Companies offering fiduciary services were the “gatekeepers of the financial system”, a spokesman for the Malta Financial Services Authority said.
The financial services regulator spokesman said it was of fundamental importance that fiduciaries were aware of and abided by the strict requirements relating to anti-money laundering laws to avoid any reputational risk.
The Times of Malta spoke to the MFSA and an industry professional to understand the responsibilities of companies providing fiduciary services in the wake of media reports that Baltimore Fiduciary Services had acted as a nominee shareholder for the underlying company, CapitalOne, which was the subject of investigations by the Dutch and Maltese police.
Nationalist Party deputy leader Beppe Fenech Adami was director of Baltimore Fiduciary Services.
It is the responsibility of the fiduciaries to carry out the necessary due diligence of the underlying companies
The MFSA spokesman said it was the responsibility of fiduciaries to carry out the necessary due diligence on the underlying companies wherein the fiduciary is acting as a shareholder.
He said the financial services watchdog itself was not aware of the identity of the beneficial owners of any underlying company, though it was legally empowered to request and obtain such information from the fiduciary should it be deemed necessary.
The spokesman said that companies offering fiduciary services were also bound by anti-money laundering laws, which demanded they should carry out the necessary due diligence processes on their clients.
The spokesman made it clear that the due diligence had to take place both at client acceptance stage as well as on an ongoing basis thereafter. He said fiduciaries had a duty to monitor their clients’ activities on an ongoing basis, however, the level of monitoring varied according to the circumstances.
“When the fiduciary is merely acting as a shareholder in the underlying company, the level of monitoring would depend on the mandate agreed to with the beneficial owner in the fiduciary agreement.
“The MFSA expects at least a minimum level of monitoring, which would, however, be of a rather general nature, as a shareholder would not be involved in the day-to-day transactions of the company,” the spokesman said.
Financial expert Paul Bonello, who made it clear he was not commenting on Dr Fenech Adami’s case in particular, said it was incumbent on the company offering fiduciary services to exercise proper due diligence at the time of acceptance of the client.
Mr Bonello said it was important there was close monitoring throughout the relationship in respect of the transactions entered into by the fiduciary company in its professional role, whether as director or shareholder.
He said fiduciary facilities should only be offered to clients in a most sparing manner and only after intensive and substantive due diligence at inception stage and effective monitoring and institution of controls throughout thereafter.