The chief executive of the Malta Financial Services Authority (MFSA) has said reform will be high on the agenda during his tenure, as he and senior representatives from the island defend its reputation and hit back at criticism.
Joseph Cuschieri, who took on the role of MFSA chief executive in April 2018, said during a breakfast briefing attended by International Adviser: “My agenda is reform. Since I joined the MFSA, I started to look at the culture and how it works. I looked at the industry to see the reviews of the MFSA.”
But he could be in for a long road as the country’s financial sector has suffered a number of setbacks over the last few years, including the collapse of Pilatus Bank, Namea Bank and Satabank; as well as the death of journalist Daphne Galizia, who led the Panama Papers investigation into corruption in Malta.
“As a regulator, we need to change our approach to regulation. We need different skills and approaches, in terms of how we are thinking about legislation,” Cuschieri said.
“Our idea is now to future proof the industry. Regulatory technology can make the MFSA more efficient and dynamic.
“Our focus on fintech is predominately based on the premise that the industry is going to look so much different in 10 years. We have seen disruption in banking, and we are going to see more, and this is going to challenge traditional models.”
Kenneth Farrugia, chief executive of Finance Malta, the promotional body for the island’s financial sector, also admitted that change was necessary but was adamant that it was part of the country’s “innovation through regulation” strategy.
Insurance
IA asked Cushcieri about his plans for the future of the Maltese insurance sector.
He added: “We are in discussion with some insurance firms at the moment. We are also, due to Brexit, in discussion with some big insurance firms, who want to have a foothold in Europe with Malta being looked at currently.
“Of course, during our big reform, we need to look at our current insurance legislation because it has served us well for a long time but, like everything, it needs an update.
“At some point, there is going to be a national committee which will consult on the changes that I want to make. We want to make changes to reform which will last for the next 15 years, and insurance will be part of that.”
Citizenship by investment scheme
In October 2018, the Organisation for Economic Cooperation and Development (OECD) released a blacklist of 21 countries because it was concerned their “golden passport” schemes threaten international efforts to combat tax evasion.
That list included Malta.
It was among other European countries, like Monaco and Cyprus, that were flagged as operating high-risk schemes that sell either residency or citizenship.
Malta has sold citizenship to more than 700 people, most of them from Russia, the former Soviet bloc, China and the Middle East.
Edward Scicluna, the Finance Minister of Malta, said that the island is looking to clear up the “misunderstanding” with the OECD surrounding its Citizenship by Investment scheme.
“Although Malta’s scheme is attractive, it’s meant for shareholders from outside. People who take the citizenship are the last to get any advantages as far as taxation is concerned,” said Scicluna. “People who get their citizenship don’t automatically get citizenship taxation, they need to apply.
“Malta is transparent and we publish the names of those on the Citizenship by Investment scheme, unlike some other countries.
“We refuse, with a very strict due diligence, 25% of those who applied. We do not accept everybody.
“We are tackling it at the moment and its not how it was depicted. It is not the intention of the government not to exchange information.”
European Commission
On 22 January, the European Commission urged a crackdown on how countries protect investment-for-status schemes — in which governments offer residence rights or full citizenship in exchange for investment — from abuse.
International Adviser reported that the European Commission is “extremely concerned” about member states offering citizenship to rich investors as they are seen as a potential “security threat”.
Global citizenship and residence advisory firm Henley and Partners also said due diligence on the UK’s Tier 1 Investor applicants should be “improved and enhanced” after the UK Home Office suspended the scheme and then reversed the decision.
