MFSA calls time on luxury credit card company Insignia with €142,000 fine

The Maltese financial regulator has ordered a credit card company that caters for the ultra-rich to cease the processing of payments and any prefunding of charge cards, fining it €142,000.

The MFSA said Insignia Cards, which famously employed former Labour economy minister Chris Cardona, said the company had been in breach of various financial and banking institutions rules, namely: failure to keep proper record keeping arrangements; to properly safeguard clients’ funds; aliging internal documentation with statutory obligations; notifying the MFSA of the outsourcing of operational functions; and of having weak governance arrangements and breaching the provision of information to the MFSA.

Inisgnia reacted by calling the MFSA announcement was “unexpected”.

“The compliance issues raised by the MFSA in their Christmas eve statement have been remediated by Insignia Cards. The MFSA decision will be appealed in the coming days and Insignia Cards are confident that the matter will be resolved.

“It must be said that other regulatory issues raised by the FIAU have also been remediated through a plan, agreed with the FIAU, and the company believes that there should be a positive outcome on that as well,” a company spokesperson said.

The luxury credit card company was nalready fined €373,000 by the Financial Intelligence Analysis Unit.

After accusing the FIAU of carrying out a witch-hunt, Insignia accused the MFSA of making onerous demands over its management structure which it had previously green-lighted.

The MFSA had protested the presence of certain former directors or managers from sister company Insignia Global Solutions, which is based in Hong Kong, who are now part of Insignia Cards’ management. But Insignia says these people were formally approved for their appointment by the MFSA itself.

The MFSA carried out an inspection on Insignia in January 2021 to review client files.

The membership-only credit card provider for ultra-rich spenders is also appealing the €373,670 fine by the FIAU over money-laundering compliance breaches during a 2019 inspection. In one serious case, a PEP (politically-exposed person) was rated as high-risk due to his adverse media links pertaining to ties with the Russian mafia.

Insignia Cards has accused the FIAU’s inspection team of being “unprepared” and of having “zero understanding of the business model and the approach which was taken was more suited for business which operates in the mass market field.”

Insignia president Nada Tucakov said regulators were failing to understand “the exact moment” that risk arises in taking on clients. “Very often the misconception is that the client risk is during the onboarding stage, this is absolutely incorrect, and we have proven this with extensive work conducted by Hogan Lovells and Baker McKenzie. The risk which most financial institutions face is at the point that the clients start to engage with the financial institution or their products. The onus has to be put on transaction monitoring, and institutions need to take more ownership in running the client portfolios in this way.”