New generation of financial supervision

29th April 2020 • News

The International Monetary Fund (IMF) and European supervisory institutions have, over recent years, recommended that Malta sharpens its supervisory tools, integrates its efforts and intensifies its regulatory oversight of the growing number of financial institutions in Malta.


The IMF’s Malta Mission Report published last week recognises the progress already achieved.  The MFSA has placed the prevention of money laundering and terrorist financing as one of its strategic priorities. Significant work has been carried out on this front and I am outlining what has been done and is currently ongoing at the MFSA, focusing mainly on: [a] governance of supervision; [b] supervisory programmes; [c] due diligence; and [d] resources.


Governance: Recent organisational restructuring brought together all pillars of supervision to ensure one coordinated reporting line for all supervisory functions, integrating AML/CFT oversight into all regulatory and supervisory monitoring and decisions, during the entire lifecycle of our supervised entities.


Supervisory Programmes:  An all-inclusive approach has been adopted to identify and understand the vulnerabilities, risks and threats to the financial system better. This  is employed at authorisation stage, where the MFSA verifies if applicants are fit and proper, and whether the business plan and operating model provide adequate safeguards and mitigation mechanisms.


Despite  COVID-19, we have continued with our on-site and off-site plans. We are meeting our supervisory targets by devising and employing technology and new data-gathering tools, for remote inspections, discussed with our peers in other member states facing similar challenges. No postponements are planned, unless the specific circumstances require it, allowing MFSA staff to reach ambitious supervisory targets by the end of the year.


Strengthening supervisory engagement will increase enforcement action substantially, and, with it, our supervisory effectiveness and efforts to deter and address regulatory breaches. The new Enforcement Directorate established by the Authority will ensure that such cases are handled efficiently and effectively.


Due Diligence:  A continuously updated and rigorous fit and proper assessment is a key focus of the Authority’s pre- and post-licensing procedures. Improvements continue to be made for the due diligence process to become more intelligence-based, data-driven and more efficient.


Resources: Raising standards requires adequate resources, and this is particularly key in terms of supervision and adequate coverage of licensed entities. The staff complement continues to bestrengthened at the Authority. The compliance functions alone, by the end of the year, will see their staff numbers grow by 45 per cent over the last two years. We have invested not only in numbers but also in terms of expertise and methodology, through the insourcing of a team of international AML/CFT experts and new professionals alongside our permanent teams.


Proper financial supervision requires up-to-date technical expertise for the attainment of the high-level objectives of regulation. The capacity-building exercise to broaden skill sets and address gaps in technical, enforcement and supervisory resources, through a comprehensive training programme, is ongoing.  The MFSA will be launching its Financial Supervisors Academy to train young and upcoming supervisors and give experienced professionals the opportunity to further their technical knowledge.


The MFSA has embarked on a €12m technological transformation programme implemented  over three years. With new investments in IT solutions, knowledge management tools and supervisory automation systems, including business intelligence tools, our technology strategy places formal data governance and centralised data management at its core to support a data-driven supervisory approach.


We are not done with implementing our plan to enhance and right-size our supervisory function. The huge inroads we have made  have also been recognised by the business community and our international counterparts. We are aware that combating money laundering and terrorist financing is mission-critical to the security and integrity of our financial system and that sustainable growth and financial supervision is a key element of the overall framework to address the abuse of the financial system by criminals. And we remain committed to deliver just that.