I often meet peoplewho remark about the high proportion of foreign workers in Malta and wonder aloud where the Maltese themselves are working.  You see this question popping up in thousands of social media posts, often accompanied by claims that thousands of people are being employed by the Government.  I even had a run-in with an accountant from Gozo on this the other day.

At my age, I find it increasingly difficult to tolerate fools.  I know, I shouldn’t judge, but for God’s sake what can I call somebody, particularly somebody who is educated, who isn’t even able to access the employment online database and find the information there?  Write “employment by sector, Malta” on the web and in 10 seconds flat you find the answer.  It’s less than it would take to show the world that you are a fool.

But I don’t want to waste time writing about fools today.  Instead, I want to write about the 6,500 educated people, many of them qualified professionals, who joined the financial services sector in the last four years. The figure was given in the Annual Report of the Malta Financial Services Authority (MFSA) which, by the way, also highlighted the stability and resilience of the Maltese financial services industry.

A major player

The financial services sector is a major player in the country’s economic success. Last year, it witnessed a robust growth of 11.8%, contributing significantly to the country’s Gross Value Added (GVA), reaching €1.25 billion.  The growth was attributable to continued expansion in the sector, not least by 352 applications for new licences, 84% of which were approved.

Financial services represent 11% of the country’s rising GDP.  Ranging from financial institutions to insurance, asset management to entities, the sector provides everything from payment services to compliance whilst playing a pivotal role in supporting the economy.  Its size is illustrated by the stock of foreign direct investment (FDI) in the country, which amounted to €460.8 billion in December 2022. A staggering 97.7% of this total was generated by financial and insurance activities.

The country has created a niche which has thrived thanks to a number of factors, such as an approachable regulator, forward-thinking legislation which has given us a competitive advantage, and the cosmopolitan nature of the workforce, which has brought a tremendous dynamism and a breathtaking pace of innovation.  The opportunities for work at high salaries are impressive.

A solution needed

Although every now and then we hear about some financial wrong-doing, this is not the prevailing situation.  The MFSA does a fairly good job in making sure that financial entities play fair and that consumers feel safe. The Authority’s efforts to safeguard consumer interests through increased oversight and ensure greater compliance by operators is confirmed by a 50% increase in supervisory interactions. In fact, in 2023, 77 enforcement actions were taken, resulting in €444,800 in penalties.

What is difficult to understand is the continuing difficulty being faced by the MFSA in enforcing penalties.  In fact, the authority’s CEO, Kenneth Farrugia, took the occasion of the tabling of the report in the House of Representatives to urge Parliament to find a solution to the ongoing problem of fines levied by the regulator being stricken down by the Constitutional Court.

I have repeatedly written about this, even in the context of other authorities finding themselves in the same situation.  There have been various judgments now where the Court has ruled that no authority should regulate an industry, find operators guilty of offences, and also levy fines.  The judge-jury-executioner syndrome falls foul of the principle of a fair hearing by an impartial authority and breaches the accused firm’s rights.  Unfortunately, as the CEO said, the Government and Parliament are closing an eye to the problem.

Farrugia rightly pointed out that some operators have noted the Authority’s difficulties and are adopting “a cavalier attitude”, even daring it to impose fines which will eventually be quashed in court.  This situation could pose a problem with the European Banking Authority, the European Commission, Moneyval, and the FATF   ̶    all of whom had insisted on the levying of dissuasive penalties on offenders.   

The MFSA is doing a good job

Meanwhile, on another front, it is positive to note that the MFSA has been setting benchmarks in several regulatory areas, including the Virtual Financial Assets (VFA) Framework, which aligns closely with the European Union’s Markets in Crypto-Assets (MiCA) regulation, positioning Malta at the forefront of digital finance.  

Another landmark was the Notified Professional Investor Funds (NPIF) Framework launched late last year.  This enhances Malta’s attractiveness as a fund management jurisdiction. Additionally, through its participation in an EU multi-country project which is set to bolster supervisory capacity in sustainable finance, the Authority is also underscoring its commitment to forward-thinking regulation.

Earlier I mentioned the Authority’s role as a financial services consumer watchdog.  Last year, it published over 30 warnings and rolled out four education campaigns to improve financial literacy among the public, including information on scams, the impact of inflation, and the risks around crypto investments.  I would only encourage the Authority, together with the Police, to be more active in this area. The increasing quantity of internet scams often leads to illiterate or uncareful consumers losing a lot of money, sometimes even their life savings.