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Raising the bar for Company Service providers

Company Service Providers (CSPs) are essential to the financial services sector, and many times, the reason why international businesses may choose to operate in Malta. CSPs are very often the first contact point for potential clients and play therefore, a vital role in the industry.

The Malta Financial Services Authority is aiming to raise the bar for all persons providing the services of a CSP by harmonising market entry requirements and addressing existing expectations gaps, and for this reason, has issued a consultation document which proposes the revisiting of the current regulatory framework.

The main changes being proposed in this regard are:

  1. Extending the role of a CSP to include a new service being the provision of professional assistance in the submission of applications for licensing, registration, recognition or any other authorisation issued by the Authority;
  2. The introduction of CSP licence classes to facilitate the adoption of a risk-based approach to regulation and supervision;
  3. Revisiting the current exemptions from registration and the de minimis rule to eliminate any existing supervisory gaps and harmonise market entry requirements;
  4. Enhanced competence assessments for directors, compliance officers, MLROs and designated persons of CSPs;
  5. Rigorous assessments of client on-boarding processes;
  6. Raising the capital requirements to ensure financial soundness; and
  7. Enhanced requirements with respect to governance, compliance and risk management

At present, some CSPs are licensed by the MFSA, whilst other small entities such as lawyers and notaries who provide these types of services on a smaller scale, are exempt from the requirement of obtaining a license. One of the reforms suggested by the Consultation Document is that persons who are currently exempt from a licensing requirement, be brought within the definition of the regulations such that they would also require a license before being able to continue offering the services of a CSP.

There are other various points which CSPs must be aware of, such as making sure that their Money Laundering Reporting Officers (MLROs) keep abreast with various Anti-Money Laundering Laws. CSPs must also be able to explain how they act in the best interests of their clients, such as, for example, where they already act for the client as an accountant or legal advisor, for instance, they will need to explain how they intend to balance their competing interests.

Record keeping is also paramount and CSPs should also be in possession of management information so that they can explain what business they do and what activities they are involved in.

Whilst the consultation document is still a work in progress, various entities have also been lobbying on issues encountered by CSPs in the industry, such as the Chamber of Advocates and the Chamber of Small and Medium Enterprises.

Integritas will keep you posted with updates as and when they happen.

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