Financial Crime World

FIAU Emphasizes Proportional Approach to AML/CTF Supervision

The Malta Financial Services Authority (MFSA) has reaffirmed its commitment to adopting a principles-based approach to Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) supervision, ensuring the safety of society and the financial system.

Risk-Based Approach

In a recent statement, the FIAU emphasized that a risk-based approach to AML/CFT supervision is crucial in identifying and mitigating potential risks. This approach allows for more effective targeting of resources, thereby minimizing unnecessary burdens on licensed entities while ensuring that those with higher-risk profiles are subject to closer scrutiny.

Supervisory Categories

The MFSA has outlined three categories of firms under its supervisory purview:

  • Category One: Ongoing supervision of higher risk firms
    • Regular touchpoints with the firm and provision of management information
    • Onsite visits may be conducted where remedial action plans are in place to address identified AML/CFT deficiencies
  • Category Two: Sampled review of other firms
    • Tailored review of highest-risk business areas
    • Ensures all parts of the financial services industry are covered through the risk-based supervisory cycle
  • Category Three: Event-driven reviews of firms
    • Reviews triggered by specific control weaknesses or breaches identified
    • May be triggered by information received from other regulatory bodies, law enforcement agencies, whistle-blowers, self-reporting by firms, or publicly available information

Systems and Controls

The MFSA’s approach to AML/CFT supervision is designed to ensure that licensed entities have the necessary systems and controls in place to prevent money laundering and terrorist financing. This includes:

  • Regular testing of financial crime frameworks and controls
  • Training staff on AML/CFT matters
  • Demonstrating an understanding of their critical role in preventing, detecting, and deterring money laundering and terrorist financing

Senior Positions

Individuals holding senior positions within authorized firms must also demonstrate:

  • An understanding of their critical role in preventing, detecting, and deterring money laundering and terrorist financing
  • Competence and capability to carry out their proposed roles

Principles-Based Approach

The MFSA’s commitment to a principles-based approach to AML/CFT supervision ensures that the regulator is able to effectively balance the need for robust risk management with the need to minimize unnecessary burdens on licensed entities. This approach ultimately enhances the safety of society and the financial system, while also promoting confidence in Malta’s financial services industry.