The Responsibilities of iGaming Operators towards their Players

Author: Christian Farrugia, Senior Corporate Administrator

Date: 19 May 2021

In the local remote gaming sector, there is a somewhat common misconception that operators are at liberty to capitalize on their players’ inability to stop playing without any concern for their wellbeing, especially on those who are considered vulnerable. While gambling addiction and its consequences are very real, the idea that companies can blindly make the most out of their misfortunes is far from the truth. Today, we take a look at what measures are currently in place for this heavily regulated and monitored industry.

Player Protection Regulations and Directives

The Gaming Player Protection Regulations and the Player Protection Directive were both issued in 2018 as part of the overhaul of local gaming laws. Together (but not exclusively), they provide an overview of obligations imposed on locally licenced operators for the protection of those who register and place bets on their websites.

Before an operator can obtain a licence, it must first have in place several written policies and procedures that address their players, including advertising policies, how player funds are managed and how player complaints are handled. Subsequent (i.e. after a licence to operate is issued) audits are coordinated by the regulator to ensure that the operator has in fact implemented, maintained and updated the contents of its written policies and procedures, and continues to do so on an ongoing basis.

The terms and conditions, which form part of the pack of obligatory documents that the operator must retain, are to always be easily accessible and intelligible on the website. New registrants must accept them as part of their registration process and any changes must be communicated to players and accepted once more before they can continue playing. Game rules must also always be readily available on the company’s website.

Segregation of Players’ Funds

Players’ funds must always be kept segregated from the company’s own funds, in a separate ring-fenced player’s account. These monies cannot be attacked by the company’s creditors, and the financial institution with which the account is held must provide a written declaration confirming that it will not enforce or execute any claim against the players’ account and it will not combine it with any other accounts in respect of any debt owed to it by the company.

Players will always have a right to their available balances, which must always be clearly shown on the operator’s website, in the specified currency. Operators are also obliged to submit periodic reports to the regulator to show that, in the hypothetical scenario where all registered players were to withdraw all their balances at once, the operator would have the sufficient liquidity to comply with said requests. Any shortfalls must be made good for by the company through its own operating fund.

Player Complaints and Player Support

Operators must have a mechanism in place to handle and discuss player complaints in a timely manner. Players are also given the option to put forward their complaints with the regulator directly. In such instances, the regulator’s own player support unit would get in touch with the operator to have the matter addressed within a specified deadline. Said unit also has the right to escalate serious breaches to the authority’s compliance sector for further action.

Furthermore, operators must offer players the possibility to refer a dispute to an approved Alternative Dispute Resolution entity if the player does not feel satisfied with the conduct of the operator following the initial complaint. Contact details of the ADR entity should be made clear.

Problem Gambling

The company should also have the ability to detect potential problem gambling by training its staff to spot unsustainable or erratic gameplay and take the necessary actions to get in touch with the player and, if need be, suspend further play. Links to problem gambling and support websites should always be available on the website and players should also have access to means to help them determine whether they have a gambling problem or not.

Other obligatory features on the website include the ability to self-impose certain limits, on for example the amount of time one can play, the amount of bets one can place or the maximum amount of losses a player can incur, within a specific period of time. If a player decides to increase a limit to continue playing, said increase will only come into effect after a “cooling-off” period, which allows the individual to mentally break away from a potentially damaging momentum of continuous betting. A decrease in limits (therefore reducing exposure) should take immediate effect.

Players should be able to opt for a “reality check”, which is when the website provides periodic pop-ups to remind the client of how long he has been continuously playing, how much has been wagered and won/lost. The payer would need to manually close this pop-up as a way of acknowledging the content. Full-screen games must always display a real-time clock.

Another feature is self-exclusion, where a player who is feeling vulnerable can opt to exclude himself from playing any further, temporarily or permanently. During this period, the website would allow the player to log in and view general information and gameplay history but cannot accept any further bets. Furthermore, no marketing material can be distributed to the player during this time. This also applies to companies with more than one brand; if the player excludes himself via one brand, it becomes effective across the board.

The above is by no means an exhaustive list of measures one must take to protect players’ welfare but provides an indication of the extent that this is integrated into the day-to-day management of any licenced gaming operation.

Should you require any further information or assistance on the matter, please do not hesitate to reach out to us personally on


©Fenlex Corporate Services Ltd.

