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MALTA’S FINANCIAL SECTOR MUST EMBRACE COMPLIANCE TO STAY AHEAD OF FINANCIAL CRIME

As financial crime continues to evolve and become increasingly sophisticated, Malta’s financial sector must stay vigilant and adapt its compliance measures to stay ahead of the game. The country’s financial institutions are no strangers to the risks associated with financial crime, including money laundering, tax evasion, bribery and corruption, and financial market abuse.

A Culture of Compliance is Key

To effectively manage these risks, organisations must instil a culture of compliance within their ranks. This starts at the top, where board members and senior management must set the tone by demonstrating their commitment to compliance. A clear message from the top is crucial in ensuring that employees adhere to the highest standards of compliance.

Enterprise Risk Assessments are Crucial

Each organisation is unique and exposed to different risks based on its business model, services, products, customers, suppliers, and geographical exposures. Therefore, conducting regular enterprise risk assessments is essential to identify, measure, and monitor these risks. Policies and procedures must be built on the results of these assessments to ensure that the organisation’s management of risks is adequate and proportionate.

Internal Policies, Procedures, Systems, and Controls are Essential

A comprehensive financial crime compliance program requires robust internal policies, procedures, systems, and controls. These must outline how the organisation adheres to regulatory requirements and mitigates its financial crime risks. Policies should establish parameters for managing risks, while procedures should translate these policies into workable practices.

Risk-Based Due Diligence is Vital

In today’s sanctions-heavy environment, organisations must conduct thorough risk-based due diligence on customers, counterparties, and assets to manage the associated risks. This includes assessing connections that could facilitate circumvention of sanctions. Technological tools can facilitate this process, making it more efficient and seamless.

Employee Training and Awareness Programs are Crucial

Well-trained employees with strong analytical skills are essential in identifying and managing financial crime risks. Training programs must be continuous and address the organisation’s specific risks. This includes legislative and regulatory changes, as well as emerging trends in financial crimes.

Designated Compliance Function is Essential

A compliance function is critical in ensuring that an organisation operates in line with applicable laws and regulations. A risk-based compliance monitoring plan is essential to ensure that the organisation’s compliance program is effective.

Independent Testing of the Financial Crime Compliance Program is Vital

Regular independent testing of the financial crime compliance program by a qualified internal auditor or external party is crucial in ensuring that it is implemented correctly and follows regulatory requirements. Internal audit results should be reported to the board of directors, and any recommendations must be followed up and closed within a specified timeframe.

Conclusion

Financial crime compliance is not just a concern for regulated entities, but for all organisations operating in Malta’s financial sector. With the ever-evolving technological landscape and innovative business models being adopted, managing financial crime has become a critical challenge. By embracing a culture of compliance, conducting enterprise risk assessments, implementing robust internal policies and procedures, and providing employee training and awareness programs, Malta’s financial institutions can stay ahead of financial crime and maintain their reputation in the global market.