One of the main duties of the Malta Business Registry (MBR) is to ensure that all companies and commercial partnerships comply with the Companies Act and the Companies Act (Register of Beneficial Owners) Regulations.
Regulatory Framework for Onsite Inspections
The Purpose and Methodology of Onsite Inspections by MBR
In 2018, the Companies Act (Register of Beneficial Owners) Regulations came in force which gave the Registrar the authority to conduct on-site inspections of companies. This helps the Registry to verify the Ultimate Beneficial Owner (UBO), the Ultimate Beneficial Owner’s link to the company and that the information submitted to the MBR is accurate and up to date. In fact, the 2020 Amendment Regulations has added measures to ensure that adequate and accurate current information is being submitted to the MBR.
Enhancing Transparency Through 5AMLD
One of the aims of the 5AMLD is to enhance the beneficial ownership transparency by legally imposing publicly available registers for companies, trusts and other legal arrangements. Access to beneficial ownership information may be partially or fully restricted where it is shown, by means of documentary evidence, that such access would expose the beneficial owner to disproportionate risk, risk of kidnapping, blackmail, extortion, harassment, violence or intimidation or where the beneficial owner is a minor or otherwise legally incapable. However, access to beneficial ownership information may in any case not be restricted for credit and financial institutions or to subject persons (as this term is defined in the Prevention of Money Laundering and Funding of Terrorism Regulations, S.L.373.01 of the Laws of Malta).
Criteria for Selecting Companies for Onsite Inspections
Onsite inspections are conducted on a risk-based approach. Few of the variables that the compliance unit of the MBR considers when choosing a company for an onsite inspection are: the activity of the company, the nationality of the beneficial owner, frequent changes in the involvements of the companies, companies which have complex structures and companies which have not submitted the BO Form as of yet. Companies can also be chosen in cases where a discrepancy has been reported in the information held by the Registry.
Detailed Onsite Inspection Procedure by the Malta Business Registry
Notification and Documentation Requirements
When a company has been chosen for an onsite inspection, a letter is sent to the registered address informing the company that an onsite inspection will be conducted on a specific day and that the officials will have access to the file holding the documentation which relates to the beneficial ownership of the company. However, depending on the letter, officials may request documents via email rather than visiting the registered address.
The letter will include the list of documentation required for the Company as well as each layer of the structure of ownership. Such documents include an organigram, beneficial owners register, share certificates, share register, among others.
Conducting the Inspection: A Closer Look
During the Onsite Inspection, the MBR officials will go physically to the company where the registered office of the company is located and will be allowed access to review the documentation listed in the list. They will look for information such as whether there are any pending penalties, that the share certificates are confirming the shareholders, that the Beneficial Owners Register confirms the individuals indicated in the BO Form submitted, and so on.
Identifying and Addressing Discrepancies
In the meantime, the MBR officials will take note of the documentation found on file and of any discrepancies found that are not complaint with the Beneficial Ownership Forms submitted by the Company. Although onsite inspections are related to the verification of the beneficial ownership, the MBR officials would still have the obligation to report to the MBR’s MLRO. The MLRO will then file the relevant Suspicious Transaction Report to the respective competent Authority and any other deficiencies encountered during the onsite inspection visit. Discrepancies which may be found during an onsite inspection may include; expired passports or ID cards, the Beneficial Owner’s Form submitted identifies a different percentage than that stated in the documentation on file, no documentation verifying the links between the indirect companies and the Beneficial Owners, etc. Thus, the MBR officials will finalise a report for the Company being reviewed according to the information found on file.
Outcomes, Penalties, and Follow-Up Procedures
In case discrepancies are found, penalties of up to €10,000 may be imposed. Such discrepancies on which penalties are issued are incorrect and misleading information, few or no documents to verify UBO.
In the event of missing documentation, the Company will be given a deadline to submit the missing documents. If these documents are not sent to the Registry, the MBR officials will continue to pursue the company until all pending issues have been resolved. If the company has no missing documents nor discrepancies, then the inspection is deemed to be complete. Once all the required documents are found and are verified, a follow up letter is sent to the registered address confirming that the inspection has been concluded.
Conclusion:
Through onsite inspections, the MBR adopted a proactive approach in confirming that the information disclosed on their website is well-resourced, accurate and up to date and also in ensuring that the companies are complying with the regulations arising from the Companies Act and Companies Act (BO Regulations).
It is worth noting that our team ensures that all documents, such as the register of beneficial owner, share register, share certificates, and so on, are held on file and are being kept up to date. Recently, the request for onsite inspections has been on the increase. Here at DW&P we strive to ensure that onsite inspections are carried out in a smooth and efficient manner in order to ensure the best possible outcome.
