It is time to have a new law covering fiduciary services, as the current legal framework is outdated, Economy Parliamentary Secretary José Herrera has said.
“I would not exclude a review of the laws in the near future. These need to reflect the reality facing the industry today,” he told the Times of Malta.
Fiduciary services are offered by law firms or financial service professionals who take on the responsibility of managing assets on behalf of businesses. About 50,000 companies with foreign beneficiaries are registered in Malta through fiduciary schemes.
The fiduciary services industry was thrust into the national spotlight in August when the name of former prime minister Lawrence Gonzi’s son, David, emerged in a money laundering probe by Italian investigators.
The investigation was part of a crackdown on the Calabrian Mafia, known as ’Ndrangheta, which was traced all the way to a betting company in Gżira.
The level of due diligence of clients carried out by fiduciary companies has been one of the major concerns raised.
Many have suggested that this is too lax and could jeopardise Malta’s reputation in the financial services industry.
Dr Herrera said he had undertaken a review of the current system when the mafia probe was first announced.
One of the main areas that may be subject to change is the liability of local professionals offering these services.
Dr Herrera said the Trustees Act and the Companies Act laid out who could offer fiduciary services and how these people should conduct themselves. However, there was no breakdown of what obligations these professionals had to the State.
“We only have a mention of their obligation in the Criminal Code and this is limited to their clients and not the public. This needs to change,” he said.
Alternattiva Demokratika even suggested ditching fiduciary services legislation, claiming it was a means through which foreign companies could evade tax, or worse, that it could provide a stepping stone for an invasion by organised crime.
Dr Herrera, however, said this was a step too far.
“What do you mean, do away with the fiduciary services? That would be devastating to our financial services industry,”he said.