Onsite inspections by MFSA up by 36% in 2019

The financial watchdog has increased the number of visits to organisations by 36% in 2019, when compared to the previous year, the Malta Financial Services Authority said in its annual report for 2019.

The Malta Financial Services Authority published its audited financial statements and annual report on Monday.

The MFSA has highlighted the following:

  • The launch of the MFSA’s Vision 2021, FinTech Strategy and the development and publication of the MFSA’s 3- year strategic plan 2019 – 2021,
  • Launch and implementation of our Technology and Data Management transformation programme,
  • A relentless focus on consumer awareness, educational campaigns and retail investor protection through increased onsite inspections and enforcement of new rules,
  • Implementation of the International Monetary Fund (IMF) and MONEYVAL reform programmes,
  • Restructuring of the MFSA’s organisational and operating model to strengthen the MFSA’s ability to address current and future challenges,
  • Development of a new risk management function and risk framework, paving the way for a risk-based approach in our supervisory programme,
  • Development of a new fee policy framework so that the Authority becomes self-funded by 2024-2025. This was complemented by a detailed 5-Year Business plan and an economic impact assessment,

Malta’s financial services have been under scrutiny by international monitoring bodies due to various corruption scandals including shuttered banks.

11% of inspections related to money-laundering

In 2018, the MFSA carried out 168 supervisory visits while in 2019 the number went up to 227. Of the visits it carried out in 2019, 65% were prudential or precautionary visits, 24% related to Conduct and 11% related to anti-money laundering and combating the financing of terrorism.

The visits were conducted by the Conduct Supervisory team and focused on the implementation of the European Securities and Markets Authority Product Intervention measures in relation to Contracts For Differences (CFDs) vis-a-vis retail clients; the business models and strategies of investment firms’ vis-à-vis the requirement of MiFID II; and corporate governance and culture within trustees and Company Service Providers, including deep-dive assessments into business and client risk assessment and corporate governance and Board effectiveness.

25 anti-money laundering focused onsite inspections were conducted at licensed entities in 2019. Most of these visits were carried out by the Financial Crime Compliance (FCC) Team which was established to carry out conduct and supervisory activities.

Investing in people

The financial watchdog has been investing in the competencies and skills of its staff, and has also engaged external consultants which is in line with the MONEYVAL recommendations related to the need of resource augmentation.

The FCC team was acting on behalf of the Financial Intelligence Analysis Unit. In its report, the MFSA noted that the information flow between the FIAU and the MFSA prudential and conduct supervisory functions was strengthened.

The FCC function is also in the process of executing a supervisory programme driven by the FIAU risk model and focused on entities which require higher supervisory efforts. With respect to conduct-related inspections, higher focus is being placed on any “red flags” which could lead to anti-money laundering issues and transactions which might involve high-risk clients and jurisdictions.

Anti-money laundering drive increased

The inspections were aligned with the ESMA Common Supervisory Action Programme. In view of the higher risk of certain vehicles being used for money laundering and terrorist financing, the Conduct Supervision team carried out several onsite inspections at licensed trustees and Company Service Providers (CSPs) focusing on business and client risk assessment and client onboarding checks and processes. The Authority also continued to further develop the Trusts Ultimate Beneficial Ownership Register (TUBOR) which is a requirement emanating from the 4th anti-money laundering directive.

MFSA CEO Joseph Cuschieri writing in the annual report said that the financial services sector directly accounted for 6% of the country’s Gross Value Added. The sector grew by 2.3% in terms of gross value added over 2018 and generated 430 jobs, bringing the total jobs within the sector to 12,230 which equals to 4.9% of the total employment in Malta.

The full annual report can be accessed here.