[WATCH] Financial services practitioners miffed by regulator’s 'no-nonsense' American supervisors

The no-nonsense approach of American financial crime experts recruited by the regulator to boost its supervisory team has miffed some practitioners, Joseph Cuschieri said.

The Malta Financial Services Authority CEO said the 10 experts have been working alongside the authority’s compliance and supervisory team since July.

Cuschieri spoke with MaltaToday ahead of the MFSA’s release of a three-year strategic plan that will beef up the regulator’s governance and supervisory role. The plan will be published later this morning.

“The Americans are not only helping us to increase the number of on-site inspections but also their quality, and their no-nonsense approach has caused a backlash among some financial services practitioners,” Cuschieri said.

The Americans were roped in earlier this summer after an agreement was reached between the MFSA and US-based FTI Consulting.

“The experts in financial crime will be with us until June next year and they are also training their Maltese counterparts in the process,” Cuschieri said.

The effort is part of the authority’s broader objective to up its game after Malta’s financial services regime came in for harsh criticism as a result of the Pilatus Bank saga and other deficiencies flagged by international institutions.

The MFSA will be spending €3 million, or 10% of this year’s budget, on its financial compliance team, Cuschieri added.

The plan foresees a robust investment of €12 million in IT that will enable the regulator to automate its processes.

Cuschieri admitted that most of the MFSA’s work was done manually. “We gather a lot of data and information but the tools we have are not efficient enough to help us go forward.”

Another aspect of the plan is a concerted recruitment drive to beef up the number and quality of human resources.

The authority has been exempted from the strictures of public recruitment in a bid to offer better salaries and attract the necessary talent.

“This is a problem for all regulatory authorities because the industry pays well… we are also recruiting foreigners to fill in gaps in expertise,” Cuschieri said.

A crucial aspect of the plan is the authority’s drive to become financially self-sustaining over a five-year period.

This had been one of the recommendations made by the International Monetary Fund to ensure the MFSA enjoyed full independence.

Cuschieri explained that the authority was working on a revision of the fees charged to industry, some of which were “ridiculously low”.

He said fees will reflect the extent of supervisory and compliance work undertaken by the authority.

“The idea is to become financially self-funded like other foreign authorities and institutions, so as not to depend on government financing. However, we will introduce the new fee structure over a period of five years so as not to give industry a shock,” Cuschieri said.

The MFSA will also be introducing new standards for corporate service providers, and provide practitioners with guidelines on what it expects from them.

The plan is focussed on achievable tasks and follows the publication of the MFSA’s strategic objectives earlier this year.