Luxury cards firm accuses MFSA of ‘putting spokes in wheel’ with new inspection

Ultra-wealthy credit card firm recently fined €373,000 by the FIAU is now facing a renewed inspection by the MFSA

The luxury credit card company fined €373,000 by the Financial Intelligence Analysis Unit, is holding the Maltese financial regulator MFSA responsible for any damages incurred in business losses due to renewed inspections.

After accusing the FIAU of carrying out a witch-hunt over an impending Moneyval assessment that is haunting Malta’s financial system, Insignia Cards is now accusing the MFSA of making onerous demands over the same management structure it had previously green-lighted.

Insignia Cards, which recently recruited the former Labour economy minister Chris Cardona, said the MFSA was protesting 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.

According to Insignia, on 15 December the MFSA requested a host of documents on the agreement the company has with IGS. The MFSA later insisted on an independent legal opinion on the relation between Insignia Cards and IGS, as well as to stop all processing of card fees through IGS.

Insignia complained that the MFSA had ignored its efforts at providing it with a new action plan, a new onboarding policy and remediation progress report. “It has not even calculated the enormous sacrifice that our new employees are doing to strengthen our professional operation... it has shown an evident lack of respect and decency at demanding that a certain director should not occupy their role while concurrently refusing the company’s suitable replacements.”

The MFSA has already issued a report in May 2020 on a full scope examination it carried out back in June 2019. “There was then no suggestion in that report in which the MFSA protested at the company’s arrangement with IGS, which was either against the law or of concern. Now the authority appears to be in a state of panic and wants to immediately terminate this arrangement.”

Insignia said that it should not suffer the brunt of the MFSA’s own shortcomings over its inspection, when it has its own contractual obligations with its clients to safeguard.

“It is impossible for us to function as a normal business under the MFSA’s new impositions, especially well before the 31 December when we have obligations towards VISA, and legal obligations to process payments that take place on a daily basis... the regulator should be helping businesses not putting spokes in their wheels.”

The MFSA will be carrying out an inspection on Insignia in January 2021 to review client files. “What is the real aim of this inspection, when our company is doing its best to improve its operations and the regulator carries our a new inspection when the current renewal is still ongoing? The MFSA must give the management a chance to function as required.”

The membership-only credit card provider for ultra-rich spenders is appealing a €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.”