Issue link: https://maltatoday.uberflip.com/i/1248303
2 maltatoday EXECUTIVE EDITOR Matthew Vella MANAGING EDITOR Saviour Balzan Letters to the Editor, MaltaToday, Vjal ir-Rihan, San Gwann SGN 9016 E-mail: dailynews@mediatoday.com.mt Letters must be concise, no pen names accepted, include full name and address maltatoday | SUNDAY • 17 MAY 2020 Upping the game in financial regulation Editorial THE recent annual report of the Malta Financial Services Authority has shown just how much has changed since new management came in to run the show. With increased manpower and more onsite inspections, the regulator is rebuilding itself to win the confidence of international institutions, be- coming a true watchdog with increased inspections and enforcement, higher compliance standards, head-hunting professionals from the UK to join its senior team, and restoring trust in the regulator. These changes have been crucial in moving Malta's financial regulator away from the mediocrity of the past, where sluggishness and an opaque licensing of certain institutions led to poor supervision. In its past incarnation, the MFSA was accused of placating the numerous interests in the financial sector, allowing the sector to grow amid accusations over the years of a financial services authority that at times looked the other way. The accusations were various, but stemmed from the handling of a number of cases over poor supervi- sion, such as the Maltese Cross bust, Nemea Bank, and Pilatus. For example, warnings on the serious regula- tory shortcomings inside the online-only bank Nemea had been pouring in from the European Central Bank for 12 months before anything was done by the MFSA. In clear-cut cases of questionable practices, the MF- SA turned out to be too slow to prevent the inevitable. On one occasion, when the MFSA was run by former chairman Joseph Bannister, the regulator remarked on the €6.2 million misappropriation at the Maltese Cross Financial Services firm – whose books the MFSA did not inspect for six years – that "notwithstanding the Authority's supervisory effort, the chance that a licensed entity may fail cannot be eliminated. No su- pervisory system is waterproof and it is therefore un- reasonable to expect supervisors to prevent all failures, particularly when we are dealing with humans whose behaviour might change during the years, together with their circumstances." The MFSA has often been under pressure for failing to act faster on accusations of mis-selling or to order compensation for wronged clients. The same can be said for the prolonged case in the BOV La Valette property fund, where millions upon millions of deposi- tors' cash were lost but the case was never treated with the urgency it merited. A similarly slow process was also undertaken with the Swedish pensions debacle at the heart of the Maltese-run Falcon Funds. All of these cases dealt a blow to retail investor confidence. The suspected lack of any MFSA on-site inspections at a firm such as Maltese Cross indeed raised the is- sue of whether the MFSA could even undertake an industry-wide exercise to give comfort to the public that what happened at Maltese Cross is not happening elsewhere, despite a workforce of over 250 at the time. Today, the MFSA has moved forward with a mission for more transparency and increased manpower. Its recently unveiled supervisory and Enforcement Dash- board for example highlights the key performance indicators on regulatory oversight and enforcement effectiveness. It showcases the progress made in capac- ity building and resourcing, increase in training and educational activities, enforcement actions and on-site examinations. For example, in 2017 at the height of the Pilatus scandal, just 177 inspections were carried out; in 2020 this will double to over 350. Employees over the same period have increased from 270 to a project- ed 450 by end-year. These are reforms which have also come hand-in- hand with investment in technology, data manage- ment, information systems, a risk-aware culture and the reforms to meet international standards. MFSA CEO Joseph Cuschieri has already stated that financial crime is going to be the main plank on which the MFSA will focus, apart from conduct and pruden- tial supervision. The supervisory dashboard indeed shows that the MFSA's new direction has lived up to its aspirations, with more training, more international expertise, and also better salaries and job conditions. A similar situation arose at the Financial Intelligence Analysis Unit, where, under pressure from European authorities, the FIAU had to reorganise itself across most levels: including beefing up its staff complement, increasing its budgets, and issuing new guidelines on how it carries out its supervisory efforts. Together the MFSA and FIAU are cooperating closely on investigations. Now there needs to be strong political will to keep on supporting these two impor- tant institutions and also to carry out a final, revolu- tionary change inside the Maltese police. An issue at stake is whether once MFSA and FIAU investigations are carried out, the police force is well equipped and well-resourced enough to take these investigations over with further interrogations and final prosecutions. Scandal has rocked the police force in the last seven years, and so far, unlike the MFSA and the FIAU, it seems little has been done to improve its image. Will a new broom at the head of the police force clean the Augean Stables? Much of this will be determined by the spine and personality of the new Commissioner of Police. They should clearly take a leaf out of the book of the MFSA and FIAU, which in the last two years have done much to step up their game. 16 May 2010 Why were BWSC's 'Christmas gifts' ignored by Enemalta? THE Danish firm BWSC kept a history of brib- ery investigations under wraps from Enemalta and the Contracts department, when it signed a declaration that they were never found guilty of "grave professional misconduct". From its parent company Mitsui, down to the subcontractors that will provide the technology for the Delimara power station extension, the investi- gations into foreign bribery reported in the world press raised no eyebrows at Enemalta, which ap- pears not to have carried out any due diligence on the Delimara bidders. A 'statement on excluding circumstances' signed by BWSC back in March 2008, asked bidders to declare whether they had been found guilty of pro- fessional misconduct "proven by any means which the Contracting Authorities can demonstrate". The declaration – part of the voluminous contract signed for Enemalta's 144MW turbine – shows both Enemalta and the contracts de- partment ignored the history of the Danish firm, its subcontractors, and even a rival bidder for the €200 million contract, which had also been a BWSC supplier – MAN Diesel. The most damning report concerns a 1999 internal e-mail by BWSC's chief executive Soren Barkholt, to issue a $90,000 payment to Felicito Payumo, chairman of the Subic Bay metropolitan authority, in the Philippines, to clear bureaucratic hurdles on the Subic Bay power plant. The December 1999 memo, first reported by the Danish financial newspaper Borsen, reads: "In our opinion, and this is supported by our agent, the tactic of the Chairman has to do with money, and therefore we strongly recommend to pay, say 90,000 USD of the payment due at ratification in accordance with the Marketing Agreement. We are confident that this part-payment, and the channelling of most of it to the Chairman, will remove his 'doubt'…" The memo goes on: "After a meeting with our contact here in our offices it is clear that he has to give smaller amounts to the key people involved, and it is his firm opinion that small amounts be- fore Christmas will have a magnified impact in our favor on the further development." The BWSC chief is said to have told the Auditor General during his investigation into the Delimara contract, that the reports were "presumptions, but no proof of bribery." ... Quote of the Week "The longer distance learning is used, the burdens will outweigh the benefits. We need to move on to the next phase." Prof. Sandro Caruana MaltaToday 10 years ago