Financial Crime World

Malta Takes Bold Steps to Combat Financial Crime

Ahead of the publication of the Moneyval report on September 12, 2019, the Malta Financial Services Authority (MFSA) undertook a significant overhaul of its anti-money laundering (AML) standards and procedures. This move followed extensive consultations with local and international institutions.

Integration of AML as Key Element of Supervision

The MFSA has taken on board specific recommendations listed in the Moneyval report and has initiated changes to ensure AML is integrated as a key element of supervision throughout the full supervisory cycle of an entity’s relationship with the Authority.

Initiatives Undertaken by the MFSA to Strengthen Financial Crime Prevention Strategies

In the past 12 months, several initiatives have been undertaken by the MFSA to strengthen its financial crime prevention strategies:

  • Setup of a Financial Crime Compliance (FCC) function: This confirmed the strategic importance of AML/CFT supervision as an intrinsic part of the MFSA’s prudential and conduct oversight.
  • Engagement of international experts: The FCC function was further strengthened through the engagement of 10 international experts, enabling the MFSA to achieve an unprecedented level of depth and quality in its joint inspections of licence holders with the Financial Intelligence Analysis Unit (FIAU).
  • Increased collaboration with the FIAU: Closer collaboration has been increased to enhance the quality and intensity of investigations.
  • Improved authorisation procedures: Authorisation procedures were significantly improved to ensure the AML process is more stringent, with a focus on:
    • Shareholding structure
    • Governance framework (including key functions)
    • Internal controls
    • Business models presented
  • Higher due diligence expectations for licence applicants: The MFSA has reviewed the definitions of “fit and proper” procedures to be applied at all stages of onboarding processes, setting out higher due diligence expectations for licence applicants.
  • Introduction of a Register of Beneficial Owners of Trusts: A Register of Beneficial Owners of Trusts was introduced, addressing the recommendations in the Moneyval report relating to the Register of Trust Ultimate Beneficiary Owners.

Looking Ahead

Several initiatives are in the pipeline:

  • Stronger collaborations with internal institutional bodies: Stronger collaborations are being envisioned, including a string of training sessions and workshops organized together with the US Embassy to guarantee greater knowledge-sharing and collaboration.
  • Investment in technology and human resources: A greater investment is being made in technology and human resources to achieve a better understanding of the increasingly sophisticated ways in which corporate structures are being exploited for money laundering purposes.
  • Publication of consultation document on due diligence processes: The MFSA will be publishing a consultation document outlining its proposed standards for due diligence processes which should be carried out by Company Service Providers (CSPs) later this year.
  • Risk Appetite Statement: A Risk Appetite Statement, which defines the amount of risk the Authority is willing to accept in pursuit of its mission and in carrying out its strategic plan, will be published in the next few months.

This statement will underpin the MFSA’s strategy, explaining the “why” behind the Authority’s actions, including its approach towards accepting or refusing licence applicants.