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Ultimate Beneficial Owner: The Key to a Transparent Financial System

In an effort to ensure a robust assessment of regulatory standards, the Malta Financial Services Authority (MFSA) has implemented a rigorous process for identifying and verifying the ultimate beneficial owner (UBO) of a financial services firm.

Definition of Ultimate Beneficial Owner

The UBO is defined as the individual who ultimately owns or controls a company, through direct or indirect ownership, or through control by virtue of their position in the company. The MFSA conducts thorough checks on an applicant’s competence and integrity to ensure that they are fit to carry out their proposed role within the scope of the business model.

Fit-and-Proper Checks

The process begins with fit-and-proper checks, which involve:

  • Verifying personal information through third-party sources
  • Reviewing regulatory histories in Malta and foreign jurisdictions
  • Collaborating with foreign regulators
  • Obtaining intelligence reports from specialized sources

Once these assessments are satisfied, the MFSA proceeds to the pre-authorization stage.

Pre-Authorization Stage

At this stage, the applicant is notified of an in-principle decision by the MFSA, along with a list of conditions subject to authorization. The applicant must address matters such as:

  • Company incorporation
  • Capitalization
  • Confirmation that they will comply with authorization conditions

Authorization and Post-Authorization Stage

Upon fulfillment of these requirements, authorization is granted through the issuance of an authorisation letter and certificate. The post-authorization stage involves monitoring compliance with regulatory requirements and initiating supervisory processes.

Legislation

The Malta Financial Services Authority Act serves as the source of the MFSA’s jurisdiction, while sector-specific laws grant certain powers to investigate cases of market abuse. Key sector-pecific financial services laws include:

  • Banking Act
  • Insurance Business Act
  • Investment Services Act
  • Virtual Financial Assets Act

The MFSA has also issued its Conduct of Business Rulebook, which transposes EU directives on conduct of business, as well as sector-specific rules and standard licensing conditions binding on financial services firms.

Scope of Regulation

Regulated entities must comply with regulatory criteria and obtain a valid license. The main areas of regulation include:

  • Governance
  • Own funds
  • Liquidity
  • Internal organization
  • Management control

In addition to the above requirements, financial services firms may be subject to rules and regulations from self-regulatory bodies, designated professional bodies, or other financial services organizations.

Conclusion

The MFSA’s commitment to transparency in its authorisation process is crucial in maintaining a robust regulatory framework for Malta’s financial sector.