When the Malta Financial Services Advisory Council launched its strategy in March 2023, the Malta Business Registry (MBR) was pleased to see that three of the five pillars on which it was based were those it had already based its own strategy on: speed, simplification and specialisation.

The MBR embarked on a transformation process with its first forays into digitisation in 2004 and has come a long way since the days that it relied on manual processes. Its CEO, Geraldine Spiteri Lucas, is very clear about what it wants to achieve: “The MBR needs to be as efficient as possible in order to make the experience much more friendly. When you are coming to Malta to open a business, this is the first touchpoint and if you have been dealt with professionally and efficiently, that creates a lasting good impression.”

The digitisation process is now moving steadily forward, which Dr Spiteri Lucas explained brings a lot of benefits, including automation of processes which allow its more than 100 staff to focus on more specialisation in order to deal with areas – especially financial services – which are becoming ever more complex. However, its staff are not the only beneficiaries, she stressed.

“We need to reengineer our processes in order for technology to help our work and that of the registered companies, practitioners and their clients. For example, there is no need for practitioners to do filings physically as with the new online system, companies can do it themselves once they have their own ‘qualified’ signature,” she explained. “Needless to say we always encourage that practitioners are involved both at incorporation stage and during the existence of a company to provide the necessary advice”.

The changes already made will dovetail with the MBR’s role in many of the 175 action points identified by the MFSAC, the main ones being the creation of a Central Identity Management Portal and changes to the Companies Act.

The portal is a government initiative, involving a steering committee composed of entities like the Financial Intelligence Analysis Unit (FIAU), the Malta Financial Services Authority (MFSA), Malta Enterprise and the Central Bank of Malta, apart from the MBR. The intention is to compile a list of all the documentation that applicants need to submit, whether at onboarding stage or during their operations. Applicants will then be able to push data held at the applicant’s digital wallet to any particular entity or subject person – ensuring that this is in line with data protection requirements. When you consider the number of documents that there are in common – the most obvious being a certified passport and utility bills – the benefits are obvious­.

“The intention is to issue a preliminary consultation, asking corporates and tech companies to come forward with proposals so that we can draft a tender with the best technological criteria, including AI. For example, technology can check whether a passport was in fact issued by a Maltese authority and it may be possible for systems to verify even some international ones,” she said.

The MBR also has a tight 18-month window to review the Companies Act. While some of the changes form part of the MFSAC action plan, the scope of the review goes well beyond the financial services industry.

“It was last changed in 1995 and much has changed since then, including EU accession and the transposition of various pieces of legislation. We send it back to Parliament almost twice a year for amendments. It was always my personal ambition to sit down and do a thorough review, which I now have a small team working on,” she added.

Another aspect that technology – and a qualified and well-trained workforce – is helping with is enforcement. The MBR does not charge the maximum allowed by law but Dr Spiteri Lucas warned that this could still amount to thousands of euro. In the end, the deterrent factor is the most important: fines are followed up by a final warning issued by a lawyer and, if not paid, then the MBR goes for a judicial order.

“In some cases, we issue a garnishee order on the personal accounts of the directors,” she added, saying that this increased enforcement had led to a far better compliance culture.

The awareness of the need to comply with requirements has been boosted by the exercise started in 2020. Technology was used to generate reports on non-compliant companies, enabling the MBR to go through the register and identify companies that had not filed anything for the past 10 years, finding over 16,946. It set itself the ambitious target to strike them off within one year and started the ‘defunct procedure’.

“A percentage of them came back to say that they were still trading but had not ever filed any returns or accounts. Some companies pre-dated the 1995 Companies Act and had never bothered to bring themselves up to date – even though all was required was filling in a form.

“Some did not manage to comply and we proceeded with striking them off. Needless to say, the law provides a remedy and around 60 were re-instated, but not that many considering!” she said.

“The defunct procedure is certainly not a way for companies to save themselves the bother of compliance! Directors must ensure that if they are no longer trading they need to take the necessary steps for voluntary dissolution. The deterrent factor of knowing that they cannot ignore their obligations is quite effective.”

This year, the MBR started on the second phase of this exercise, honing in on around 5,000 companies that have not filed anything for the past five years.

Dr Spiteri Lucas said that the change in approach is particularly noticeable with family businesses and succession.

“In the past, the founder (normally the father) would do everything and his children were not even aware of the company’s assets. Now, before the next generation accepts shares, they come to us to ascertain what the situation is and that everything is in order…

“Companies realise that it is in their interest to be compliant, for example, when they bid for a tender or transacting with other businesses who would check their records on the MBR website.”

She stressed that it is important for companies to know whether their business partners are solvent as there is a ripple effect when payments falter. The MBR transposed the Insolvency Directive last December and the Office of the Official Receiver – the person in charge of insolvent companies as appointed by the court – is now putting in place early warning tools on the MBR website that companies can use to self-check whether they are in distress or not, an important step that could enable them to seek assistance in time.

Dr. Geraldine Spiteri Lucas, CEO, Malta Business Registry (MBR)

The MBR is also the host of the Ultimate Beneficial Owner register – a vital element of the fight against money-laundering. This uses a multi-pronged approach as recommended by the FATF, which involves onsite inspections, while BO information is cross-checked via different sources, such as the FIAU, the MFSA, MGA and even subject persons.

There is also robust due diligence on the individuals involved, including screening for whether they are a politically-exposed person, a disqualified individual, or affected by sanctions and other variables. The MBR uses technology to give each company a risk score which is used to determine the extent of the MBR’s level of onsite inspections.

The UBO register is currently made available to subject persons and competent authorities as defined in the PMLFTR, while the MBR is following a discussion between Member States and the European Commission on how to determine legitimate interest while staying in line with privacy law as to whether it can be made available to individuals having a legitimate interest – including journalists and civil society.

The MBR has identified a number of discrepancies but most were confirmed to be administrative errors/an inaccurate interpretation (in certain aspects the BO definitions is not always straight forward), rather than actual concealment of the beneficial owner – which would incur thousands in penalties.

All this activity means that the MBR’s progress is being followed with interest by its peers.

“There is quite a lot of interest in Malta because we got off the FATF greylist in just one year, a relatively short period of time. The MBR is part of the Corporate Registries Forum and we are hosting its next conference here in October. One of the spotlights is going to be how we as a registry put all the measures in place to get Malta off the greylist. Internationalisation is important as we can share our experience with other jurisdictions and learn from them,” she said.