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The Malta Financial Services Authority (MFSA) has issued a new Dear CEO letter aimed at improving transparency and raising standards in the authorisation process for firms seeking MFSA licences.
Addressed to advisors and representatives who assist applicants in obtaining authorisations, not only outlines the MFSA’s expectations, but also highlights several deficiencies that the regulator warns have led to delays, refusals and withdrawals of applications.
It is the latest in a series of interventions from the MFSA that have highlighted misleading websites, safeguarding and outsourcing problems at payment firms, and financial crime controls at payments and crypto firms.
In a clear message to the market, the MFSA stressed that advisors must be “fully aligned” with its expectations and should uphold the highest levels of professionalism and ethical conduct.
The regulator emphasised that the authorisation process is a rigorous, technical assessment of an applicant’s business model, governance, financial soundness and compliance capabilities.
Key expectations
The letter provides a comprehensive overview of best practices to ensure a smoother authorisation journey.
One of the MFSA’s expectations is early engagement. Applicants are encouraged to submit a statement of intent and, where appropriate, take part in initial meetings to outline their proposed business models and clarify their regulatory approach.
Regulatory preparedness is also essential: advisors must ensure that all applications comply with relevant Maltese and EU regulations, and that they refer to applicable standards issued by bodies such as the European Central Bank (ECB), the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), and the European Insurance and Occupational Pensions Authority (EIOPA).
Proactive communication is another critical expectation. The MFSA urges advisors to act as the primary point of contact, providing timely, complete and consistent responses to any requests from the MFSA and facilitating clear, ongoing dialogue between the applicant and the regulator.
The MFSA also stresses the importance of integrity and transparency, suggesting that applicants need to fully disclose all material facts, including details on governance arrangements, financial position, internal controls, and group structures, to support a thorough and effective assessment.
Despite its advice, the regulator also emphasised that applicants must apply their own judgement during the process.
“Whilst the Authority strives to provide guidance and feedback, where applicable, on the regulatory framework, its approach, and processes, it is important to note that offering consultancy services or advising on how proposals should be modified to meet regulatory requirements is beyond its remit,” it says in the letter.
“The onus shall always remain on the Applicant to decide and implement solutions which adhere to the applicable legal requirements.”
A consistent message
The Dear CEO letters the MFSA has released this year show that the watchdog wants to instil a culture of maturity and professionalisation among firms on the island.
Payment firms, e-money institutions and crypto-asset service providers (CASPs) must now meet clearer and stricter standards throughout the authorisation process.
The MFSA is raising the bar to ensure that only well-prepared, compliant and transparent firms are licensed. This includes detailed checks on governance, business models and financial soundness, and payments and crypto firms will need to ensure that these standards are demonstrably met.
This is also likely to influence firms' choice of consultant. The MFSA now expects advisors to take on a more active and accountable role in supporting applicants.
For fintech and crypto-related firms, which are often viewed as higher risk, selecting advisors with sector-specific expertise is no longer optional but strongly advised.
Competent advisors can significantly streamline the authorisation process and help firms avoid common pitfalls. This may mean seeking out local experts or paying a premium for a more experienced subject matter expert.
Ultimately, the regulator is taking a firm stance on application quality, and appears clear that it will no longer tolerate incomplete, unclear or poorly presented submissions. This message is especially relevant for CASPs navigating the incoming Markets in Crypto-Assets (MiCA) framework.
Firms must be thorough and precise to avoid delays, rejections or prolonged scrutiny.
