Last Updated on Thursday, 7 July, 2022 at 9:57 am by Andre Camilleri
Getting Malta out of the FATF’s grey list involved all of the country’s institutions. The Malta Business Registry is one such institution. This newsroom sat down with the Registrar and CEO of the MBR GERALDINE SPITERI LUCAS for an interview, where she spoke about the institution’s work and its efforts to reduce bureaucracy.
Malta has just emerged from the FATF grey list, something which involved work from a number of institutions, one of which being the MBR. What work was carried out over the course of the past year in order to reflect the recommendations put forward by the FATF?
To improve the understanding of ML/TF risks associated with the misuse of companies and to ensure that the MBR is targeting companies which impose the highest risk with respect to potential concealment attempts of Beneficial Ownership (BO) information, a day after Malta was declared greylisted by the FATF, the MBR carried out a risk assessment on commercial partnerships with specific focus on BO information.
This assessment was finalised in August 2021, using data available to the MBR, with contributions from data provided by the Financial Intelligence Analysis Unit (FIAU), the Malta Financial Services Authority (MFSA), the Office of the Commissioner for Revenue (OCfR), the Malta Gaming Authority (MGA) and the Office of the Attorney General, and consolidated by the National Coordinating Committee on Combating Money Laundering and the Funding of Terrorism (NCC). Then we developed an internal action plan to inspect all high-risk companies identified by February. Thanks to our hardworking employees at MBR’s Compliance Unit, headed by Andrew Schembri, we’ve managed to reach the target.
We worked on a strict action plan in order to ensure that all obligations are met before the targeted deadlines. Progress was monitored on a daily basis and on a weekly basis we used to review the work done so far to examine whether we are on track
As a jurisdiction we did not rely only on the inspections carried out on a risk-based approach. The MBR’s Compliance Unit also conducted onsite inspections on companies that were reported by competent authorities, namely the FIAU and the MFSA, and subject persons (such as lawyers, auditors and company service providers) that the information on the MBR portal does not match with the data they have in hand. This exercise helped a lot in identifying inaccurate BO information.
Since the BO information is available to the public, we even went a step further from both the EU Directives and the FATF recommendations and launched a feedback tool in September 2021 whereby the general public can report any discrepancies that they are aware of. Thus, our Compliance team also conducted onsite inspections on companies that were reported via the new feedback tool.
The risk assessment variables were adopted to each and every new company incorporated. We are now in the process of also updating the risk assessment.
In 2021, the MBR staff attended training on concealment of beneficial ownership and red flags. MBR’s red flags policy was also prepared and shared with all staff. I am a firm believer of education and in fact such training has yielded results: the Compliance Unit has conducted various inspections from the intelligence passed over from desk officers working at the MBR’s Registry Unit. I would like to thank all staff at the Registry Unit for their sterling work in relation to reviewing meticulously each and every beneficial ownership data received at the Registry. Their efficient work was important in order to ensure that the beneficial ownership register is fully populated.
Certain drastic measures had to be taken against companies that failed to file the beneficial ownership information. For this purpose, administrative penalties were imposed on companies that filed late information or did not file the information. Such penalties were issued by the Registry Unit. Then the Legal and Enforcement Unit personnel, who I also thank for their work, were in charge of enforcing such penalties and also in charge of striking off companies that failed to comply to our requirements.
Additional measures were also taken by the MBR to conduct screening on all involvements of a new proposed company (that is before incorporation stage) and also whenever there are changes in beneficial owners, shareholders and directors in an existing company. In both these cases, the screening is not done on a risk-based approach due to the fact that screening is done in all cases without any exemptions. The same screening takes place also before the Registrar initiates the striking off procedure. Any positive hits will be escalated to the MBR’s MLRO to take the necessary action.
We worked on a strict action plan in order to ensure that all obligations are met before the targeted deadlines. Progress was monitored on a daily basis and on a weekly basis we used to review the work done so far to examine whether we are on track. Needless to say, this meant that most times we had to work long hours, and the support of our families and other colleagues was greatly appreciated.
With the addition of new obligations and increase in inspections by the MBR, as reflected in its recently published Annual Report, what has the response from the business community been?
Needless to say no one would be willing to have an inspection carried out by a government agency knowing that in the event a discrepancy was identified, then an administrative penalty of up to €100,000 could be imposed. As Registrar, I personally understand the pressure that the business community was facing, both with the greylisting and, to add insult to injury, a global pandemic. However, we had to work together in order to ensure that we implement all measures necessary in order to be placed again on the white list. The business community understood the repercussions of having Malta included on the grey list even to their business. We worked closely with entities like the Chamber of SMEs and the Chamber of Commerce in order to ensure that the message gets through.
I have spoken about change in culture, by having more compliant companies and therefore our next natural step is to ensure that while we keep the same momentum of enforceability, we ensure that any bureaucracy is tackled
We needed a change in culture. The businessperson could not just focus on business matters and activities and then ignore their legal obligations emanating from laws. Yes, compliance does come at a cost and there were situations where companies had to resort to professionals in order to assist them. We have also worked closely with the Institute of Financial Services Practitioners, the Chamber of Advocates, Malta Institute of Accountants and Malta Bankers Association in order for all advisors and practitioners involved in assisting companies to be aware of what was expected from them.
So in a nutshell, at first our measures were not looked at favourably but over time we have realised that there was a total change of culture in the business community. Needless to say we now have to keep this same momentum.