Disclaimer │ The information provided on this Update does not, and is not intended to, constitute legal advice. All information, content, and materials available are for general informational purposes only.  This Update may not constitute the most up-to-date legal or other information and you are advised to seek updated advice.

The CSP Reform, what’s new?

Author: Adrian Mercieca, Manager, Corporate Administration Department

Date: 29th March 2021

On the 15th March 2021, the MFSA published the new Company Service Providers (‘CSP’) Rulebook which shall apply to all Company Service Providers that are currently authorised under the Company Service Providers Act, 2013 (the ‘Act’) together with many other operators such as accountants and law firms who previously has an exemption and did not require authorisation from the MFSA and where therefore ‘unregulated’. .

The amendments, also introduce categorisation of CSPs into three licensing classes as follows:

  • Class A CSP – captures the provision of (i) company incorporation and re-domiciliation and (ii) provision of registered office, business address or administrative address.
  • Class B CSP – includes a CSP that acts or arranges for another to act as a director, company secretary or partner in a partnership or any other similar position in an entity; and
  • Class C CSP – a CSP that provides all the services captured by Class A and Class B or as defined in the Rulebook all of the services of a company service provider specified in the definition of “company service provider” contained in article 2(1) of the Act

Application under one of these CSP licence classes is obligatory subject to two exceptions:

  1. Under threshold Class A CSPs – Individual warrant holders or civil partnerships in possession of a warrant or equivalent, to carry out the profession of advocate, notary public, legal procurator or certified public accountant whose revenue from corporate services work forms, or is forecast to form, in the upcoming year, not more than: [a] 35% of the combined total revenue in a calendar year from the provision of all professional services; or [b] EUR100,000, whichever is the higher.
  2. Under threshold Class B CSPs– Individuals who hold not more than ten involvements as a director, company secretary or partner in a partnership or any other similar position in an entity.

Depending on the Class of CSP licence that an applicant submits different capital and insurance requirements apply as indicated in the table below (fig.1).

CSP Class Initial Capital Requirement
Class A CSPs € 10,000
Under threshold Class A CSPs – € 2,500
Class B CSPs € 15,000 + Mandatory Pll
Under threshold Class B CSPs – € 5,000
Class C CSPs € 25,000 + Mandatory Pll

Figure 1

Whilst risk has always been an important matter on the agenda of CSPs, the Rulebook introduces a requirement on the Class C CSPs to establish and maintain a risk management function which shall independently, implement policies and procedures referred to in the Rulebook and provide reports and advice to the CSPs senior management. The MFSA may allow the CSP to establish and maintain an in house risk management function, provided that the said CSP provides evidence to the Authority that the establishment and maintenance of a dedicated independent risk management function ,with the sole responsibility for risk management is not appropriate and proportionate in view of the nature, scale and complexity of its business and the nature and range of the CSP services. This notwithstanding, where a Risk Officer is not specifically employed by the CSP, the role should be performed by a senior official of the CSP or a non-executive director.

The MFSA will also be assessing the fitness and properness of any applicants. In this regard the following aspects will be assessed (i) Competence (ii) Reputation (iii) Conflicts of Interest and Independence of Mind and (iv) Time Commitment. The fitness and properness assessment shall be applicable to: (i) the Applicant, where the CSP is a natural person; (ii) Qualifying Shareholders; and (iii) any individual that intends to hold an approved position within the CSP.

On the 16th March 2021, the MFSA opened applications for authorisations under the Act.  CSPs have to submit applications via the online portal between the 16th March and the 16th May of 2021. It is interesting to note though, that existing CSPs who were in possession of a CSP Licence prior to the date of coming into force of the amendments introduced by Act L of 2020 are obliged to take all necessary steps in order to adhere with the obligations within six (6) months from the date of the publication of the Rulebook. Provided of course that during such interim period, said CSPs shall remain compliant with the previous version of the Rules and do their utmost to comply with the new Rulebook to the best of their abilities.

Fenlex has over 30 years of experience in the sector and through its Compliance team is in a position to provide support and  assist individuals and or organisations now required to apply for a license and who are now deemed to be subject persons and required to fully comply with the Prevention of Money Laundering and Funding of Terrorism Regulations as well as the implementing procedures as published by the FIAU. Contact us at for more info.

