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Regulatory Updates

June 2020

Contact the PwC Malta Regulatory Team for further information in relation to any of the updates or if you wish to discuss how these may impact your business.

Welcome

Welcome to PwC Malta’s Regulatory Updates - giving a recap for this month of the main legislative updates and key regulator activity.

Anti-Money Laundering

01/06/2020 - Amendments to the Prevention of Money Laundering and Funding of Terrorism Regulations (S.L. 373.01)
The amendments made to the Prevention of Money Laundering and Funding of Terrorism Regulations (S.L. 373.01) (the “PMLFTR”) seek to address the technical compliance shortcomings within the PMLFTR that were identified by MONEYVAL assessors during the 5th Round Mutual Evaluation of Malta. Other minor amendments have also been made so as to further clarify certain provisions, as well as to enhance the legislative framework in place for the prevention of ML/FT.

Link to the notice can be found here.

17/06/2020 - Going live with goAML
The FIAU is granting all reporting entities an extension of the deadline for the XML integration with goAML till the 22nd August 2020. This deadline is ONLY in relation to the use of XML and NOT in relation to the goAML web forms for the purpose of STR submissions. During this extension period, reports are to be submitted via the goAML web forms and account statements can be submitted in excel format.

Link to the notice can be found here.

23/06/2020 - Publication of Interpretative Note
The FIAU is informing subject persons that in order to assist notaries with determining whether a given service constitutes a relevant activity, and therefore whether AML/CFT measures must be adhered to out, the FIAU has published a document entitled ‘Interpretative Note: Relevant Activity for Notaries’. 

Link to the notice can be found here.

30/06/2020 - Jurisdictions under increased monitoring 
On 28 April, the FATF paused the review process for the list of jurisdictions under increased monitoring. The FATF granted jurisdictions an additional four months for deadlines, with the exception of Mongolia and Iceland who requested to continue on their original schedule. As a result, the FATF reviewed and virtually met with only these jurisdictions. 

Link to the publication can be found here.

Asset Management

09/06/2020 - European Securities and Markets Authority: Questions and Answers regarding Market in Financial Instruments Directive and Regulation Investor Protection and Intermediaries Topics
ESMA has published an updated version of its Q&As on the implementation of investor protection requirements under the MiFID II/MiFIR. The Q&As provide new answers on MiFID inducements and provides clarification on the application of the definition attributed acceptable minor non-monetary benefits and whether such benefits are also acceptable to investment or ancillary services, other than portfolio management and independent investment advice.

Circular can be found here.

15/06/2020 - ESMA’s response to the EC’s consultation on the revision of the NFRD
On 11 June 2020, ESMA submitted a response to the European Commission’s consultation on the revision of the Non-Financial Reporting Directive (NFRD). In this regard, ESMA stresses the requirement of having stronger standardisation, prepared by an EU public body, of non-financial disclosures is needed, whilst also outlining that the scope of the NFRD should be expanded and calls for consistency amongst different legislative initiatives involving sustainable finance.

Circular can be found here.

22/06/2020 - ESMA integrates the 2020 IFRS taxonomy into ESEF RTS
On 18 June 2020, ESMA published the ‘Final Report on the draft amendments to the Regulatory Technical Standards (RTS) on the European Single Electronic Format (ESEF)’, which are intended to apply mandatorily for financial years beginning on or after 1 January 2021. The draft amendments are intended to incorporate the 2020 IFRS taxonomy published by the IFRS Foundation on 16 March 2020.

Circular can be found here.

25/06/2020 - European Securities and Markets Authority: Guidelines on certain aspects of the MiFID II compliance function requirements
ESMA has published the final guidelines on the MiFID II compliance function, which will replace the existing guidelines on the same topic issued in 2012. The final guidelines will enhance the value of existing standards by providing additional clarification on certain specific topics, such as the new responsibilities in relation to MiFID II’s product governance requirements.

Circular can be found here.

25/06/2020 - ESMA publishes an example of an Annual Report in ESEF
Further to the report published by ESMA on the integration of the 2020 IFRS taxonomy into ESEF RTS, on 17 June 2020, ESMA published an example of an Annual Financial Report prepared in compliance with the requirements of the Regulatory Technical Standard on ESEF and with the guidance provided by ESMA in the ESEF Reporting Manual as last updated in July 2019.

Circular can be found here.

