No law is ever fully future-proofed. To reflect our reality, laws need to be updated in order to remain effective, as well as regularly reviewed to ensure that they remain fit for purpose. 

“The notion of an entity, or company, has legally existed for a couple of hundred years,” said Emily Benson, Head of Conduct Supervision at the Malta Financial Services Authority. “There are two aspects to this construct – one can set up a company and one can run it. 

“Within this context exists the notion of Company Service Providers – that is, those who act on behalf of a company.

“CSPs have been regulated since 2014, with the exception of warranted persons, who are nonetheless subject persons falling within the remit of the FIAU for compliance with anti-money laundering and terrorist financing requirements, and very small operators. This has left a legal gap and, ultimately, an incompletely regulated sector – a situation which came to the attention of the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism, otherwise known as Moneyval.”

It is for this reason that last year, the MFSA launched a consultation document to propose a reform for the sector and updated the Rules for CSPs. These updates follow the amendments made to the Company Service Providers Act, passed by Parliament and published last November 2020. 

Through these amendments, categorisation of CSPs into classes, depending on the services offered, has been introduced. Moreover, the amendments have removed the exemption from licensing for warranted persons and small players offering CSP services by way of business. 

“The updated Rules for Company Service Providers will also provide for supervision,” Benson added. 

This means a move from the concept of registration to authorisation for all CSPs. There are two types of authorisation, each with a different timeline – six months for a simple authorisation and 18 months for a complex one. That said, businesses can carry on operating until the final authorisation. 

The Rules for Company Providers also ensure the proportionality principle is applied while establishing detailed rules on governance systems, core functions and capital requirements expected of CSPs as well as transitory periods, where applicable. The Rulebook outlines the criteria for those classes considered as ‘under threshold’ where a proportionate regulatory approach will apply in line with the Feedback Statement to the Consultation Document issued in April 2021. 

The updated Rulebook was published with the consultation document before being brought into force, in order to give stakeholders time to familiarise themselves with its requirements.

“The role of CSPs is critical as they are primary-level gatekeepers of our jurisdiction, ensuring bad players do not infiltrate the local financial services sector,” added Benson. “Therefore, it is important to raise the standards for CSPs across the board.”

The MFSA has started receiving applications for CSPs’ authorisation and will continue to accept such applications until May 16, 2021. All the information and resources related to the new regime for CSPs, including guidance on completing the application form, can be found on a specifically dedicated section on the MFSA website.

“As part of our outreach to these entities, we have recently organised a virtual training session which was attended by over 500 CSPs, to explain the changes which will be brought about by the reform.”

“I believe that, from the feedback we received, most people were comfortable with the reasonable approach that the MFSA took,” Benson concluded.

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