The 2021 VAT changes for cross border e-commerce

Authors: Kristina Hili, Tax Supervisor, Amanda Abela, Senior Tax Accountant and Maria Spiteri Purkiss, Tax Accountant

Date: 5th March 2021

The main aim for the 2021 VAT changes, which come into force as of 1 July 2021, is to simplify the VAT compliance obligations for taxable persons operating cross-border transactions of either goods or services to final customers and to ensure that the VAT due on such supplies is duly paid to the Member State (MS) of where the customer is established. The changes were originally set to be applicable with effect from 1 January 2021, however the European Commission proposed to postpone the introduction of the new e-commerce VAT rules by six months, which in fact such proposal was adopted by the European Council.

Transactions covered by the 2021 changes

The following transactions are covered by the new provisions of the law:

  • Distance sales of goods imported from third territories or third countries carried out by suppliers, except for goods subject to excise duties;
  • Intra-community distance sales of goods carried out by suppliers or deemed suppliers[1];
  • Domestic sales of goods by deemed suppliers; and
  • Suppliers of services by taxable persons not established within the EU or by taxable persons established within the EU but not in the Member State of consumption to non-taxable persons.

Extension of the current MOSS to OSS

The Mini-One-Stop-Shop (MOSS) scheme, currently applicable to business-to-consumer (B2C) supplies of telecommunications, broadcasting and electronic (TBE) services, will be extended with effect from 1 July 2021 to the One-Stop-Shop (OSS) scheme, covering all types of B2C services as well as intra-community distance sales of goods.

Under the current VAT rules, supplies of goods to end consumers by Maltese businesses (‘MS 1’) to another MS (‘MS 2’), whereby the customer is not registered for VAT in that other state (‘MS 2’), is treated as supplied in the country of dispatch (‘MS 1’), unless the distance sales threshold is breached. Once the distance sales threshold is exceeded, the supply is subject to VAT in line with the VAT rules where the end consumer is established (‘MS 2’). Thresholds vary from one country to another; currently in Malta the distance sales threshold is EUR 35,000.

The new rules require EU based suppliers to report these transactions, which will now be referred to as ‘intra-community distance sales of goods’ under the OSS.  B2C operators established in the EU providing intra-community distance sales of goods, will be subject to the VAT rules of the MS where the transport ends. However, if the EUR 10,000 threshold is not exceeded, the intra-community distance sales will be deemed to be taking place in the country of dispatch. The application of the OSS will eliminate the need for multiple VAT registrations in different EU jurisdictions and will ease the compliance burden as EU businesses may opt for the OSS system and will be able to remit the VAT due in other Member States through one return, known as the OSS return.

The following businesses would be eligible to apply for an OSS regime in Malta:

  1. Taxable persons established in Malta engaged in intra-community distance sales; or
  2. Taxable persons established outside the EU having a fixed establishment in Malta, engaged in intra-community distance sales; or
  3. Taxable persons established outside the EU and have no fixed establishment in Malta but is dispatching intra-community distance sales from Malta.

The OSS will also be applicable, with effect from 1 July 2021, to B2C services taking place in a MS other than the MS where the supplier is established. This mainly applies to businesses providing hiring of means of transport (such as the pleasure yacht chartering industry), supply of transport services, and supply of services connected with immovable property. Under the current VAT rules, such suppliers must register in the different Member States where the services are taking place. Through the application of the OSS system, such businesses will no longer be required to retain multiple VAT registration but may opt to declare such services through the OSS regime.

The practicalities of the OSS scheme

A taxable person should notify the Commissioner for Revenue when intra-community distance sales and/or supplies of services falling within the scope of the OSS regime commence or cease through an application filed electronically. The OSS registration would subsequently be cancelled if the taxable person no longer performs such supplies.  The OSS return is a calendar quarter return (i.e. January to March, April to June, July to September, October to December) and would be due within 30 days of the end of the calendar quarter.

