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Malta Financial Services Authority Upholds Independence and Fairness in Disciplinary Powers

The Malta Financial Services Authority (MFSA) has established robust disciplinary powers to hold financial institutions accountable for regulatory breaches. This ensures transparency and accountability, maintaining a robust regulatory framework that protects the integrity of Malta’s financial sector.

Reporting Suspicions of Financial Crimes

The MFSA’s enforcement function has uncovered evidence of financial crimes such as money laundering, fraud, and misappropriation involving both authorized and unauthorized individuals. In these cases, the authority promptly reports findings to relevant law enforcement agencies, including the Financial Intelligence Analysis Unit or the Executive Police.

Administrative Measures

According to Article 56(j) of the Malta Financial Services Authority Act, any administrative or disciplinary sanction imposed by the MFSA must be published in a medium deemed warranted by the circumstances and nature of the breach. However, public notices are only published after formally notifying the investigated person of the MFSA’s decision.

Exceptions to Naming Individuals

In some cases, the MFSA may opt for anonymous publication of administrative measures, including when the penalty is below €10,000 or if publication could jeopardize market stability, ongoing investigations, or cause disproportionate damage to the involved party.

Financial Services Tribunal

The Financial Services Tribunal (Tribunal) is a dedicated body that adjudicates financial services criminal and civil infractions. The Tribunal has jurisdiction to determine whether the MFSA’s decision was wrongly applied or constitutes an abuse of discretion or manifest unfairness.

Appeals Process

An appeal can be made by an appellant following a decision by the MFSA, which must be made in writing within 10 days from the date the decision was notified. The MFSA has 10 days to file its reply, and decisions imposing penalties below €211 may not be appealed.

Typical Sanctions Imposed

The MFSA can impose administrative penalties on license holders for breaches of regulatory requirements. In determining the quantum of the penalty, the authority exercises discretion in respect of effectiveness, proportionality, and dissuasiveness. The penalties imposed must remain within the limits specified by relevant legislation.

Methodology for Setting Penalties

The MFSA has established a methodology for setting administrative penalties, which assesses the seriousness of a potential breach in five risk categories: very low, low, medium, high, and very high. This classification ensures that penalties are proportionate and serve as effective deterrents.

Range of Regulatory Actions

The MFSA can impose a range of regulatory actions under sector-specific legislation applicable to entities or individuals authorized by the authority or those potentially providing financial services without authorization. These actions include issuing public reprimands, imposing directives, suspending licenses, removing or restricting authorized individuals, and more.

By upholding its independence and fairness in disciplinary powers, the MFSA demonstrates its commitment to maintaining a robust regulatory framework that protects the integrity of Malta’s financial sector.