The UK may not be the shining light in the political world at the moment, but that hasn’t stopped the Malta Financial Services Authority (MFSA) from wanting to copy the regulatory strategy of its British counterpart.
Joseph Cuschieri, chief executive of the MSFA, told International Adviser: “The Financial Conduct Authority has a very good practice, which I want to replicate, they publish a supervisory programme and what they want to do.”
He is set to announce a supervisory programme for financial services firms to make sure there is no doubt about what the regulator expects, so there “shouldn’t be any excuses”.
“[The FCA] spell it out immediately and we need to do that. I personally believe in the self-regulatory approach, which is the British approach.
“The British system is a culture of compliance, which is a traditional regime. They tell firms this is what needs to be done, come back when you have done it.
“The European approach is more you need to do this; we will watch you do this, and we will breathe down your neck until we do this.”
Problems before
Malta’s financial sector has been in the global spotlight for all the wrong reasons over the last few years.
Setbacks have included the collapse of Namea Bank and closure of Satabank for money laundering issues; as well as the murder of journalist Daphne Caruana Galizia, who led the Panama Papers investigation into corruption in Malta.
Cuschieri, who was appointed chief executive in April 2018, is aware that there are issues.
“I think what happened for quite a number of years, the international environment changed dramatically, particularly post financial crisis, with the amount of all the directives that came into play,” he told IA.
“But the authority 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.
“The MSFA didn’t modernise its supervision or invest enough resources to be able to do that.
“It is now a question of playing catch-up and trying to recover that time. The activity is there and it is only a matter of time.”
Initiatives starting to take shape
A little over a year into the role, Cuschieri is not letting the grass grow under his feet.
In February 2019, IA reported on the MFSA’s strategy to combat money laundering and terrorism financing, as well as its long-term Vision 2021 plan, in a bid to ensure it has a resputation as a “trustworthy supervisory authority”.
The MFSA’s total budget in 2019 is around €28m, with 70% spent on compliance.
Malta also recently announced a national agency to solve financial crime, particularly in the areas of money laundering.
“Our police are good at solving conventional crimes, but when it comes to white collar or financial crime, then you need a particular set of skills, which potentially we need to source from abroad,” said Cuschieri.
“This government is trying to do that. It is working with the UK to see how we can model our financial crime agency on theirs.
“We are working with the US on training programmes. We need the support of much larger countries, who have much more resources at their disposal to help Malta.
“With the resources we are putting in place, the amount of training and the funding, it will increase the number of enforcements and prosecutions.
“There will be increased scrutiny and increased oversight. The improvement is being registered.”
He said it is only a matter of time until Malta has all the necessary resources in place and the island reaches a certain standard.
Moneyval
But the problems are not insignifiant and they have caught the eye of various European and global institutions.
In June, the European Banking Authority (EBA) admitted to having “serious concerns” about the supervision of financial institutions by the MSFA; however, it acknowledged that there was insufficient evidence that the Mediterranean country had breached EU law.
In July 2019, local newspaper Times of Malta reported on a leaked document that said Malta’s anti-money laundering regime had failed a review by international monitoring body Moneyval.
Cuschieri said: “The Moneyval report covers the period until November 2018. The assessment started in Q3 2018. I started in April 2018 as chief executive.
“There are areas we need to improve, but we have already started doing that.
“There is a cut-off date. They are not going to take into account what we did last November and the progress that we have had.
“At the end of the day, I see positives of the assessors. I don’t see them as a nuisance because they have reviewed many countries and institutions, so for us it is a learning opportunity.
“The Moneyval review addresses certain areas where we need to improve. The areas which they recognise we have made significant improvements, but they also say we need to make more improvements especially in the prosecution side.”
Insurance
Cuschieri said that the MFSA has three main priorities including banking supervision, financial crime supervision and risk management.
If the changes are successful, it may mean that the watchdog can look to attract other financial services industries to the island.
“One of the areas we are growing is the life insurance space. With the Brexit situation, we have had a number of UK-based insurers applying for a European base in Malta,” said Cuschieri.
“If you want to have a passport for Europe, Malta is the ideal jurisdiction.”