The Import One Stop Shop (I-OSS)

To complement the OSS system, with effect from 1 July 2021 the Import-One-Stop-Shop (I-OSS) scheme will be introduced. The I-OSS regime applies to distance sales of goods imported from countries outside the EU with value not exceeding EUR 150.  Operators have the option to register under the I-OSS scheme and VAT will be charged by the supplier at the point of sale to the EU customer. Therefore, if I-OSS is applied, no VAT would be charged by Customs on importation as is currently being done. This will likely speed up the process as the goods will not be delayed at Customs due to processing and collection of VAT payment. Operators have the option to appoint an intermediary to register under the I-OSS on their behalf. The operator or intermediary will submit a monthly I-OSS return reporting the VAT collected and remit the VAT due to each MS of importation.

The low value consignment relief which exempts from VAT on importation of low-value goods not exceeding EUR 22 will be abolished as of 1 July 2021. To support this measure, suppliers may opt for the I-OSS regime.

The practicalities of the I-OSS scheme

Similar to the OSS, a taxable person or its appointed intermediary should notify the Commission for Revenue when activities falling under this scheme commence or cease through an application filed electronically. The I-OSS return is a monthly declaration and would be due by the end of the following month.


The reason behind these changes is to overcome the barriers to cross-border online sales, in particular challenges arising from the VAT regimes for distance sales of goods and from the importation of low value consignments. The new rules will place EU businesses on equal footing with non-EU businesses, wherein according to the current rules non-EU businesses are not required to charge VAT.

For any queries or assistance on any of the above, please feel free to contact


[1] Deemed supplier is defined as a taxable person who is deemed to receive the goods from the underlying supplier and to supply the goods to the final customer. The deemed supplier is the taxable person facilitating supplies through an electronic interface.

Tax Treaties and COVID-19

Author: Letizia Grech Seychell, Senior Tax Accountant

Date: 1st March 2021

Head of Tax Compliance Department William Cassar and Senior Tax Accountant Letizia Grech Seychell write in yesterday’s edition of the Times of Malta:

“COVID-19-related measures such as travel restrictions and curtailment of business operations are still very much in place and they seem to be here to stay for at least the medium- term. To this end, the OECD felt that it should provide additional insight on three main concerns…”

“What clearly stems from the OECD guidance is that, in the OECD’s opinion, temporary changes in circumstances during these extraordinary times should not give rise to tax treaty implications. However, this guidance only represents the views of the OECD secretariat and therefore taxpayers should closely monitor any guidance issued from relevant tax authorities to be able to correctly assess their particular situations.”

Read the full article here: 

Foreign Direct Investment – Brief overview of the regulation and the process in Malta

Author: Josianne Cilia, Senior Corporate Administrator

3rd November 2020

On the 19th of March 2019, the European Parliament and Council introduced Regulation (EU) 2019/452 (the “Regulation”) for the screening of foreign direct investments into the Union. As from the 11th October 2020, this Regulation became also applicable to Malta.

Foreign Direct Investment (“FDIs”) screening differs between one country and another worldwide, and prior such introduction of this Regulation, the European Union (“EU”) did not have any regulations in place to monitor FDIs. The EU recognizes FDIs as an integral part of the economic growth and is in no way moving towards reducing FDIs. The scope of such Regulation is mainly to control such investments, and investigate where necessary, to ensure the EU’s security and public order.

The Regulation defines FDIs “as an investment of any kind by a foreign investor aiming to establish or to maintain lasting and direct links between the foreign investor and the entrepreneur to whom or the undertaking to which, the capital is made available in order to carry on an economic activity in a Member State, including investments which enable effective participation in the management or control of a company carrying out an economic activity” and it defines a foreign investor a “natural person of a third country or an undertaking of a third country intending to make or having made a foreign direct investment”.

Every EU Member State is allowed to implement its own tailor-made screening mechanisms while also taking consideration that such mechanisms are to be transparent and not discriminate in any way an investment coming from different third countries. The introduction of such screening mechanisms would allow each EU Member State to collaborate between them and with the European Commission.

