The Maltese financial services sector has come under fire time and again over the past few years.
Whether because of money laundering concerns, problems regarding its citizenship-by-investment scheme or financial supervision following the closure of several banks; the country has been in the spotlight fairly regularly.
This has left the Malta Financial Services Authority (MFSA) to try and remedy the many issues all at once.
Preparations for the UK’s exit from the European Union and the outbreak of the covid-19 pandemic have only added to the regulator’s priority list.
To understand how the MFSA is trying to change the Maltese financial sector’s reputation and handle the joint impact of Brexit and the coronavirus outbreak, International Adviser spoke with chief executive Joseph Cuschieri.
“Historically, Malta and the UK have had a close relationship and we are committed to maintaining it,” Cuschieri said. “We have achieved a lot together through collaboration and cooperation, for instance, Malta’s adoption of a culture of compliance.”
But the covid-19 pandemic has proven difficult and the regulator has tried to ease companies back as close to ‘business-as-usual’ as possible, while working remotely.
He continued: “We have sought to reassure financial services firms during this period of uncertainty, while inviting them to make contingency plans for their businesses. This includes issuing updates on temporary measures to support business continuity and minimise disruption.
“All our recommendations align with the three European Supervisory Authorities.
“In addition, we are actively encouraging licensed entities to continue providing timely and accurate information about the potential impact of Brexit on services and ‘business as usual’.
“The MFSA has been preparing for all eventualities including the possibility of a no-deal and is now closely monitoring developments in preparation for the end of the transition period.”
Focus on improvement
But, of course, the global pandemic is not the only issue the Maltese industry is facing, following backlash on projects such as its Individual Investor Programme.
As a result, the regulator is working towards developing a more efficient and transparent sector.
“The global financial services sector faces many challenges. This has been exacerbated by the covid-19 pandemic,” Cuschieri said. “As a result, we have intensified efforts to transform the MFSA as we work towards achieving our ambitious three-year strategic plan.
“We want to increase both the efficiency and effectiveness of our authorisation and supervisory processes. This includes the establishment of a dedicated risk function, financial crime compliance (FCC) team, strengthening of enforcement, investment in technology and data management.
“Central to this is our commitment to be a trusted, international financial centre. Protecting companies and consumers from instances of financial crime is important in itself, but it is also critical if we are to continue to grow sustainably.
“We do not shy away from progress and reform and our approach is as ‘hands-on’ as possible.”
Cuschieri is not in denial about the problems the Maltese financial services sector has experienced in the past.
“Malta also had its challenges and setbacks which have been addressed head-on through reform, policy changes and the adoption of a risk-based approach across the entire authorisation and supervisory activities.
“Furthermore, AML/CFT standards have been integrated across all authorisation and supervisory activities, thus minimising the risk of AML/CFT breaches by licensed entities.
He admitted that Malta struggled to keep up with the speedy evolution that the sector has had around the world.
Cuschieri continued: “The global financial services sector has developed and evolved significantly over the last ten years. For some time, the MFSA lacked the necessary resources and capacity to keep up with this pace of change.
“However, we have made multi-million investments to ensure that we can modernise and meet new challenges. For example, we announced an investment of €20m (£18.5m, €23.7m) over the next three years to boost digitalisation and the automation of all our workflows, supervisory automation and business intelligence platforms.
“Data management and technology are central to the MFSA’s strategy going forward.”
The MFSA has reached out to international experts to use their knowledge and help to make the best out of its investments for the sector.
“Collaboration and the sharing of expertise is critical to the development of sound financial regulatory oversight. The recent withdrawal of Satabank’s banking licence by the European Central Bank (ECB) on MFSA’s recommendation, provides an example of a truly unified approach to supervision and law enforcement.”
It comes as no surprise that the last six months have proven incredibly challenging for the MFSA, as well.
“The global impact of covid-19 has been huge. Of course, the priority has been public health, but we have also seen dramatic changes across business and financial services,” Cuschieri added.
“As Malta’s only financial services regulator, we felt it was imperative to be proactive in ensuring that we were prepared for the pandemic. As a result, we stress-tested our systems, conducting operations with staff working remotely, in order to gauge our operational readiness in the eventuality of a full-scale lockdown, which did not happen in Malta.
“This meant that we were well-positioned when remote working was enacted more widely and so could continue to address financial crime threats and post-Brexit preparations.”
But the MFSA was not the only one who had issues. Malta’s financial sector relies a lot on travel and international talent, and the coronavirus outbreak completely halted that.
“The travel restrictions and widespread global lockdown measures significantly limited the ability of wealth firms to recruit talent internationally. However, domestically, many businesses were able to transition well to remote working practices, aided by the strong digital infrastructure.
“This meant that a lot of businesses, including wealth firms, were able to continue ‘business almost as usual,’ including recruitment. Despite this resilience, understandably some firms were forced to freeze their hiring policies.
“Looking ahead, I am confident that the industry will continue to adapt and strengthen.”
Widening the talent pool
Considering how much the industry counts on talent, especially from abroad, the MFSA has been working on training programmes and campaigns to invite more people to join the sector.
“Training is incredibly important and boosting the expertise and skillset of our team and the industry is a priority,” he said. “We are organising more workshops, training and seminars to increase compliance standards across the sector and enhance professional expertise.
“Over recent months, the MFSA has worked with various local stakeholders including Finance Malta, the University of Malta and the Malta College of Art, Science and Technology to promote and share information relating to opportunities for development within financial services.
“Later in 2020, we are set to launch the Financial Supervisors Academy, which will create a forum to educate and upskill on financial regulation and supervision.”
Technology in financial services has to potential to become a major drive for recruitment as well.
Cuschieri continued: “In terms of training and education across the broader financial services sector, we have several initiatives to encourage new entrants.
“This includes the FinTech Regulatory Sandbox, launched in July. The sandbox aims to foster sustainable technology-enabled financial innovation, in a safe space that allows fintech start-ups and entrepreneurs to test new concepts.
“This is part of our long-term strategy to facilitate and strengthen technological innovation and expertise across Malta and internationally. The spread of covid-19 also provided us an opportunity to develop alternative, digital learning opportunities.
“This enabled us to continue our training programmes with minimal interruptions.”