MFSA Takes Inspiration from FCA
Over recent years, Malta’s financial sector has received serious scrutiny over its failure to provide a consistently reassuring level of regulation. However, the Malta Financial Services Authority (MFSA) recently announced that it will be adopting a new regulatory strategy that is to be based on Britain’s much-lauded Financial Conduct Authority (FCA) compliance model.
This important development follows a number of concerning events, including the money laundering-related collapse of the banks Namea and Satabank.
Malta’s financial sector had previously received significant adverse publicity following the 2017 murder of the Panama Papers investigative journalist Daphne Caruana Galizia and in June this year, the European Banking Authority (EBA) expressed “serious concerns” regarding the MFSA’s regulation of financial institutions, although it conceded that there was not enough evidence available to prove there had been any breach of EU law.
Joseph Cuschieri, the MFSA’s Chief Executive Officer, told International Adviser* that the international financial services environment has changed dramatically following the 2008 financial crisis as a result of new directives which have come into force.
“But,” he said, “the [MFSA] didn’t develop at the same pace. I think it lagged behind in terms of resources, upscaling and certain standards, which need to go up if we are to be on par with our peers.”*
As a response to the negativity, Cuschieri has made it his mission to modernise the MSFA and to provide it with a much-needed boost in resources.
The goal is clear: Cuschieri says he wishes to reproduce the good practice and supervisory programme of the Financial Conduct Authority. Doing so, he believes, will ensure that financial services firms are fully aware of what the regulator expects and this will mean there can be no doubt or excuses.
“I personally believe in the self-regulatory approach, which is the British approach,” said Cuschieri. “The British system is a culture of compliance, which is a traditional regime.”*
He contrasted the British system with the prevailing European approach, which he characterised as being less to-the-point and inducing a climate of fear for financial services providers.
Growing the regulatory reputation
This year the MFSA has had a €28million budget to work with; 70% of which was earmarked for compliance, while significant sums are also being devoted to fighting money laundering and the financing of terrorism. These sums are contributing to the organisation’s Vision 2021 plan, all of which, Maltese authorities hope, will result in the transformation of the MFSA into a “trustworthy supervisory authority”.*
However, there is still work to be done. For example, there is a finite amount of financial crime expertise in Malta and Cuschieri conceded that the MFSA may need to source top level talent from abroad, particularly the UK. The authority is also taking advice from the US to develop training programmes, and, it is hoped, that these new resources will help improve scrutiny and supervision.
Ultimately, the MFSA wishes to attract new and more diverse financial services industries to Malta, not least UK-based insurers and financial services firms looking to leave the UK post-Brexit.
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* https://international-adviser.com/financial-services-firms-in-malta-to-be-put-on-notice/ Accessed 20-09-19