Compliance as a Service Provider in Malta
A robust governance framework is the foundation of success for Company Service Providers (CSPs) in Malta. It sets the tone from the top and ensures a culture of compliance permeates every level of the organization.
The Role of Boards of Directors
Boards of Directors play a crucial role in establishing this culture by determining the means to embed it within the company. They must ensure that ongoing monitoring is in place to guarantee its development.
Compliance Requirements
CSPs must comply with local and international regulations such as:
- GDPR (General Data Protection Regulation)
- FATCA (Foreign Account Tax Compliance Act)
- CRS (Common Reporting Standard)
In addition, CSPs must have tailored policies and procedures in place that support the Board’s expectations.
Clear Reporting Lines
Clear reporting lines are vital, with the Compliance and Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) functions documenting their work and reporting to the Board on a regular basis. Senior management must be competent and well-versed in the rules applicable to CSPs.
Staff Training
Staff should receive training to apply procedures in practice.
Three Lines of Defence Model
A “three lines of defence” model is also essential for CSPs, comprising:
- First Line of Defence: Those interacting with clients
- Second Line of Defence: Monitoring and oversight functions
- Third Line of Defence: Assessing internal controls
In larger organizations, this may involve an internal audit function, while smaller entities may rely on a strong Compliance function.
Accountability and Transparency
Accountability and transparency are key tenets of a strong governance framework. CSPs must have:
- Documented policies and procedures outlining responsibilities
- Accurate board minutes
- Records of complaints and breaches
- Client agreements and clear fee structures
- Ability to access and manage information efficiently
Business Risk Management
The COVID-19 pandemic has highlighted the importance of business risk management for CSPs. They must consider:
- Money laundering and terrorism financing risks
- ICT and security threats
The Malta Financial Services Authority has recently issued guidance on implementing technology arrangements, ICT and security risk management, and outsourcing arrangements to harmonize the approach.
Conclusion
A strong governance framework is critical for CSPs in Malta, ensuring compliance with regulations, effective risk management, and transparency in their operations.