In Malta, the local legislation has not yet been finalized, however the National Foreign Direct Investment Screening Office (the “Office”) has been set up and is fully operational from June 2020. The Office has worked together with the Institute of Financial Services Practitioners and the Malta Institute of Accountants, to draft a notification form which is to be completed in respect of FDI’s. Such application is to be filed with the Office prior submission of the Memorandum and Articles of Association and any other related documents to the Malta Business Registry.[1] The Office would be monitoring transactions including, but not limited to, transfer of shares and assets where the current or the new ultimate beneficial owner (“UBO”) is a third country national OR mergers and acquisitions of companies involving third countries or a UBO who is a third country national OR the incorporation of new entities by a UBO who is a third country national. The Office advises that the notification form is to be filled only:

  • where the Ultimate Beneficial Owner, whether existing or new, is a ‘foreign investor’ (as defined in Article 2 of the EC Regulation 2019/452);
  • the activity is one as described in Article 4 of the regulation cited below; and
  • where the investment within the territory of Malta, is of a direct, tangible and long-lasting nature.[2]

Article 4 of the Regulation lists the factors that may be taken into consideration by Member States or the Commission. While determining whether a foreign direct investment is likely to affect security or public order, Member States and the Commission may consider its potential effects on, inter alia:

  • critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure;
  • critical technologies and dual use items as defined in point 1 of Article 2 of Council Regulation (EC) No 428/2009 (15), including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies as well as nanotechnologies and biotechnologies;
  • supply of critical inputs, including energy or raw materials, as well as food security;
  • access to sensitive information, including personal data, or the ability to control such information; or
  • the freedom and pluralism of the media.[3]

In addition to the above, the Member States and the Commission may also consider, in particular: –

  • whether the foreign investor is directly or indirectly controlled by the government, including state bodies or armed forces, of a third country, including through ownership structure or significant funding;
  • whether the foreign investor has already been involved in activities affecting security or public order in a Member State; or
  • whether there is a serious risk that the foreign investor engages in illegal or criminal activities.[4]

Every Member States must submit an annual report to the commission by the 31st March of each year, which report would include the FDIs recorded in the reporting Member State and requests received from other Member States pursuant to Articles 6(6) and 7(5). The Member State must also report the screening mechanism they have implemented. On the other hand, the Commission shall provide an annual report on the implementation of this Regulation to the European Parliament and to the Council[5] which report shall be made public.




[4] Ibid.

[5] Ibid.

©Fenlex Corporate Services Ltd.

Disclaimer │ The information provided on this Update does not, and is not intended to, constitute legal advice. All information, content, and materials available are for general informational purposes only.  This Update may not constitute the most up-to-date legal or other information and you are advised to seek updated advice.


Author: Karl Diacono, Director & CEO of Fenlex Group
1st July 2020

Recent money laundering scandals within the EU over the last few years tied in with a more global initiative driven by the FATF to constantly tighten the grip on laundering of criminally earned monies, is driving the EU to take more control of the implementation of the EU’s own initiatives. As Gate keepers’ subject persons are expected to fully implement the EU Directives as transposed into law and following guidelines and procedures as published by the Competent Authority of each member state. This at least up to now.

From 2010 to 2014, twenty shell companies made almost 27 thousand payments through 732 foreign banks. Many of these banks were located in Cyprus, Denmark, Estonia, Germany, Netherlands, Sweden and the UK — all EU countries. These twenty-one companies moved thirteen billion dollars of illicit monies. This led to the license of Latvian based Trasta Komerbanka being withdrawn. In 2017 the OCCRP (Organised Crime and Corruption reporting Project) revealed serious issues at Danske banks Estonian branch that was used to launder a 2.9 billion US dollar slush funds used by the Azerbaijan’s regime to buy influence using UK shell companies. Malta has its own very serious issues to contend with as well and is at risk of being grey listed by MoneyVal until such time that Malta implements and complies with all of the recommendations made by MoneyVal in their 2019 report on the country.

The EU is now moving to the next phase in its war, because a war it is, against Money laundering and terrorist financing. On the 7t of May 2020 the Commission issued a communication on it Action Plan for a comprehensive union policy. The plan is ensure that there cohesion across the union and seeks to stop criminals exploiting weaknesses created by inconsistent at times lax implementation of rules.

The Action plan clearly seems to indicate that the Commission is frustrated that whilst on paper the AML Directive is a strong tool to fight money laundering its implementation and enforcement across the Union leaves a lot to be desired, so much so they state “there is growing consensus that the framework needs to be significantly improved. Major divergences in the way it is applied and serious weaknesses in the enforcement of the rules need to be addressed. “

The Commission intends to take more control over the implementation, via a harmonized rule book as well as the supervision of local Financial Intelligence Units (FIU’s) via an EU-level supervisory body that will work closely with local competent authorities. The commission wants to take over control.

