Major Gaps in AML and CFT Protocols at MFSA Lead International Monetary Fund to Urge Immediate Changes


Two of the critical policies that holds the crypto environment in Malta Financial Services Authority (MFSA) together is that of anti-money laundering (AML) and combating the financing of terrorism (CFT). However, after some investigation, the International Monetary Fund (IMF) discovered that there are critical gaps in the way that the MFSA is presently supervising these policies. In fact, the gaps are so significant that the authority is calling for urgent action to be taken, according to Times of Malta.

According to the report, the IMF issued a Financial System Stability report yesterday, which includes an assessment of the financial system in the region. It also includes how the regulatory and supervisory framework is supporting the needs of the industry, and how the country is dealing with various financial crises.

The report specifically stated that the presence of integrity risks poses a greater threat to financial stability. To handle the deficiencies in these areas, the IMF recommended a multi-prog approach as their way of enhancing the system. With the gaps fixed, the authorities believe that the financial sector and the rest of the economy will have the protection they need from outside threats.

In the report, the IMF also focused on the need to improve the screening processes that are currently implemented to include more owner information regarding beneficiaries. The improvements would also impact risk-sensitive accounts, particularly for non-resident clients, new technologies, and IIP-related funds.

As far as blockchain technology and cryptocurrencies, the report suggests including additional resources that would allow for the supervision of the providers in this sector. There are many challenges presented in front of the MFSA of this nature, varying from the increase licensed financial institutions that need supervision to the complexities that the regulatory environment needs to handle. The MFSA also faces a need to increase the operational capacity for a more effective functionality.

The friendly atmosphere developed for blockchain technology and cryptocurrency is one of the traits that Malta is most well known for. However, attention from IMF exposed the fear that blockchain is one of the areas of interest that could be in violation of the AML compliance protocols.

Speaking on this issue, the agency said that the “rapid development” and evolution in regulatory changes have led the Malta Financial Services to be placed under “considerable strain.”

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