Nick Captur has been the President of the Institute of Financial Services Practitioners since July 2023, having been an active member since 2007. He spoke to Vanessa Macdonald about the main topics discussed during the Institute's annual conference held in May 2024.
Nick Captur is proud of the respect that the Institute of Financial Services Practitioners (IFSP) has painstakingly built up over the years: its members provide what he described as "real insight" into what is happening out there, not only with regulators and the Government but also with the Malta Financial Services Advisory Council, which is working on the future of the financial services sector on the island.
The Institute has a membership of around 400-450 members, a number which has remained fairly stable over recent years, but who punch well above their weight because of their roles in various sub-committees and the fact that the membership base includes all the key employers within the financial and professional services industry.
However, stability in terms of membership does not reflect the sector in general, which – like so many other sectors – is facing challenges with resources. Apart from the fact that there is de facto full employment on the island, financial services and accountancy have become less desirable as a career opportunity compared with 20 years ago.
"We are seeing across our membership base lower numbers and low uptake at the relevant university courses," he said, noting that there was more competition for candidates.
This brought him to one of the main points of the interview: the need for Malta to do more with less.
"We need to get higher productivity output per person. Why do so many professionals need to be working on a function such as internal compliance rather than a client-facing one? That is one of the challenges we have," he said.
One of the main problems is to review the "checklist mentality" and move to a more "risk-based, proportionality approach". He explained the context behind this, which in his view comes from Malta having raised the bar "very quickly and very successfully".
"We got off the greylist in one year which is a very good outcome. However, a number of procedures are very prescriptive and very granular. You have individuals in positions of responsibility who say that if the law wants, for example, a document in a certain way, then they want it from you that way and no other, as they will have to answer for it. We respect that.
"But sometimes there is a level of common sense and if it is only slightly different to what the law is saying but still achieves the objective, can't we be comfortable with that? As we mature as a country and an industry, we need to have the collective confidence to say that where the risk level is low, some deviation from the prescriptiveness is required and we should be able to sign off on it...." he said.
He believes that the 'checklist' mentality is more prevalent at the operational level than at the decision-making one, noting that during conversations with the Malta Financial Services Advisory Council (MFSAC), the Financial Intelligence Analysis Unit or the Malta Business Registry, to take but a few examples, there is "more alignment at a high level than you would expect from the behaviour that you see at the lower level".
The problem is that changing behaviour means changing the guidance, a process that not only requires justification but which could be linked to entities beyond Malta's boundaries.
He is optimistic that changes are happening. The IFSP is working with the Malta Financial Services Authority (MFSA) on the rulebook for company services providers, for example, and revisions might be in place by the end of the year. It is also working with the Malta Business Registry to 'ease in' the new online platform as it moves towards a paperless electronic filing system, ironing out some of the initial teething issues.
"Where there is a desire, where there is a maturity, some of the prescriptiveness can be rolled back. But it does take time, even if there is agreement in principle, as there is a procedure – from consultation all the way to training on the new guidelines – that takes time.
Much of what is happening is part and parcel of the MFSAC's strategy, with 175 action points identified. Many of the initiatives will probably come to fruition in the second half of the year, with the benefits being felt by practitioners as early as the first part of next year.
"We had a panel discussion about this at the IFSP conference held in May, but we will only start seeing tangible results if the commitment to the MFSAC remains solid across the board and if people deliver. If you get to a meeting and have not done what you were meant to, then the timelines fall out of the window," he warned, adding that it was important for the sector to send out a clear message that Malta is open to business and determined to grow.
Picture: Nick Captur, President, Institute of Financial Services Practitioners (IFSP)
This approach was by no means a given: not too long ago, other areas such a gaming and construction were promising fast and dramatic results. However, the IFSP commissioned a study about two years ago on the direct and indirect multiplier effect of financial services.
"Our message is that the economy needs to be broad-based, and that financial services are particularly important to the Maltese economy as it matures because it is a high value added sector and has a relatively low environmental impact. It is all part of this narrative of 'doing more with less'," he said.
Of course, it is a very competitive sector and growth will only come from a proactive outreach.
"No-one in New York or London wakes up in the morning and thinks of doing business through Malta. You have to have a case; you have to be out there; you have to sell the country. And when you are proposing Malta, everything about it matters from the flights and schools, to restaurants and hotels as much as the banks and financial services practitioners. It is not just about the interaction with regulators and financial services practitioners. Potential clients need to go away saying 'that is really neat, I had no idea that Malta could do that'."
Of course, taxation – within the parameters of the OECD and the European Commission – is going to be a very important consideration in the overall assessment of moving business to Malta.
"I don't believe it is a feature of Malta that can be dismissed or shut down. However, when the media says that everyone will pay a standard rate of 15 per cent tax (due to 'Pillar 2'), that is incredibly simplistic. When you take into account incentives, credits, possible arbitrage around definitions and rules etc., it is never as straightforward as some might make you believe.
"We must not look at what Malta offered five or ten years ago and get stuck there. The world has changed. Obviously, competitiveness in tax is a relative thing so if the tide moves the bar up, we need to look at what Luxembourg and Ireland and the Netherlands offer today and will be offering in the future, within the context of newly introduced OCED and EU rules" he said.
"Taxation has become increasingly complex on a local level, with both opportunities and threats to Malta and the tax system. The Finance Minister is obviously keeping his cards close to his chest but he has also publicly indicated that he does not wish there to be a dramatic shock to the tax system. This suggests that changes may be introduced over time. In the past, the 'old system' ran in parallel with a 'new system' for about four years, which gives you an indication of how Malta tends to approach this," he said.
As complex as the global rules are, he believes Malta is well-placed since Maltese professionals, many of whom have studied or worked abroad, are specialised and well placed to be at the forefront of understanding these developments and reacting to them.
"There is a time to analyse and process, and a time to react and propose initiatives: at the moment, I think perhaps we lie somewhere between one and the other. It is not my personal view that there is already a conclusion that any particular element of today's systems will be shut down during a predetermined timeframe. Rather, I think you will have different aspects added to the taxation system we currently have. And remember that not all the clients would be affected the same way: private wealth and mid-sized clients below the Pillar 2 threshold would look at things differently."
The IFSP conference also discussed ways to prevent money laundering and financing of terrorism, a topic on which Moneyval will soon once again assess Malta in the years to come. The most topical issue is the extent to which the FIAU and other authorities can act as a deterrent to bad operators, something which is being challenged by several operators in court.
"Clearly, if every case ends up in Court – and the Constitutional Court – and a €300,000 fine is reduced to, say, €10,000, that is not an effective deterrent, so Malta has a potential issue in the eyes of assessors that we have to fix," he said.
"Without going into the merits of the [court] cases, I would ask whether it is time to approach this problem head on and introduce different procedures in this space? The challenge at the moment is that the FIAU is judge and jury, but there could be alternative solutions."
IFSP carried out research at working group level to understand the situation in other European jurisdictions, particularly UK, Cyprus, Ireland and Luxembourg, and is currently putting forward its observations to the relevant authorities.
He believes that these are a few examples of the productive, behind-the scenes-conversations towards which the IFSP can contribute.
"IFSP is very trusted and respected as we are not cowboys coming in for a fast buck. We work together to find common ground and work towards the common good and the national interest. We do not just grumble and add to these serious and complex problems but try to proactively develop solutions.
"We are not in a position to make the changes but we can guide the way," he concluded.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.