As the single regulator for financial services in Malta, the Malta Financial Services Authority (‘MFSA’) is responsible for the regulation, authorisation and supervision of banks and other financial institutions, investment services providers, the capital markets, insurance service providers, trustees and company service providers; and since 2018, the licensing and regulation of virtual financial assets.
In 2022 the MFSA is celebrating its 20-year anniversary. In fact, the setting up of the Authority as the single regulator, brought together three distinct entities: the Central Bank of Malta[1], the Malta Stock Exchange and the Malta Financial Services Centre. The MFSA was established by an Act of Parliament on the 23 July 2002 which centralised the regulation of the sector under one roof.
The MFSA is a fully autonomous institution, meaning that whilst the Minister responsible appoints the Board of Governors who provides direction and oversight, decisions on regulatory matters are taken by the Executive Committee and the various functions of the MFSA. The Authority has its own legal personality and remit, separate from the Government, and reports directly to Parliament, presenting a yearly report of its activities and an audited copy of the financial statements.
Over the past year, notwithstanding the prevalent Covid-19 pandemic, the MFSA progressed on projects which had been mapped out in its strategic plan. Momentum on transforming the process of supervision was maintained, with significant progress being achieved in relation to the re-engineering of the authorisation process – this is being streamlined in order to make it smoother and more accessible to applicants while laying the groundwork for digitisation.
Together with other local authorities overseen by the National Coordinating Committee on Combating Money Laundering & Funding of Terrorism, the MFSA is on a shared journey of continuous improvement. All the institutions have been working in tandem to meet the commitments made with international standard-setters, including MONEYVAL, the Financial Action Task Force (FATF) and the International Monetary Fund.
The Authority recognises the importance of its public service role, acting as a custodian of a key sector for the jurisdiction. This is also reflected in the culture of the organisation as it continually strives to deliver effective regulatory intervention, increased supervisory coverage, better industry guidance, and an improved service to the industry.
In 2020, the Authority implemented more measures to ensure that bad actors do not have access to the sector, and in fact from 265 applications for authorisations, 25% were either withdrawn or refused.
In terms of ongoing work to strengthen the sector’s compliance culture, the number of supervisory inspections also rose to 419, an 84% increase from 2019 and a 149% increase over 2018 figures. The enforcement actions taken amounted to 52, reaffirming the Authority’s commitment to raising standards within the industry. The organisation is committed to accountability and in this respect, the MFSA publishes Supervisory and Enforcement Effectiveness Dashboards on a monthly basis.
As a key contributor to the crack down on financial crime in the jurisdiction, the MFSA has continued to integrate AML and CFT into its conduct and prudential supervisory activity, as well as its risk assessment, in line with the MFSA AML and CFT Strategy. To this end, the Authority conducted 81 supervisory inspections with an AML focus, in collaboration with the FIAU. It also participated in numerous webinars and published guidance documents with the aim of ensuring that all regulated entities are aware of the risks and threats, as well as their obligations.
As a regulator committed to a risk-based approach and to continuous learning and improvement, the MFSA collects data and information across a wide range of resources, from consumers to Boards. It also engages with numerous stakeholders and participates at the highest level within the European System of Financial Supervision to ensure that every aspect of its work is targeted and relevant. The MFSA's supervisory engagement contributes to the national as well as to the European supervisory priorities.
Looking forward to 2021, the MFSA shall focus its efforts on three priorities:
[i] stability – the MFSA will focus on creating a stable growth environment through focused and effective supervision for the longer-term benefit of the financial services sector;
[ii] continuity– the MFSA will continue with the implementation of its strategic plan and setting the tone for the next strategic period. In this light, the MFSA will continue implementing the major projects which it has embarked upon, such as the planned investment in technology. These projects demonstrate the MFSA’s commitment to achieving greater resource efficiency, including data, intelligence and enhanced time efficiency from which regulated entities will also benefit; and
[iii] fostering sustainable growth – the MFSA will be prioritising initiatives for the sustainable growth of the sector. Initiatives on FinTech, Sustainable Finance, and the MFSA’s Capital Markets and Asset Management Strategies.
The MFSA’s goal continues to be that of fostering a sustainable, resilient and consumer-centric financial services industry which has a strong compliance culture, backed by an efficient and effective regulator as a solid foundation. As with all things done well, it will take time to get where we want to be, but we are on the right track in our resolve to safeguard market integrity and the country’s financial stability while securing consumer protection. I am encouraged by the fact that as eventful as 2020 was and as ambitious as our strategic targets are, the Authority has remained steady on course to achieve a higher degree of supervisory effectiveness. The MFSA is set to continue investing in people, processes and technology, growing further its capacity and capabilities, to ensure proper supervision of an evolving and dynamic financial services industry.
Dr Christopher P. Buttigieg, Chief Officer Supervision and Chief Executive Officer ad interim, Malta Financial Services Authority