Banking

04/06/2020 - Circular to Credit and Financial Institutions on Amendments to Banking Rule BR/14
MFSA has published a revised version of Banking Rule BR/14 on ‘Outsourcing by Credit Institutions Authorised under the Banking Act 1994’ (the “Rule”). The Rule is being wholly revised to implement the EBA Guidelines on Outsourcing Arrangements (EBA/GL/2019/02) (the “EBA Guidelines”), and to introduce the procedure for credit institutions to notify the MFSA of material services or activities that they intend to outsource, pursuant to Article 19A(1) of the Banking Act. The Revised Banking Rule BR/14 will come into force with immediate effect.

Circular can be found here.

04/06/2020 - Circular to Financial Institutions on amendments to the FIR/01
The MFSA has amended the FIR/01 on “Application Procedures and Requirements for Authorisation of Licences under the Financial Institutions Act, 1994” (the “Rule”). The amendments to the Rule are being undertaken in order to transpose in its entirety Article 10 of PSD2, which transposition has also resulted in the publication of the Legal Notice 71 of 2020 which amended the Financial Institutions Act (Safeguarding of Funds) Regulations (S.L. 376.04). These amendments shall come into force with immediate effect.

Circular can be found here.

24/06/2020 - Circular on the Shareholding Policy for Credit Institutions and Insurance Companies
The MFSA would like to draw the attention of Licence Holders and applicants for authorisation as Credit Institutions and Insurance Companies that the MFSA has issued a Shareholding Policy for Credit Institutions and Insurance Companies. The said Policy shall repeal and supersede the previously published policy dated 13 February 2012. The purpose of the new Policy is to provide an overview of the MFSA’s assessment process of shareholding structures of credit institutions and insurance companies and communicate to the industry, the MFSA’s risk appetite and criteria in relation to such assessment.

Circular can be found here.

02/06/2020 - EBA issues Guidelines to address gaps in reporting data and public information in the context of COVID-19
The EBA published Guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis. These Guidelines follow the implementation of a broad range of measures, such as legislative moratoria on loan repayments and public guarantees in Member States intended to support the operational and liquidity challenges faced by borrowers. The Guidelines have been developed to address data gaps associated with such measures to ensure an appropriate understanding of institutions’ risk profile and the asset quality on their balance sheets both for supervisors and the wider public.

Link to the publication can be found here.

04/06/2020 - EBA starts delivering on the implementation of the new regulatory framework for investment firms
The EBA outlined its roadmap for the implementation of the new regulatory framework for investment firms and launched a public consultation on its first set of regulatory deliverables on prudential, reporting, disclosures and remuneration requirements. The roadmap outlines the EBA’s work plan for each of the mandates laid down in the IFR/IFD and clarifies the sequencing and rationale behind their prioritisation. Through these mandates, the EBA will contribute to the implementation of a regulatory framework that is calibrated to the size and nature of investment firms. This will strengthen supervision, which will rely more directly on the risks faced by the clients and the investment firms themselves. 

Link to the publication can be found here.

18/06/2020 - EBA publishes final revised technical standards to enhance quality and consistency of information for passport notifications
The EBA published its final draft amending Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS) on passport notification. The two sets of amending technical standards increase the quality and consistency of information to be provided by a credit institution notifying its home competent authorities when it intends to open a branch or provide services in another Member State, as well as of the communication between home and host authorities.

Link to the publication can be found here.

18/06/2020 - EBA publishes revised standards to identify staff with a material impact on the institution’s risk profile
The EBA published its final draft Regulatory Technical Standards (RTS) on the criteria to identify all categories of staff whose professional activities have a material impact on the institutions’ risk profile. The objective of these RTS is to define and harmonise the criteria for the identification of such staff and to ensure a consistent approach across the EU. The identification process is based on a combination of qualitative and quantitative criteria.

Link to the publication can be found here.

Company Service Providers

10/06/2020 - Circular addressed to all trustees and other fiduciaries: Sectoral Risk Assessment & Action Plan - Key Results on Legal Entities, Legal Arrangements and Voluntary Organisations
The MFSA is undertaking further supervisory engagement with regulated firms and industry outreach, intended to raise further awareness of risks and vulnerabilities in the different sectors and assist industry players in identifying possible red flags. Accordingly, this sector sets out the sectoral risk assessment onl legal entities, legal arrangements and voluntary organisations and outlines the MFSA's expectations in this regard - that is, for trustees to recognise the findings outlined in the key results document and to familiarise themselves thoroughly with its contents, with a view to reviewing the sector they operate in, implement risk mitigating measures where required in this regard and incorporate any MFSA key findings in their internal business risk assessment and client risk assessment exercises. A gap analysis should be conducted to develop proportionate and effective controls and undertake any necessary risk mitigating measures.

Circular can be found here.

