MFSA annual report suggests panic ahead of impending Moneyval audit

The MFSA underwent a frantic year in 2020 attempting to get its house in order and mollify international critics at Moneyval and the FATF, the MFSA’s annual report for the year suggests.

The number of inspections the authority carried out jumped and overall income rose by €1 million, while the surplus for the year rocketed almost four-fold on dramatically increased income from fines, the document shows.

The MFSA carried out 419 inspections in 2020, up by 84% on 2019 numbers and by 149% on those in 2018. This is evidence of “a super effort” to catch up on previously lax standards and “may be exclusively attributed to then approaching Moneyval test,” an industry source familiar with the authority told The Shift.

The Council of Europe’s anti-money laundering monitoring body Moneyval carried out an audit of Malta’s financial services jurisdiction in early 2021, after the island failed a similar test in 2019.

Although Malta satisfied the audit, which evaluated the reforms introduced since 2019, the international Financial Action Task Force last week moved Malta onto its so-called grey list, citing lack of enforcement, poor transparency and weak financial intelligence on tax crimes as the main “serious strategic deficiencies” of the jurisdiction.

The fact that the financial services watchdog took in so much more cash from penalties in 2020, which increased to €975,462 in 2020 as against €1.2 million in the previous three years combined, is a strong signal that it had been “lax in its enforcement” until the looming Moneyval test forced it into action, the source said. The authority carried out 52 enforcement actions in 2020, it said in its report.

The increased income from fines boosted the surplus registered for the year, which jumped to €2.7 million in 2020 compared to €749,000 the year before. This despite the fact that the government’s contribution dropped by almost €3 million to €21,558 million from €24,764 million in 2019 while operating expenses shrank by nearly €4 million.

The government’s subvention, or contribution, poses a problem in itself, because it “prevents the Authority from acting independently of government, and this is the reason why this institution can never apply enforcement/governance with equity and without political interference,” a veteran auditor told The Shift.

The report also shows that while the MFSA sought in 2019 to shed staff through a voluntary severance scheme (for which it paid €681,585), it then went on to hire 60 new employees, bringing the full complement to 382 in 2020 versus 322 in 2019. This swelled employee costs to €18.1 million in 2020 from €15.5 million in 2019.

The fact that the authority offered a severance scheme to get rid of staff one year, only to increase its staff complement by another 60 employees the following year, raises a number of questions.

The MFSA also reported a tenfold increase in the number of registered beneficial owners of trusts in 2020, with 3,000 declarations being made last year. This implies that the Malta jurisdiction was being chosen specifically because of the secrecy it offered to the owners behind trusts set up in Malta.

“This, in my opinion, is absolute confirmation that Malta was being preferred as a jurisdiction because of its advantage of secrecy of the ultimate beneficial owners of trusts and companies owned by the trusts,” and is one of the main reasons the FATF failed Malta on issues of transparency, experts who spoke to The Shift agreed.


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Henry s Pace
Henry s Pace
1 year ago

‘ Malta satisfied the audit, which evaluated the reforms introduced since 2019, ‘
Just on paper and nothing more than that.

1 year ago

Does the report mention that Edwina Licari was kicked out or resigned from FIAU’s board but she still holds a 100,000 euro job at MFSA? How come Edwina Licari is still sitting on the Executive Committee of MFSA?

Does the report mention that Christopher Buttigieg concluded a world record of 5 promotions in 8 years of Labour Government?

Does the report mention that MFSA reached a settlement with a licensed firm but does not want to divulge the name of the firm?

Does the report mention that members of MFSA’s executive committee still refuse to publish their conflict of interests to the public?

Does the report confirm the conclusions of the investigations in disgraced Joe Cuschieri, the Las Vegas boy?

Graham Crompton
Graham Crompton
1 year ago

The turnover of staff was Cuschieri getting rid of the honest,quality people and employing his girlfriend and other cronies to replace them.
Why is he not facing investigation?

Leonard Schembri
Leonard Schembri
1 year ago

Once Dr Manfred Galdes resigned soon after Labour was elected to government, I felt that there was something very fishy that the elected government wanted to change. Most probably Galdes didn’t want to play the game. Once he was out, MoF Edward Scicluna started poking his fingers in the FIAU. He also introduced the ‘severance scheme’ but quite a few were reemployed soon afterwards. The first step that the FIAU needs to take is to become completely independent from the government as had already been mentioned and was planned in the past.
The FIAU’s one million is a pittance. FATF is wanting to see 1 billion. Anything less, we (the Maltese nation) would be in big trouble.
Not let us wait and see what the FIAU’s next move is going to be.

Godfrey Leone Ganado
Godfrey Leone Ganado
1 year ago

Very good analysis.
What surprised me in reading the report, is that no mention is made in the report on Pilatus Bank and Satabank.
In particular, the report fails to mention the competent persons appointed in terms of the Banking Act, and the Investment Services Act.
Specifically, the report does not mention the apparent failure by the competent persons to send the latest two to three half-yearly reports to the Minister of Finance, who is bound by law to table the reports in Parliament within 10 days.
I must also highlight that the reports that had been sent previously, were very lacking in details, and fell terribly short of the transparency that Moneyval and the FATF expect of serious Financial Services Jurisdictions.
The MFSA neither mentions that the audited accounts of these two banks, have remained unfiled for a number of years. Nor does it mention the status of the FIAU investigation report, and whether any criminal proceedings are being initiated.

1 year ago

A question which also seems unanswered is how many of these fines have actually been paid?

It seems that whenever fines or compensation claims are imposed on MFSA regulated Pension Trustee Schemes these entities immediately launch appeals.

One only has to look at the number of significant awards made by the Arbiter in July 2020 to complaints lodged against their Trustee Companies where appeals were then launched which are yet to be ruled upon to realise these seem to yet more window dressing exercises.

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