The action plan is built on six pillars, namely:

  1. Ensuring the effective implementation of the existing EU AML/CFT framework;
  2. Establishing an EU single rule book on AML/CFT;
  3. Bringing about EU level AML/CFT supervision;
  4. Establishing a support and cooperation mechanism for FIUs;
  5. Enforcing Union-level criminal law provisions and information exchange;
  6. Strengthening the international dimension of the EU AML/CFT framework.

In brief each of the pillars aim to fulfill the following:

  1. Ensuring the effective implementation of the existing EU AML/CFT framework

The Commission is frustrated that member states delay implementing AML Directives. All member states had implementation procedures opened against them for not fully transposing the 4AML Directive in a timely manner. A number of actions have also been opened against member states for the same reason on the 5th AML Directive. The Commission also wishes to strengthen and monitor member state capacity to supervise and prevent money laundering. The Action plan also specifically mentions handling “shortcomings in the application of the risk-based approach, and mitigating risks from the misuses of shell companies, golden visas and citizenship schemes.”. The Commission is looking at the European Banking Authority (EBA) who has been entrusted to co-ordinate and monitor AML/CFT activity of all EU financial services providers as well as competent authorities.

  1. Establishing an EU single rule book on AML/CFT

Fragmented, inconsistent implementation as well as rules that go beyond the scope of the AML directive has led to regulatory shopping as well as created extra burdens and costs for cross border business. The Commission notes that “legislation needs to become more granular, more precise and less subject to diverging implementations.” The Commission notes that works needs to be done to use technology to help fight the battle. The Commission also recognizes that the burden placed on obliged entities has created unintended effects with obliged persons exiting markets or withdrawing products for services, such as correspondent banking, that has had a negative effect on provision of financial services and economies. Balancing data protections rules the exchange of information rules between authorities is an issue the commission also recognized and needs to address.

  1. Bringing about EU level AML/CFT supervision

The Commission recognizes that scandals in a number of member states have adversely affected trust in the systems put in place by local competent authorities. Failures can be blamed on the fact that “ quality and effectiveness are uneven across the EU, due to significant variations in human and financial resources, skills and priority devoted to this task”  The proposed supervisory body will also be tasked to build relations with other national authorities to strengthen the EU’s position and access to information to fight AML globally. Direct supervision and inspection on obliged entities by the EU Supervisor is also be considered and the action plan looks at a number of possible responsibilities the Supervisory body could take on. What is clear is that the task is a mammoth one. Whether it will be the EBA or a newly set up dedicated entity is also open to discussion.

  1. Establishing a support and cooperation mechanism for FIUs

Cross border collaboration between FIU’s is limited. The reasons are many and vary from lack of resources, old technology (such as the system currently in use and managed by Eurpol) that hinders information exchange. It is clear that heavy investment is required here and the Commission, as part of the wider plan, is seeking to take over the support and co-ordination between Competent Authorities to ensure more effectiveness across the union and beyond. Most cases reported by FIU’s are cross border. These require better co-ordination to be effective and the commission is adamant to tighten up in this area and improve information exchange.

  1. Enforcing Union-level criminal law provisions and information exchange

Measure have been taken to close loopholes and increase access to timely information to FIU.s enforcement authorities and Europol (such as access to the Central Bank Account Mechanism) to effectively combat cross border crime. Efforts have also been made and new standards set to not only capture criminals but also seize or recover assets or proceeds derived from criminal activity. Efforts to improve and expedite the cross-border recovery of illicit funds will also be made and new measures are expected to be implemented by December 2020. The new European Economic and Financial Crimes Centre (EFECC), which should also become operational in the course of 2020. The EFECC will become the centre within Europol that will handle all financial intelligence and economic crime capabilities.

The Commission is looking at ways the private sector and authorities can further collaborate to battle money laundering and increase exchange of information opportunities in this regard. This though always needs to be done within the safe guards of other laws such as data protection.

  1. Strengthening the international dimension of the EU AML/CFT framework.

The final pillar of the action plan goes beyond the EU’s borders. The EU is a strong supporter of the Financial Action Task Force (FATF). It contributes to work of the FATF as well as to implementing the FATF recommendations and standards. Having said that the EU shall still implement its own policies aimed at third countries to protect its own financial systems as well as identify countries that have their own strategic deficiency, in fact the Commission is obliged to do so under its own 5th AML Directive. This is driven by the need to manage external risk.

