Company service providers : gatekeepers to Malta’s financial system

Abstract

Company Service Providers (CSPs) are particularly vulnerable to money laundering and terrorist financing risks due to their role in forming companies and other legal entities. Nonetheless, they are essential gatekeepers to Malta’s financial system, often serving as the first point of contact for individuals and entities looking to invest in Malta. In this regard, CSPs play a crucial role in preventing criminals from using legal entities to obfuscate the ownership of illicit assets. The Malta Financial Services Authority (hereinafter referred to as MFSA or the Authority) recently published “The Nature and Art of Financial Supervision Volume X – Company Service Providers Reform” which outlines the reforms implemented in the CSP sector. This document elaborates on the expectations of the MFSA for current and prospective CSPs.

The purpose of this article is to briefly examine the MFSA’s CSP reform, highlighting its objectives, implementation, and the positive outcomes for Malta’s financial sector. The central argument of the article is that the comprehensive reform of the CSP sector by the MFSA has significantly strengthened Malta’s financial system by enhancing regulatory oversight, ensuring compliance with international standards, and fostering a risk-based and proportionate regulatory framework.

The CSP reform not only ensures that CSPs adhere to fit and proper standards, good business practices, and legal and AML/CFT requirements, but also categorises CSPs according to the nature and complexity of their services. As a result, the reform has effectively reduced the sector’s risk profile and contributed to a more robust, transparent, and resilient financial environment in Malta.