The Malta Financial Services Authority plans to become financially independent within the next five years, eliminating the need for government assistance, MFSA CEO Joseph Cuschieri said.

He was addressing journalists on the MFSA’s Strategic Plan 2019-2021, which was published today.

Cuschieri explained that the financial services watchdog is investing heavily in resources and technology to be able to step up its compliance supervision, but the authority also wants to eliminate its dependence on government for funding.

He explained that the authority lost around €14 million in revenue when the Malta Registry of Companies became an independent entity last year. The MFSA’s main source of revenue now is licensing.

The government had stepped in to make up for the shortfall in funding but the MFSA has drawn up a 5-year-business plan to become financially independent, similar to some European counterparts.

Cuschieri explained that, in order to do this, the authority will be revising licensing fees upwards. The current fees are “ridiculously” low, he said. The MFSA, however, is conducting an economic impact assessment as it does not want to give the market any shocks, he said.

This reform in the financing model will ensure the MFSA’s long-term sustainability and equip it with sufficient resources to fulfil its mandate, Cuschieri said.

The reform also includes the introduction of new ancillary fees to cover services that are currently provided free of charge.

Cuschieri also explained that the authority is investing heavily in its human resources and technology in order to be better able to perform financial crime compliance. It has engaged ten foreign experts, who are giving on-the-job training to 18 MFSA inspectors. At the same time, the MFSA has also stepped up the number of on-site visits, something which Cuschieri said was already having an effect on the ground.

To perform this task, the MFSA has recently set up a dedicated team that works closely with the Financial Intelligence Analysis Unit (FIAU) – the national supervisory body. The two entities carry out joint inspections. €3 million are being spent to this effect in 2019.

The MFSA is investing in new technology to be better able to analyse data collected during these inspections. The total planned investments in technology development amounts to €12 million over 3 years. This would enable the MFSA to automate its supervisory activities which are largely carried out manually. 

Cuschieri explained that the number of Suspicious Transaction Reports being raised with the FIAU increased drastically in 2018 and are expected to increase substantially this year as well. 

He clarified, however, that it is ultimately up to the police to follow-up these reports and prosecute when required.

 

Satabank

Cuschieri said the investigation into Satabank is ongoing, and the process to ‘segregate’ the suspicious accounts from the others is ongoing. Once this process is completed, all those holding accounts that are not flagged as suspicious will be able to access their funds. The process is expected to last another two to three months, he said, although most accounts have been cleared.

In October 2018, MFSA had placed Satabank under the charge of a competent person and instructed the bank to stop receiving deposits after a joint inspection by the authority and the FIAU had found shortcomings in the bank’s anti-money laundering procedures.

Asked about the overall progress of the investigation, Cuschieri said the authority is working closely with the FIAU but it is ultimately up to the police to take the issue further and prosecute.

Cuschieri also explained that the MFSA is currently reviewing applications by four new banks to set up shop in Malta. Two of the applications are at a very advanced stage, with the banks expected to receive a license by the second quarter of 2020.

An official report by Moneyval is expected to be published in the coming weeks, Cuschieri said, adding that a lot of progress had been made since the Council of Europe body drafted its report. According to reports, Malta’s anti-money laundering regime had failed the Moneyval review.

 

The strategy

The MFSA CEO said the main aim of the strategy is to give the authority more resources and knowledge.

He insisted that a mentality change is needed in the sector, particularly when it comes to Corporate Service Providers, who are the bridge between MFSA and the rest of the industry.

“We will be changing the standards of who can be a CSP. This will be a gamechanger in the sector.”

Cuschieri said he wants to change the culture of compliance by increasing presence in the field and by explaining more what the MFSA’s expectations for the industry are.

“We are increasing the level of supervision and compliance. We will be telling the industry what we expect of them and what our inspections will focus on. We will help players in the sector to comply with legislation. If they do not, then action will have to be taken.”

The publication of the Strategic Plan follows consultation with licence holders, international experts and recommendations made by international institutions and standard setters, including the European Banking Authority, the International Monetary Fund, Moneyval, the EU Commission and the European Central Bank.