Financial Markets

19/06/2020 - Market Abuse Regulation (“MAR”) - PDMR notifications: A Follow Up
Article 19 of the Market Abuse Regulation (MAR) provides that persons discharging managerial responsibilities for issuers (PDMRs) and their respective persons closely associated (PCAs) are required to notify the issuer and the MFSA of every transaction conducted on their own account relating to the shares or debt instruments of that issuer. The requirement to notify is triggered once the total value of transactions executed within a calendar year exceeds €5,000. Any such notifications are to be made promptly and no later than 3 business days after the date of the transaction. In this respect, the MFSA expects PDMRs and PCAs to be fully compliant with the applicable requirements contained in MAR. In the eventuality that a PDMR or PCA has carried out a notifiable transaction and has, to date, failed to submit a PDMR notification, they are urged to rectify their position and submit the PDMR notification to the MFSA immediately, without any further delay.

Circular can be found here.

Fintech

17/06/2020 - Circular to VFA Agents in relation to Annual Supervisory Fees
The MFSA has today published a revised version of Chapter 1 of the Rulebook applicable to VFA Agents. The amendment to the Rulebook consists of the addition of R1-2.3.4.4.3, which provides an exception to the conditions set out in R1-2.3.4.4.1 and R1-2.3.4.4.2 in such cases where Annual Supervisory Fees fall due between 1 May 2020 and 18 December 2020. In such instances, the Annual Supervisory Fees payable by VFA Agents shall be paid to the Authority by no later than Friday 18 December 2020. 

Circular can be found here.

17/06/2020 - EIOPA issues Discussion Paper on (Re) Insurance Value Chain and New Business Models arising from Digitalisation for public consultation
Insurance undertakings and intermediaries are developing new business models and products and services offerings, often through outsourcing and co-operation with third parties, such as Big Technology (‘BigTech’) firms and Financial Technology (‘FinTech’) companies. In this light, the European Insurance and Occupational Pensions Authority (‘EIOPA’) has issued a Discussion Paper on (Re)Insurance Value Chain and New Business Models arising from Digitalisation (‘Discussion Paper) for public consultation to obtain industry feedback on possible fragmentation of the insurance value chain and supervisory challenges related to new business models arising from digitalisation. 

Circular can be found here.

Gaming

05/06/2020 - MGA published amendments to its Sandbox Regulatory Framework
The MGA has published amendments to the ‘Guidance on the use of Innovative Technology Arrangements and the acceptance of Virtual Financial Assets and Virtual Tokens through the implementation of a Sandbox Environment’, which amendments cover, inter alia, (i) the requirement for authorised persons and/or prospective authorised persons to submit a legal opinion signed by a registered VFA agent, regarding the licensability or otherwise of the services in terms of the Virtual Financial Assets Act (Cap. 590 of the Laws of Malta); (ii) amendments clarify that authorised persons and/or outsourcing service providers that are carrying out a licensable activity in terms of the Virtual Financial Assets Act (Chapter 590 of the Laws of Malta) require a licence from the MFSA; (iii) requirements relating to the verification of control that a player exercises over his/her wallet have been brought in line with applicable AML/CFT obligations; and (iv) requirements applicable to the audit of innovative technology arrangements by auditors registered with the MDIA.

Link to the publication can be found here.

General application

04/06/2020 - Risk-Based Supervision - Strengthening our Supervisory Approach
The MFSA published a document detailing the principal features and objectives of MFSA's approach vis-a-vis risk-based supervision, including an indication on future work to be carried out by the MFSA intended to further enhance its supervisory and enforcement action and to provide an overview of the manner in which AML/CFT has been integrated into the MFSA’s risk-based approach to supervision.

Circular can be found here.

08/06/2020 - Circular to Licence Holders on MFSA’s Licence Holder Portal - Corporate Profile
MFSA issued a guidance document for the LH Corporate Profile which applies as from 8 June 2020. More specifically, the said guidance document deals with the process for the appointment of individuals to an approved position, as well as the process for the resignation of persons from approved positions. 

Circular can be found here.
Link to guidelines can be found here.

30/06/2020 - Regulatory Reporting following the Outbreak of COVID-19
After having assessed the COVID-19 pandemic situation on the financial services sector, as well as following feedback from the industry, the MFSA considers it necessary and proportionate to once again apply flexibility in the applicable deadlines for the submission of regulatory reporting falling due. In this respect, MFSA may accept a delay from the reporting deadline for some of the submissions/publications falling due by June 2020 albeit, on a case-by-case and very exceptional basis.

Circular can be found here.

