The purpose of this proposed Act is to implement Article 36 of Directive 2005/60/EC of the European Parliament and of the Council of 29 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, in so far as the said article applies to company service providers. The proposed law establishes the requirements needed to obtain a license to provide the services of a company service provider.
A ‘company service provider’ is defined in the Bill as a natural or legal person which, by way of business, provides services to third parties including the formation of companies or other legal entities, acting or arranging for another person to act as a director or secretary to a company, a partner in a partnership or any similar position with regards to legal entities, as well be involved in providing a registered office, business correspondence or an administrative address as well as any other related services for a company partnership or any other legal entity.
Article 3 states that all company service providers have to be registered with the Malta Financial Services Authority (MFSA, hereinafter referred to as the ‘Authority’) unless the person in question is a warranted member of the legal profession or a, a certified public accountant or authorized to act as a trustee or provide fiduciary duties in terms of the Trusts and Trustees Act. However, such persons are required to notify the Financial Intelligence Analysis Unit that they are providing such services. This Article does not expressly state that legal persons providing such services are also covered by this provision, nevertheless this is indicated by the definition granted to persons or firms offering services from Malta in Article 2, besides the actual definition of a company service provider. However this point must be clarified in order to avoid extensive interpretation.
An application for registration as a company service provider has to contain all information requested by the MFSA, which must be verified by it. An application must also include the registered address of the company, and include any fees requested by the Authority.
This proposed Act stipulates that all company service providers shall register their activities within three months from the enactment of the Bill and that all applications shall be processed by the MFSA within a six month period.
The Authority may refuse such an application unless it is satisfied that the applicant is a fit and proper person to carry out such services and comply with the requirements of the Act. Such instances include cases where the applicant is a natural person who is not resident or operating in Malta or when the applicant is a company or another kind of legal entity who offers services not compatible with that of a company service provider if these are not listed as one of the objects of the company.
Other cases for refusal include instances such as when there are less than two directors in the company or when shareholders who own more than 25% of the shares or voting rights are not deemed to be fit and proper persons. A company may also have its application refused if it’s name is misleading or it is not registered in a reputable jurisdiction as defined by the Prevention of Money Laundering and Funding of Terrorism Regulations.
The Authority is duty bound to protect investors and the general public, protect Malta’s reputation and promote competition and choice when approving or refusing such applications. In granting authorization, the applicant may be subject to conditions imposed by the Authority. These may be changed or removed at the Authority’s discretion. Notification of the decision shall be done within a 6 month period, with approved companies being listed in a public register. Any changes within the company have to be notified to the Authority.
The Authority is empowered to cancel a registration at its discretion in a number of instances, namely when the registered person is no longer deemed to be a fit and proper person, if the registered person contravenes any provision stipulated in this Act, if the registered person provided misleading or false information to the Authority, if the registered person ceases to provide such services, upon specific request by the registered person or when circumstances are present which would have precluded the Authority from granting the registration. Any cancellations have to be made public by the Authority and the effected registered person must cease his operations within a 60 day period.
The Authority is obliged to give the applicant notice in writing in the event that it refuses or decides to cancel any registration or requires additional conditions to be imposed. The applicant is given the right to appeal these decisions provided that the appeal is made in writing to the Authority within a reasonable period of time not exceeding a 30 day period.
The Authority is authorized to conduct investigations and enquiries into the operation of such companies and may request information, which must be delivered. The Authority is granted authority to issue directives in writing requiring steps to be taken by the service provider or for the company to cease operations and wind up its Affairs. Article 13 provides that any officer, employee or agent of the MFSA may enter the premises of the company in question with a view of obtaining such information.
Persons who do not comply with these requests, furnish misleading information or hinder the investigation are deemed to have committed an offence as per the provisions of Article 15 and relevant sub-articles. Such persons may be liable to a fine not exceeding €466,000, a term of imprisonment not exceeding 4 years or both.
Similar to the MFSA Act and the Financial Markets Act, this Bill grants the MFSA the authority to ensure that the company is led by persons of good standing and the MFSA can order the replacement of persons who do not fulfill this criterion.
Article 17 lays down conditions that will lead to the disqualification of a person for registration as a company service provider. Conditions include being a minor or convicted of financial offence in terms of various legislation regulating banking and financial services. This Bill provides a comprehensive approach to the registration of company service providers to ensure that the services provided are of a high standard recognized in order with European criteria as it establishes a legal framework within which such service providers should operate. Company service providers must remain vigilant to adopt directives issued by the MFSA as well as other regulations and practices in order to avoid incurring the severe penalties stipulated in this Bill. Nonetheless, existing service providers will have a relatively short time frame within which to adjust to this new framework.
By Edward Mario Camilleri