In Malta, two regulatory bodies, which have impact on the licensees, are the Malta Financial Services Authority (MFSA) and the Financial Intelligence Analysis Unit (FIAU).

How did we get here?

There have been recent cases where entities have been cited in public statements and have suffered reputational damage. This is likely to have had three consequences, which have led to the following:

• A reluctance among individuals to assume prescribed positions such as Director, MLRO and Compliance Officer for which they hold personal responsibility;
• An increase in the number of STRs being reported to the FIAU, for fear that failing to do so may be seen as poor judgment at a future point;
• A reduction in the quality of information being submitted as part of the STRs, given the desire among MLROs to get such matters moved “off their desks” as quickly as possible.

The language widely used among licensees to describe the role of regulators from their points of view appears to have become polarised between those who see regulators as “enablers of business” and those who take the negative view that they are “blockers of business”. Further, there is concern amongst individuals working with licensees to improve the robustness of their business models that they may be “caught up” in any subsequent prohibitions despite their role to address shortcomings.

In our view, regulators need to fulfil roles, which may be seen as conflicting. One relates to assisting Malta in the development of its financial sector, whilst the other involves ensuring that business is not of the type, which could be detrimental to our reputation, thus damaging that same sector.

However, with the increase in monetary fines issued by the FIAU in relation to AML/CFT failures, the increase in regulatory inspections and the influx of new and proposed regulations, suggest that there is a perception that the competent authorities are increasingly more interested in playing their enforcement roles as opposed to a role of helping develop the sector locally. That is highly unlikely to be the case but it appears to be the common perception.

How do we resolve this?

The traditional response is often that it is better to “keep one’s head down” to avoid attention, which is not helpful. A lack of willingness to engage may stem from a lack of trust and that requires attention.

Consider the benefits, which might flow from a truly collaborative relationship between licensees and regulators:

• Clarity over requirements of both parties
• Understanding of issues of high priority over coming year(s)
• Standardised formats for reporting

In the UK, the Joint Money Laundering Steering Group (JMLSG) is a private sector body made up of the leading UK Trade Associations in the financial service industry. The JMLSG produces guidance to assist those in financial industry sectors to comply with their regulatory obligations.

We already have associations in place such as the Malta Association of Compliance Officers (MACO), and the Malta Association of Risk Management (MARM), both of which serve to act as a professional industry voice on matters related to compliance and risk in Malta. Perhaps, these associations in collaboration with the Malta Regulators can produce more guidance to the industry, which will assist licensed entities in fulfilling their regulatory obligations.

Whilst we recognise such a move will not happen without a conscious effort, it is our contention that the benefits of a truly collaborative relationship between licensees and regulatory bodies would be a hugely positive step for the local finance industry.

Should you have any questions on the above or seek guidance on any compliance matters, please contact Aspida Advisory Services (Malta) Ltd on the following email address maltainfo@aspidagroup.com