30/06/2020 - Consultation Document on the Guidance on Technology Arrangements, ICT and Security Risk Management, and Outsourcing Arrangements
The MFSA is proposing to issue principle-based cross-sectoral guidelines in the areas of Technology arrangements, ICT and Security Risk Management, and Outsourcing Arrangements, setting out the MFSA’s expectations and intended to apply to, inter alia, credit institutions, financial institutions, insurance and reinsurance undertakings, insurance intermediaries, investment service license holders, trading venues, central securities depositories, trustees and other fiduciaries, company service providers, virtual financial assets, retirement pension schemes and pension service providers. Accordingly, the MFSA invited financial market participants to provide feedback/ comments with respect to such proposed guidance document.

Link to the consultation document can be found here.

Insurance

12/06/2020 - Circular on the Amendments in relation to Chapter 1 and Chapter 2 of the Insurance Business Rules issued under the Insurance Business Act (Cap. 403 of the Laws of Malta)
The MFSA published amendments to Chapters 1 and 2 of the Insurance Business Rules, intended to ensure that the MFSA is transparent and as clear as possible in the requirements and also to facilitate the provision of information by applicants enabling the MFSA to carry out its assessment in a timely and holistic manner. The amendments cover inter alia, that the MFSA may require qualifying shareholders to submit a statement of wealth, the introduction of a new section related to financial crime analysis, further detailed requirements relating to IT systems, data protection and data security, etc.

Circular can be found here.

24/06/2020 - Circular on the Shareholding Policy for Credit Institutions and Insurance Companies
The MFSA would like to draw the attention of Licence Holders and applicants for authorisation as Credit Institutions and Insurance Companies that the MFSA has issued a Shareholding Policy for Credit Institutions and Insurance Companies. The said Policy shall repeal and supersede the previously published policy dated 13 February 2012. The purpose of the new Policy is to provide an overview of the MFSA’s assessment process of shareholding structures of credit institutions and insurance companies and communicate to the industry, the MFSA’s risk appetite and criteria in relation to such assessment.

Circular can be found here.

25/06/2020 - Circular on the amendments of Chapter 5 of Part B of the Insurance Rules
The MFSA has amended the paragraph 5.3.30 of Chapter 5 of the Insurance Rules, so that for each relevant country, the volatility adjustment to the risk-free interest rates, for the currency of that country shall before the application of the 65% factor, be increased by the difference between the risk-corrected country spread and twice the risk-corrected currency spread, whenever that difference is positive and the risk-corrected country spread is higher than 85 basis points. The said amendment will be effective as from the 1 July 2020. 

Circular can be found here.

17/06/2020 - EIOPA issues Discussion Paper on (Re) Insurance Value Chain and New Business Models arising from Digitalisation for public consultation
Insurance undertakings and intermediaries are developing new business models and products and services offerings, often through outsourcing and co-operation with third parties, such as Big Technology (‘BigTech’) firms and Financial Technology (‘FinTech’) companies. In this light, the European Insurance and Occupational Pensions Authority (‘EIOPA’) has issued a Discussion Paper on (Re)Insurance Value Chain and New Business Models arising from Digitalisation (‘Discussion Paper) for public consultation to obtain industry feedback on possible fragmentation of the insurance value chain and supervisory challenges related to new business models arising from digitalisation.

Circular can be found here.

Trust and Fiduciaries

10/06/2020 - Circular addressed to all trustees and other fiduciaries: Sectoral Risk Assessment & Action Plan - Key Results on Legal Entities, Legal Arrangements and Voluntary Organisations
The MFSA is undertaking further supervisory engagement with regulated firms and industry outreach, intended to raise further awareness of risks and vulnerabilities in the different sectors and assist industry players in identifying possible red flags. Accordingly, this sector sets out the sectoral risk assessment onl legal entities, legal arrangements and voluntary organisations and outlines the MFSA's expectations in this regard - that is, for trustees to recognise the findings outlined in the key results document and to familiarise themselves thoroughly with its contents, with a view to reviewing the sector they operate in, implement risk mitigating measures where required in this regard and incorporate any MFSA key findings in their internal business risk assessment and client risk assessment exercises. A gap analysis should be conducted to develop proportionate and effective controls and undertake any necessary risk mitigating measures.

Circular can be found here.

Contact us

Fabio Axisa

Fabio Axisa

Assurance Partner, PwC Malta

Tel: +356 2564 7191

Mark Lautier

Mark Lautier

Partner, PwC Malta

Tel: +356 2564 6744

Chris Mifsud Bonnici

Chris Mifsud Bonnici

Senior Manager, Tax, PwC Malta

Tel: +356 2564 6935

Lee Ann Agius

Lee Ann Agius

Manager, Tax, PwC Malta

Tel: +356 2564 4027

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