Strengthening defences: MFSA’s Thematic Review on financial crime

Malta’s financial services sector has undergone significant changes in recent years, shaped by evolving local and international regulatory frameworks, geopolitical developments and emerging typologies.

Speaking to BusinessNow.mt, Matthew Scicluna and Sarah Vella from the MFSA’s Financial Crime Compliance function, explain how this review fits into a much broader national effort to combat financial crime.

“Against this backdrop, the Malta Financial Services Authority (MFSA) has stepped up its supervisory efforts, through targeted thematic reviews and Dear CEO letters to ensure that licence holders have in place robust and effective control frameworks to address these emerging threats.” Mr Scicluna explains.

One such initiative is the Thematic Review on Mitigating the Funding of Terrorism and Sanctions Evasion Risk targeting Financial Institutions and Crypto Asset Service Providers.

Selection of scope

Ms Vella explains that the selection of the sample and areas of focus being targeted in the thematic review are not random but take into consideration a range of relevant aspects.  

“The National Risk Assessment, which essentially informs the MFSA’s AML/CFT supervisory efforts, serves as the starting point of our determination when assessing which sector and area of focus we should target”

The National Risk Assessment, which brings together various local stakeholders, is a country-wide risk assessment on money laundering, terrorist and proliferation financing and targeted financial sanctions. “From a geopolitical perspective, Crypto Asset Service Providers and Financial Institutions have gone through various developments in 2024”, she says.

Mr Scicluna highlights sanctions compliance as another key area of focus in the thematic review.

“At a time when sanctions are being given greater importance and the regulatory framework is continuously evolving, we wanted to ascertain that MFSA licence holders have adequate controls in place to ensure compliance”

Extending the focus

Following FATF’s recent publications, the MFSA has recently rolled out the second iteration of the thematic review now targeting Banks.

“This thematic exercise’s focus was extended to consider crime typologies particular to Banks. Of course, what applies to Crypto Assets does not necessarily apply to Banks, and vice versa.” Mr Scicluna also explains that the concept of proportionality and risk-based remain crucial.

The exercise was not carried out in isolation.

“The MFSA continuously cooperates and collaborates with other local stakeholders, including the Financial Intelligence Analysis Unit, the Sanctions Monitoring Board and the National Coordinating Committee. Their valuable input was also sought in this exercise.”

From findings to guidance

Mr Scicluna explained that following the conclusion of these thematic reviews, the Authority is issuing guidance to communicate and remind the industry of its supervisory expectations.

“The MFSA has been prioritising the issuance of further guidance to assist licence holders in the implementation of their obligations. Through these Dear CEO letters, we are providing an overview of our observations, together with the Authority’s supervisory expectations, as aligned with the relevant regulations and frameworks” he said.

The findings observed may also inform the MFSA’s future outcomes-based supervision.

Not a box-ticking exercise

Ms Vella emphasises that these initiatives are designed to deliver meaningful outcomes rather than serve as a box-ticking exercise.  

“Our supervisory efforts are not about ticking boxes but about achieving real outcomes that strengthen the financial services sector as a whole. This is not a standalone project,” she says. “It’s part of an ongoing national effort, informed by international developments and FATF publications.”