MFSA offers secret deals on non-compliance offences to select companies, individuals

Since 2014, the Malta Financial Services Authority has been offering secret settlements to a select few financial services companies or individuals caught breaching compliance rules, meaning they may avoid the mega fines, publicity and potential reputational damage that others face in similar situations.

The secret settlement system was confirmed by Finance Minister Clyde Caruana in reply to a parliamentary question from PN MP David Agius in April this year.

Caruana said, in his answer, that since 2014, the MFSA had reached five settlements with finance companies or individuals. There were no settlements at all between 2007 and 2014.

He refused to give any details about the secret agreements or to divulge any information about which companies or individuals were involved, or what rule breaches and type of penalties, they cover.

While regulators in several jurisdictions may offer non-compliant offenders some kind of settlement process, the fact that the MFSA withholds all details of these deals from the industry and the public could have serious competitiveness, transparency and client protection implications, industry sources familiar with the practice told The Shift News.

These practitioners told The Shift News that such settlements usually mean the company/individual concerned is fined a much lower amount than it would otherwise face. The MFSA does not publish any information about the companies or individuals concerned or the action taken against them, and thus, their reputations remain untarnished.

The MFSA, replying to emailed questions from The Shift News, said that beyond confirming the number of settlements reached, further details “cannot be provided for confidentiality reasons.”

This secrecy means it’s not known whether or how many of these secret settlements involved the cancellation of any licence or the revocation, or lowering, of any fine. The lack of transparency means, also, that the public is not told whether the MFSA has declared any practitioner as not ‘fit and proper,’ as a result of a settlement agreement.

The opportunity to reach this type of deal with the MFSA is not offered to everyone, but only to a select few, raising serious questions about discrimination and how and why those offered the deals are chosen, the sources said.

The MFSA said in its emailed replies that “it is generally the person under investigation that would approach the Authority to initiate settlement discussions,” and claimed that “factors taken into account” when the decision is taken include the “determination that the appropriate sanction is still imposed” and whether regulatory breaches have been addressed, among other things.

The Authority’s continued refusal to disclose information that could affect clients and the general public, however, suggests several problematic issues as a result of the lack of transparency. Decisions on compliance breaches and whether to offer settlements or not are taken by the MFSA’s executive committee. Their meetings are closed, and no minutes are published.

The five members of the MFSA’s executive committee are Christopher Buttigieg, the acting CEO up to this month when newly-appointed Joseph Gavin takes over as CEO, Michelle Mizzi Buontempo, Ivan Zammit, Michael Xuereb and Edwina Licari.

The committee previously had six members and included former MFSA CEO Joseph Cuschieri up to his resignation in disgrace after it was revealed that he’d travelled to Las Vegas with accused murderer and money launderer Yorgen Fenech.

Licari, who accompanied Cuschieri to Las Vegas, is still a member of this Committee, despite reports that she and Cuschieri went on 38 business trips together, which cost half a million euros in taxpayer funds.

The five officials on the committee decide who gets a licence and whose gets cancelled. They judge whether an individual should be considered an ‘approved person’ to carry out specific jobs in the industry. They decide on alleged breaches of regulations and the sanctions to be imposed on companies or individuals.

Yet their deliberations are kept secret, withheld even from the companies and professionals affected, industry sources told The Shift. Firms that attempt to challenge decisions by the MFSA or the FIAU find it very difficult to obtain copies of these minutes. The reason given for blocking access to the minutes is “data protection obligations.”

The source explained that when meetings are held to discuss alleged breaches by particular companies or individuals, and where decisions against those specific entities are taken, the respective subject firm, individual or their legal representatives are not allowed to attend.

The MFSA’s practice of agreeing to secret settlements only with the select few also highlights again the clear lacunae caused by the government’s refusal to publish MFSA executive committee members’ conflicts of interest statements.

As a result, “no one knows whether they or their families are clients of the companies which they supervise,” the source said, reflecting concerns expressed by others in the industry.

The MFSA said in its replies that all members of staff are required to declare conflicts of interest, and that “decisions are taken on a collegial basis” and “cannot be taken by one person.”

The finance minister, in reply to an opposition parliamentary question asking for conflict of information details about MFSA officials taking the decisions to grant settlement deals to select subjects, turned down the request citing data protection rights.

                           
                               
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carlo
carlo
1 month ago

MFSA’s mafia deals.

John
John
1 month ago

With which company do Christopher Buttigieg, Michelle Mizzi Buontempo, Edwina Licari, Michael Xuereb and Ivan Zammit (and their families) invest their wealth? They earn more tens of thousands of euro each. Come on, declare your interests.

Who are the “selected few” who are priviledged?

carmelo borg
1 month ago
Reply to  John

John nahseb li int taf hafna affarijiet imma ma tistax tizfelom hux?

John
John
1 month ago
Reply to  carmelo borg

Int ma’ min tahseb li ghamlu ftehim sigriet dawn l-ufficjali imhallsa mit-taxxi tieghek?

Paul Bonello
Paul Bonello
1 month ago

Every case is to be dealt with on its merits and one cannot say, a priori, that there could not be circumstances where the regulator takes a more lenient view and apply a lower sanction. However, in the interest of the transparency MFSA so solemnly preaches in its frequent circulars to practitioners, and to dispel any conflicts of interest, MFSA should publish terse details of any such circumstances as leads it to avoid sanctioning, or reducting the sanction, of a service provider. Otherwise, it is inevitable that one concludes that there is a law for the Gods and a law for the animals. Pretexts of data protection, confidentiality etc must be overcome in the same manner as MFSA othewise publicises its sanctions. Meantime, Licari should have long ago been removed from the Executive Committee; her legitimacy to chastise others is altogether lost and MFSA should develop some spine and do what it preaches.

Betta Ellul
Betta Ellul
1 month ago

Unbelievable bias! How can this be allowed?

Paul Bonello
1 month ago
Reply to  Betta Ellul

Explain yourself: do you mean unacceptable bias in the article, or unacceptable mfsa practice as revealed in article?

John
John
1 month ago
Reply to  Paul Bonello

Dear Paul,

Why do you think that Edwina Licari was made to resign from FIAU, but not from MFSA?

Why do you think that Chris Buttigieg still sits on the Executive Committee of MFSA, despite leading the “blockchain island” project, which resulted in a complete failure and waste of taxpayers’ monies?

Crooks are everywhere
1 month ago

MFSA is even able to refuse publishing documents received under ‘public consultations’ against any transparency or freedom of information standard.

MFSA’s ‘confidentiality’ is only smoke to cover their own corruption, incompetence and mismanagement.

Their reputation won’t change no matter how many articles they sponsor in ToM or how many “copy-paste” guidelines or risk culture papers they publish.

Rgb
Rgb
1 month ago

It comes to no surprise. MFSA is a government entity and has been managed like this fom the outset. The number of promotions dished out to several staff without a call for application, should highlight the issues within this regulator. It’s hilarious that they have an audit section which should be autonomous but never ever find anything wrong. It would also be interesting to see what happened with the famous Vision 2021, how much money was spent (and given to employees in terms of increments), and was the ROI. Similar to other government organisations that always get increases through collective agreements, the employees always rake in more money, while the common citizen gets nothing. Just a reminder that MFSA was also one of the regulators that should have safeguarded that Malta never got grey listed.

James
James
1 month ago

Administered by crooks to ensure the crooks get a free ride.

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