Lawyers, accountants will have to register with the regulator to handle financial services companies

The Malta Financial Services Authority has just published a consultation document proposing more onerous regulations for company service providers

The Malta Financial Services Authority has released a public consultation document intended to raise the bar for company service providers
The Malta Financial Services Authority has released a public consultation document intended to raise the bar for company service providers
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Lawyers, accountants, and notaries providing assistance to financial services firms will have to register with the Malta Financial Services Authority under proposed new rules.

The MFSA is proposing to remove the exemption from registration for legal professionals and accountants as it tries to raise the bar for company service providers.

The proposal is one of several made by the authority in a consultation document released on Tuesday, targeting companies that offer their services to firms seeking authorisation from the MFSA.

The rationale behind the proposed regulations is to ensure a more robust first line of defence against problematic operators.

The requirement to have all providers register with the MFSA is partly in response to concerns raised by Moneyval in its damning report on Malta released last month.

The regulator is also proposing a three-tier classification for company service providers that will define what services they are able to offer.

No such classification exists and any lawyer or accountant who today acts on behalf of a client requires no form of authorisation from the MFSA.

The authority is also proposing that the current notification requirement for persons having a licence or registration to provide company services be converted to a full authorisation.

The rules propose that prospective applicants for authorisation would be required to engage a CSP in order to proceed with their application.

Persons wishing to be authorised as CSPs will be required to do so as a company, the rules are proposing. This is a necessity given the onerous requirements related to controls and effective financial crime compliance, and other regulatory pressures, the MFSA said.

Service providers will be obliged to appoint two designated persons or more, depending on the company size, to act as directors, company secretaries, or serve as a partner in partnerships, on behalf of their clients.

The MFSA is proposing enhancing the competence assessments for designated persons, and other officials such as money laundering risk officers and compliance officers.

The new rules will introduce a thorough scrutiny by the MFSA of client on-boarding systems and processes adopted by CSPs.

Service providers will be required to conduct “a fitness and properness assessment” on prospective clients seeking their service prior to on-boarding.

A requirement to inform the MFSA where any person fails such a fitness and properness assessment would also be introduced in order to ensure that the “first line of defence is not circumvented through forum shopping”.

The MFSA is also proposing substantial increases in capital requirements for commercial partnerships and natural persons that will range between €30,000 and €150,000 from the current levels of €2,500 and €5,000.

The MFSA said that a proposal from the industry for a self-regulated supervisory model was not considered a viable option given the strict demands of the anti-money laundering directive.

The consultation process is open until 22 November 2019 and the MFSA is receiving feedback on email CSPframework@mfsa.mt.

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