Posted on 04 February 2020

MFSA's Clear Supervisory Expectations for Licensed Entities


The Malta Financial Services Authority (MFSA) has released a document outlining its expectations on supervision for financial entities.


With this document, the MFSA aims to reduce the scope for risk and drive adoption of measures to improve supervisory processes and strengthen recurring weak points that it has identified.


Entitled “Supervision: Risks Identified, Weaknesses and Expected Controls – A Cross-Sectoral Analysis,” it highlights what the MFSA view as primary risks that financial entities of all kinds may present to their clients and includes best practices to follow.


Tightening up financial entity obligations

By issuing this document the MFSA is letting financial entities know what they expect of them with total clarity. Therefore, financial entities will have little scope for excuses should they fail to comply with what the regulatory body is demanding.


The MFSA expects financial entity board of directors to scrutinize the document and understand how it applies exactly to their organization. They are “expected to address any misalignments between their internal frameworks and practices and the expectations as set out in this document and to establish the necessary processes in order to ensure that the firm will continue to meet such expectations on an ongoing basis.” The authority also wants to see firms carry out the required updates in a proactive spirit of self-regulation and cooperative compliance.


What is the MFSA’s objective?

The overarching reason for issuing this document is to make Malta a more secure jurisdiction for financial sector clients, by enhancing its supervisory engagement and standards. It focuses heavily on anti-money laundering and the counter financing of terrorism (AML/CFT) and on combatting financial crime.


The MFSA sees the Maltese financial sector as particularly exposed to inflows of capital from higher-risk jurisdictions and customers, which indicates a greater risk of financial crime. It is eager to address this weakness with tighter regulatory measures in place. Notably, the authority plans to issue a follow-up document to expand on its proposals to address the identified weaknesses.


MFSA Chief Officer Supervision, Marianne Scicluna commented that: “The Authority is planning to intensify its supervisory work, both in terms of coverage and standard. The MFSA has fused the three pillars of its supervisory strategy – prudential, conduct and AML Supervision – to ensure a holistic and more efficient supervisory approach.”