The Malta Financial Services Authority said that both the licensed Trust and Company Service Provider and the banking sectors are “fully compliant with international requirements”, in as far as the maintenance and accuracy of Ultimate Beneficial Owner information in Malta, noting that the Trusts Ultimate Beneficial Ownership Register has been transformative in this area.
Speaking to The Malta Business Weekly, the MFSA noted that TUBOR has been transformative in the TCSP sector.
TUBOR is a digital register which centralises information for all trusts in Malta, including information about their UBOs and their connections, both foreign and local. This information is kept in a register so that authorities can access it in case they need to investigate suspected crimes or perform other responsibilities.
The system was implemented as part of wide-reaching reforms being conducted by the MFSA.
Indeed, the number of trusts reported since the implementation of TUBOR has increased over tenfold – going up from 295 and 336 in 2018 and 2019 respectively, to 3,558 this year. The information on the register is up to date, and the MFSA, in fact, has already fined two firms for TUBOR compliance failings.
The Organisation for Economic Co-operation and Development’s tax assessment team was in Malta in early 2019, with the MFSA participating, along with the Office of the Commissioner for Revenue, the Financial Intelligence Analysis Unit and the Malta Business Registry via questionnaires, follow-up information requests, and meetings.
The aim of that assessment was tax transparency, which is, in essence, on whether international requests about the beneficial ownership of assets and trusts within Malta’s jurisdiction are complied with. These requirements are in the Cooperation Regulations, which, in turn, are overseen by the OCR and are relevant to the TCSP and banking sector in so far as maintenance of beneficial ownership information.
“The MFSA is confident that its licence holders in both sectors are currently fully compliant with international requirements,” the MFSA said.
“The most effective tool for ensuring that within the trusts and trustees sector there is 100% beneficial ownership transparency is TUBOR and this was implemented and was fully populated with beneficial ownership information on all trusts after the review period of this OECD Report, which was March 2019.”
TUBOR is not intended to be publicly accessible (in accordance with the 5th Anti-Money Laundering Directive). However, the information in it is shared with other Authorities to support in the discharge of their duties and responsibilities. TUBOR requires that all trusts, irrespective of whether they generate tax consequences, submit ultimate beneficial ownership information to the MFSA.
Noting the conclusions of a recently published report by the OECD, which considered 2018 as the period under review, the MFSA said that, since that period, the MFSA has completely transformed its supervisory approach and invested heavily in resourcing. With regard to the latter, the MFSA has increased its overall compliance headcount, re-allocated resources to TCSP and has established a dedicated TCSP Authorisation team. Furthermore, data management and governance, cybersecurity and ICT risk have been placed as key strategic priorities.
With regard to supervisory effectiveness, the Authority has built and implemented a risk assessment framework, conducting more inspections year on year which is leading to more enforcement interventions. With respect to the banking sector, the MFSA complies with a number of supervisory frameworks and has a very high level of compliance in this regard.
Meanwhile, in an interview with the International Adviser MFSA CEO Joseph Cuschieri spoke of the challenges faced by the MFSA to catch up with the financial services world, especially in the midst of a global pandemic.
“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 team, strengthening of enforcement, and 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 noted that Malta also had its challenges and setbacks, but said that these “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, noting that the MFSA lacked the necessary resources and capacity to keep up with this pace of change. “We are relentlessly making up for years of under-investment in information systems, technology and data management which modern financial supervisors should be armed with,” said Cuschieri.
“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 over the next three years to boost digitalisation and the automation of all our workflows, supervisory automation and business intelligence platforms.
Cuschieri noted that the recent withdrawal of Satabank’s banking licence by the European Central Bank on the MFSA’s recommendation is an example of a “truly unified approach to supervision and law enforcement.”