Increased onsite inspections, enhanced due diligence procedure and transparency – The Malta Business Registry CEO

Last year fines for non-filing of accurate business information skyrocketed. Does Farrugia believe the current enforcement in place is satisfactory?

“Yes, since June 2020, companies now also have an annual filing obligation in relation to beneficial owners to satisfy, in addition to their existing ongoing responsibilities and keeping up-to-date records on their beneficial owners, as well as making filings to the MBR when changes occur. Another change that took effect last year is that the maximum statutory penalties for default, which were not low, to begin with, but have increased significantly.

“One hopes that these penalties will deter those who wish to mislead or deceive on this front. Indeed, the maximum lump sum penalty for filing delays and for failure to keep proper records has jumped from €1,000 to €5,000.

An inadvertent delay in filing one form for a fortnight might just cost a company up to

€6,300. There is then also the penalty that the Malta Registrar of Companies could impose should he find a discrepancy between the records disclosed to him by a company and that company’s internal records. The maximum for this penalty has leapt from €10,000 to a whopping €100,000.

But what about those countries operating from before this amendment? Farrugia explained, “Those companies operating before these rules came into force (i.e. companies incorporated prior to 2018), which did not comply with the new rules upon the lapse of the initial moratorium, and are still non-compliant, are bearing a daily penalty of €500 on top of the lump sum maximum of €10,000.”

“It must be acknowledged the excellent work we have done to weed out illegitimate companies continuously. As far as we know, we are one of the only jurisdictions to carry out onsite inspections on companies to verify the Beneficial Owners. Needless to say, inspections will be increasing. As of last July, we had 10,000 companies struck off with the defunct procedure following an extensive due dilligence process which shall continue. In the coming months, we will also be publishing a list of disqualified Company Directors to keep on enhancing transparency.

Of course, Covid-19 had its challenges; as an entity, we were agile to react and continue our work without ceasing operations. I am grateful for the team here and the collaborative efforts. We followed health protocols to quarantine physical documents after using the designated drop off points and amplified our digital portal to enable easier access. We are an entity that handles over 200,000 paper documents a year. We plan to reduce, if not eliminate, this paper trail.

Although one could already submit company documents online, many of our users were not aware of this. In fact, we have seen a jump in usage from 15% pre-Covid to 35%, which has continued to grow. There are also benefits from using the online service”.

Aside from the pandemic, the entity also saw Brexit in the mix. “Fortunately, we already have excellent protocols in place for the handling of noneu countries, so we were able to apply existing processes. But, of course, it required more significant human resources from our side, increased due diligence checks, references and authentication processes. I believe we have risen to that challenge, and its business as usual here."

• Public list of disqualified company directors to follow in coming months to enhance transparency • Increased onsite inspections to verify the identity of Beneficial Owners of companies.