This case study explores the challenges faced during the licensing process, the strategies employed by BDO Malta, and the eventual outcomes, showcasing how the company leveraged its expertise to navigate the regulatory landscape and achieve compliance with Maltese financial regulations.
Background
Client A was established with the goal of first setting up a software company catering to ease the software development burden of regulated financial institutions in Europe. Given their involvement and experience in the industry, this idea expanded into offering their own regulated financial services. The company identified Malta as the ideal base due to its EU membership, regulatory stability, and favourable business environment. However, before retaining appropriate expertise, Client A had a tough time navigating certain complexities requiring adherence to strict conditions under the Financial Institutions Act and regulations implemented by the Malta Financial Services Authority (MFSA).
Challenges
Client A faced several obstacles, including:
- Regulatory Knowledge Gap: While having experience in other jurisdictions, Client A lacked the in-house expertise to meet the MFSA’s licensing requirements.
- Operational Presence: The need to establish a meaningful local presence in Malta posed logistical and financial challenges.
- Compliance Requirements: Ensuring robust anti-money laundering (AML) procedures, obtaining a Professional Indemnity Insurance policy, calculating Own Funds as defined by the MFSA) and safeguarding client funds were critical objectives that had to be achieved.
- Documentation and Application: The licensing process demanded extensive paperwork, including a detailed business plan, financial projections on a three-year basis, and personal questionnaires for key personnel.
Strategy and Actions
BDO Malta assisted Client A to address these challenges systematically:
- BDO Malta provided a comprehensive regulatory roadmap, detailing the EMI licensing process and requirements.
- BDO Malta performed a gap analysis to identify areas where Client A’s existing operations fell short and brought existing policies from different jurisdictions in line with Maltese requirements.
- BDO Malta guided Client A in determining the required skillset for C-suite officers thus establishing a bona fide local presence.
- BDO Malta assisted in preparing all necessary documentation, including:
- A three-year financial projection aligned with MFSA expectations
- An internal control framework to manage risks and ensure AML compliance
- A detailed business continuity plan to safeguard operations in case of disruptions
To streamline communication with the MFSA, BDO Malta appointed a dedicated in-house regulatory expert (senior lawyer) who coordinated on behalf of Client A, ensuring smooth submission and review of the application.
Outcome
After a thorough review by the MFSA, Client A received its EMI license within eight months from the date of submission. This allowed the company to issue electronic money, provide payment services, and passport its operations across the European Economic Area (EEA). The collaboration with BDO Malta not only expedited the licensing process but also laid a strong foundation for Client A's operational success in Malta and the wider EEA.
Conclusion
This case study highlights the importance of expert consultancy in navigating regulatory frameworks. By leveraging BDO Malta’s expertise, Client A overcame significant challenges and achieved its goal of becoming a licensed EMI in Malta. This case demonstrates the value of strategic planning, local compliance knowledge and meticulous documentation in securing financial licenses in a competitive regulatory environment.
This example reflects a scenario that combines practical issues with strategic problem-solving to showcase a case study in action.
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