One of government’s main priorities has always been marketing Malta as a clean and reputable business destination. No doubt, a major part of that work falls under the MBR’s remit since it is responsible for screening owners, directors and shareholders, among others. How many cases have there been when the MBR stopped a business from opening or a director or shareholder from being involved in a business because of questions over their reputation or because of concerns after they were screened?
The MBR is a gatekeeper for sure and that’s why we carry out screening, ask for clarifications where required and reject new companies and new involvements in existing companies. One has to keep in mind that most of the companies are delivered for registration by company service providers and these are subject persons for the purpose of the PMLFTR and are therefore supervised by the FIAU and some companies/individuals may also be rejected at that level, that is, before actually reaching the MBR.
The figure mentioned in the Annual Report of 835 rejected new companies, does not specifically refer to companies that were rejected because of having individuals that are not of repute. That figure includes also companies that failed to file BO information, failed to provide us with evidence that the initial share capital has been paid, also directors involved in other companies that failed to file BO information or disqualified, in accordance with Companies Act, directors/secretaries.
The robust regime that we have built, based on full transparency of commercial entities, makes it very difficult (not impossible) for criminals to come and hide behind a Maltese company. I say it is not impossible and that’s why we have introduced onsite inspections to verify BO information. Needless to say we need to always keep updated as risks change all the time.
Much has been said about the increase in bureaucracy in recent years, which may ultimately become detrimental for Malta’s desire to be an attractive business jurisdiction – do you think that there needs to be more of a balance to make things more streamlined for businesses?
The short answer is yes, definitely. I’ve spoken about change in culture, by having more compliant companies and therefore our next natural step is to ensure that while we keep the same momentum of enforceability, we ensure that any bureaucracy is tackled. From my end I have instructed the Communications Unit to issue a survey and request feedback on where the MBR should improve from our stakeholders (companies and practitioners). We had a good response and we have analysed the results and put everything in an internal action plan. On a larger scale I am happy to exclusively share with you that an exercise has been initiated, which exercise is led by the Ministry for the Economy, in order to eliminate any duplicate processes and streamline them accordingly in order to reduce bureaucracy.
One of the Nationalist Party’s proposals in the last electoral campaign was the removal of certain bureaucratic procedures for voluntary organisations. Such VOs today need to be registered with the MBR and have certain legal obligations with the MBR to fulfil. Do you believe that this is something that can change in the future or is this something necessary in order to safeguard against people who may use VOs to cover up certain financial irregularities?
Just to clarify, the VOs are enrolled with the Commissioner for Voluntary Organisation, with whom we work closely. All VOs (whether foundations, registered associations and unregistered associations) need to register their beneficial owners with the MBR. This obligation for a jurisdiction to have the BOs registered emanates from the AML Directive and also from the FATF recommendations. Therefore, this obligation is for sure necessary. We are aware that the majority of VOs in Malta are small, however, despite the fact that they are small, some of them still handle large sums of money and therefore as a jurisdiction we cannot just say that our VOs are low in risk just because they are small and certainly cannot say that we have to remove all measures.
Having said that, we need to do everything possible in order not to kill Maltese VOs as they form a vital part of our community and most times are of immense benefit to society at large. For this purpose, we are already in discussion with the Commissioner in order to ensure that as entities we reach the right balance and again streamline any duplication of work. I am also a firm believer of the importance to educate all volunteers, especially those acting as administrators, of their obligations at law and their importance. The imposing of obligations is of benefit to the licit VOs because as a jurisdiction we will be able to identify those that are abusing and take the necessary measures to eliminate them.
What are the main areas of focus for the MBR going to be in the coming years?
My intention is clearly to push the drive for a high-performance culture registry, putting stakeholders at the centre of the MBR while remaining true to our values and mission of providing businesses with a sense of security throughout all of their endeavours. We need to ensure that all the work that was done for the FATF’s action continues in order to ensure sustainability.
We need to do everything possible in order not to kill Maltese VOs as they form a vital part of our community and most times are of immense benefit to the society at large
We need to be certain that we are offering an efficient service both in relation to company incorporation and dissolution and also the processing of documents. Complementary to this, is my vision to see the MBR going paperless and seeing the system fully functioning on the DLT system. A lot of development has already been done, however, going paperless is a very ambitious and, needless to say, requires a huge effort and determination, the latter of which our team has plenty of, and it is with that determination that we will succeed in this as well. Once the online system is in place we will already be one step closer to ensuring that bureaucratic processes, in relation to the MBR, are eliminated as the system will guide you step by step on what needs to be done. Needless to say we are going to actively participate in initiatives that ensure the elimination of duplication of requests from various authorities.
As MBR we need to also ensure that the information, both basic and beneficial ownership information, on the MBR’s portal is accurate and up-to-date. This is a topic which is very close to heart as having a proactive register, which is fully transparent with accurate information, is a tool both for competent authorities and professionals involved in the fight against money-laundering and the general public (including businesses).
During my time as chief legal officer I have ensured that when proposing legislation to Parliament, we included measures, and at times even sanctions, to ensure that all companies are adhering to their filing obligations in a timely manner. At the beginning it might have looked too much however now everyone is appreciating that this was needed and that the portal is now more useful than ever before.
In order to continue with our AML/CFT vision, we are working on an automatic support decision-making risk tool in order to identify all companies with a risk rating and therefore from the MBR’s side we would be in a better position on where to focus our efforts.