The action plan is open to a consultation period up to the 29th of July 2020.

It is still not clear when or if we will ever be rid of Covid-19, some pundits claim that we will never truly get rid of the virus and must be on our guard at all times. Money Laundering, we all know, is not dissimilar to a virus. Obliged persons or as we refer to them locally, subject persons, are the front liners, the gate keepers in the fight against this virus. The world is what it is and man succumbs to temptation and greed , we will always have criminals amongst us.

What is clear and now has become a given, is that as subject persons we are deeply entrenched in this battle. Conscripted, for lack of a better term into the EU’s army. We now expect more obligations to be placed upon us in this battle against the criminal, a criminal who always seems to be step ahead.

©Fenlex Corporate Services Ltd.

Disclaimer │ The information provided on this Update does not, and is not intended to, constitute legal advice. All information, content, and materials available are for general informational purposes only.  This Update may not constitute the most up-to-date legal or other information and you are advised to seek updated advice.

Important Information – Beneficial Ownership Register

The Companies Act (Register of Beneficial Owners) Regulations came into force on 1st January 2018 (the “Regulations”). These Regulations were recently amended to transpose certain provisions of the Fifth EU Anti-Money Laundering Directive (the “5AMLD”) into Maltese law.

The most notable change brought about the 5AMLD relates to the accessibility of beneficial ownership information in respect of various entities which obliges member states to make the information on the beneficial ownership of companies registered therein freely accessible by members of the general public. Accordingly, Regulation 7 of the Regulations as amended, now provides that members of the general public are to also have access to beneficial ownership information of companies but only to the name, the month and year of birth and the country of residence and nationality of the beneficial owner as well as the nature and extent of the beneficial interest held. This specific amendment has come into force on the 1st January 2020 and the Malta Business Registry online portal was very recently updated to cater for this amendment and now allows persons to access beneficial ownership information against a minimal fee.

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. In any case, access to beneficial ownership information may not be restricted for credit and financial institutions or to subject persons (as defined under the Prevention of Money Laundering and Funding of Terrorism Regulations)

Following the publication of the Companies Act (Register of Beneficial Owners) Regulations, 2017, Fenlex has during the course of 2018/2019 assisted numerous client companies registered in Malta to maintain a register of their respective ultimate beneficial owners, together with the preparation and presentation of such information to the Malta Business Registry by means of filling in and presenting the prescribed beneficial ownership form. Should you have not as yet filed said form with information pertaining to your company, please do get in touch as we would be more than happy to assist.

For further information kindly contact our Compliance Department via email

Tax Consolidation Rules in Malta

Introduction to the Rules

The Tax Consolidation Rules in Malta have been recently introduced via Legal Notice 110 of 2019, Subsidiary Legislation 123.189.

The Rules aim to simplify the tax compliance obligations of companies forming part of a Group (as defined under the rules), whilst arriving at the same tax charge for the Group as a whole. These rules introduce the formation of a tax Group in Malta.

For the purposes of the Rules, the Parent Company of the Group (the Principal Taxpayer) must hold in its subsidiaries at least 95% of either:

  • Voting Rights
  • Profits Available for Distribution
  • Assets Available for Distribution upon Winding Up

The subsidiaries forming part of the Group (Fiscal Unit) would be considered as transparent for tax purposes.

Forming part of a Group and the application of these rules is optional and the choice to form a Fiscal Unit is to be made via an election made at the level of the parent company (holding 95% shareholding in its subsidiary), but must regardless be subject to the consent of the minority shareholders, if applicable.

The Rules in Practice

The Main outcome of the application of the Rules is the fact that intra-group transactions are ignored for tax purposes, and thus not included in the tax computation of the group, except for transfers related to Immovable Property situated in Malta. Based on the fact that it generally takes months for a shareholder to receive a refund, the main aim of these Rules is to provide a cash flow advantage in the instance where shareholder refunds may be claimed by non-resident shareholders. This is achieved by having the tax computation factor into the possibility of a refund and arriving at the net effective tax without having to claim the refund.

The Rules also have an affect on the Notional Interest Deduction (NID), whereby the application of the NID must be taken for the group as a whole, including the fact that the Risk Capital of the Group would be aggregated, whilst eliminating any intra-group debt.

