Laundering and Combating the financing of terrorism (AML/CFT) requirements, among other topics featured in the recommendations.

The IMF identified constraints placed on MFSA due to the increasing number of financial entities which were placed under the financial watchdog’s supervision, as well as the new financial products and evolving regulatory environment. IMF recommended that the authorities should ensure that the long-term financial and operational independence of MFSA should be guaranteed, while the resources at MFSA should be in line with the Authority’s hiring requirements. Further, the Fund stated that supervisory actions should not be delayed through judicial appeals, recommending the adoption of an administrative insolvency regime for banks.

In its report the IMF also had recommendations related to AML/CFT requirements, warning that the envisaged expansion of block-chain related activities, as well the existing demand for IIP and Malta’s gaming and financial sectors pose risks related to money laundering and financing of terrorism. The Fund urged for measures to be taken so that the 50-point action plan which was recently enacted is implemented without further delay. The IMF also urged that to close the gaps which exist between the supervisory capacity and enforcement capacity. Furthermore it was recommended to ensure that timely and adequate sanctions were applied in case of breaches.

The Government noted that the IMF praised its work in strengthening the integrity of the financial service in a statement on Wednesday. The IMF remarked that it was important to keep reforming the sector in its report.