Ahead of the publishing of the Moneyval report on 12 September 2019, the MFSA had already implemented a significant re-think of its AML standards and procedures, following extensive consultation with local and international institutions. The MFSA has also taken on board specific recommendations listed in the Moneyval report and has initiated changes ensuring AML is integrated as a key element of supervision throughout the full supervisory cycle of an entity’s relationship with the Authority.
What were the initiatives undertaken over the past twelve months?
1. The setup of a Financial Crime Compliance (FCC) function
The creation of a dedicated function confirmed the strategic importance of AML/CFT supervision as an intrinsic part of the MFSA’s prudential and conduct oversight. The setup was strengthened further through the engagement of 10 international experts, enabling the MFSA to achieve an unprecedented level of depth and quality in its joint inspections of licence holders with the FIAU.
2. Closer collaboration with the FIAU
The MFSA is working more closely with the FIAU to increase the quality and intensity of its investigations. The additional resources have resulted in a substantial increase in the number of inspections carried out.
3. A reform in authorisation procedures
Authorisation procedures were significantly improved to ensure the AML process is more stringent, with a focus on the shareholding structure, governance framework (including key functions), internal controls and business models presented.
4. More rigorous due diligence procedures
The MFSA has reviewed the definitions of “fit and proper” procedures to be applied at all stages of onboarding processes, setting out higher due diligence expectations for licence applicants. In 2018, the MFSA refused 25% of the applications, a notable increase from the 7% in 2017.
5. The introduction of a Register of Beneficial Owners of Trust
Addressing the recommendations in the Moneyval report, relating to the Register of Trust Ultimate Beneficiary Owners, the Authority has fully implemented the National Strategic Action Plan requirements on beneficial ownership information on trusts. This included the setting up of a Register of Beneficial Owners of Trusts which will be extended to all Trusts by 1 January 2020.
What’s in the pipeline?
1. Stronger collaborations with internal institutional bodies
Keenly aware of the international dimension of financial crime, the MFSA is envisaging stronger interactions with foreign regulators and international bodies. In fact, a string of training sessions and workshops have been organised throughout September 2019 together with the US Embassy, guaranteeing greater knowledge-sharing and an opportunity for further collaboration.
2. A greater investment in technology and human resources
Investment in more technical capacity and supervisory instruments, as well as additional resources, will help the MFSA achieve a better understanding on the increasingly sophisticated ways in which corporate structures are being exploited for money laundering purposes.
3. The publication of Standards for Company Service Providers (CSPs)
Later on in the year, the MFSA will be publishing a consultation document outlining its proposed standards for due diligence processes which should be carried out by CSPs. Recognising how significant their role is in bringing new entities to operate in Malta, the Authority would like to ensure that this responsibility is taken seriously and measures for scrutinising new operators are clearly communicated.
4. The formulation of a Risk Appetite Statement
A Risk Appetite Statement which defines the amount of risk the Authority is willing to accept in pursuit of its mission and in carrying out its strategic plan, will be published in the next few months. This Statement would underpin the MFSA’s strategy, explaining the ‘why’ behind the Authority’s actions, including its approach towards accepting or refusing licence applicants.
