Financial Crime World

Malta’s Financial Sector Regulatory Bodies on the Spotlight as Economy Continues to Thrive

Introduction

Malta’s financial services sector has emerged as the fastest-growing sector of the economy, accounting for approximately 11 percent of the country’s GDP. The industry is driven by core sectors such as asset management, investment funds, insurance, private wealth and corporate services, with fintech, including blockchain and e-payments, also gaining traction.

Key Sectors Driving Growth

  • Asset management
  • Investment funds
  • Insurance
  • Private wealth and corporate services
  • Fintech (including blockchain and e-payments)

Regulatory Framework

The Malta Financial Services Authority (MFSA) is responsible for enforcing legislation within the sector, adhering to EU standards and codes as well as those of most other international frameworks. The Companies Act provides a favorable legal framework for the establishment of investment companies with variable share capital and companies with share capital denominated in foreign currency.

Key Regulations

  • Malta Digital Innovation Authority Act (MDIA Act)
  • Innovative Technology Arrangements and Services Act (ITAS Act)
  • Virtual Financial Assets Act (VFAA)

Blockchain Technology and Fintech

Malta has made significant strides in embracing blockchain technology, including cryptocurrency and other fintech solutions. In July 2018, the Maltese Parliament passed three bills into law - the MDIA Act, ITAS Act, and VFAA. These regulations provide comprehensive details on the treatment of cryptocurrencies, initial coin offerings, and blockchain/DLT service providers.

Fintech Opportunities

  • Blockchain technology
  • Trade finance
  • Group marketing
  • Private banking
  • Trust business
  • Investment banking
  • Venture capital banking
  • Captive insurance
  • Fund management and custody services
  • Private pension funds
  • Outsourcing and coordination services (accounting, administration, insurance management, electronic payments systems)

Challenges Ahead

Despite the growth and opportunities in the sector, there are challenges ahead. The Financial Action Task Force (FATF) has placed Malta on its list of jurisdictions under increased monitoring, citing concerns over the country’s treatment of Ultimate Beneficial Owners (UBOs) and investigation and prosecution of tax evasion. The Maltese government has committed to working with FATF to strengthen its anti-money laundering and counterterrorist financing regimes.

Sources

  • Finance Malta
  • Malta Financial Services Authority