With respect to Groups wholly owned by Maltese Resident shareholders, and thus with no tax refund availability, the rules are nonetheless beneficial in that they simplify the tax obligations without having to claim the imputation credits.

The Rules naturally include a number of obligations which need to be adhered to in order for a Group to be able to apply the said Rules. For example, the Principal Taxpayer shall be responsible for the payment of the tax and for the submission of the annual tax return. Furthermore, the Principal Taxpayer will be required to prepare an audited consolidated balance sheet and consolidated profit and loss account covering all the companies in the Fiscal Unit. On the other hand, the transparent subsidiaries will be exempt from preparing audited financial statements. It is important to note however that every entity forming part of the Fiscal Unit shall be jointly and severally liable for the payment of the tax.


Whilst the Rules seem to be providing a practical solution for the current cash flow disadvantage in claiming tax refunds, it is important to ensure that the benefits outweigh the costs applicable to create a Fiscal Unit. Furthermore, several aspects in the Rules are open to diverging interpretations and thus the Revenue may be issuing guidelines some time in the future for a better application of these Rules.

Author: Stephanie Aquilina Galea, Tax Supervisor, Tax Compliance Department

The Fifth Anti-Money Laundering Directive: Key Amendments

The Fifth Anti-Money Laundering Directive (5AMLD) partly amends EU Directive 2015/849 of the European Parliament and of the Council of 2015 (4AMLD) and was adopted by the European Parliament on the 19th of April 2018. The 5AMLD will come into force on the 10th of January 2020 and will tackle  further shortcomings in the European Union’s AML/CFT mechanism. This article aims to explore the key changes brought about by this directive, of which the influence is expected to be extensive.


The 5AMLD considerably revises the previous directive, however it legislatively takes a concrete and progressive step in the treatment of virtual currencies, starting off with a legal definition of cryptocurrency, which may be predominantly considered as “a digital representation of value that can be digitally transferred, stored or traded and is accepted … as a medium of exchange”. This Directive has further rendered cryptocurrencies and cryptocurrency exchanges as “obliged entities”  which will equally be obliged to abide with AML/CFT regulations that apply to financial institutions under 4AMLD. Realistically this incorporates an obligation to carry out customer due diligence and to accordingly present suspicious activity reports (SAR).

In its reporting obligations, 5AMLD builds upon the previous directive and gives Financial Intelligence Units the authority to procure the identities and proof of addresses of owners of virtual currencies, and therefore dismiss the anonymity generally associated with the utilisation of cryptocurrencies. The directive also incorporates regulation for suppliers of cryptocurrency wallets and exchanges which must now be registered with the competent authorities in their national jurisdiction – in Malta’s case, the Malta Financial Services Authority (MFSA).

Beneficial Ownership

When adopted in 2017, 4AMLD’s brought about a degree of  transparency with respect to the ultimate beneficial ownership, aiming to mitigate risk and to prevent money laundering. The new directive enhances this, and incorporates the below measures:

  • The lists of ultimate beneficial owners of EU based companies formulated under the 4 AMLD will now be made accessible to the public.
  • Further improves transparency in case of trusts where information on beneficiaries will be made available to the competent authorities and/or other persons manifesting legitimate interest.
  • The national registers of ultimate beneficial ownership will be interconnected at an EU level so that cooperation and the exchange of information between member state authorities is facilitated.

Centralised Bank Account Registers

The 5th AML Directive ends the anonymity of bank and savings accounts, as well as safe deposit boxes and creates central access mechanisms to bank account and safe deposit boxes holder information throughout the EU.Politically Exposed Persons (PEPs)

5AMLD further obliges EU member states to assemble and publicly divulge a functional PEP list which should constitute distinguished politically exposed public functions. The lists will not divulge the names of the persons holding such functions and will only list the public offices and functions that qualify as politically exposed.  This requisite expands to include authorised international organisations, and the EU will additionally publish an EU-level issue of the list.

Prepaid Cards

Another measure aimed to combat the financing of terrorism that was introduced via 4AMLD restricted the anonymous use of electronic money products (such as prepaid cards) where the maximum monthly payment transactions was limited to €250. The new directive sets an even lower limit of €150, one which also applies to the amount which can be stored on cards. Likewise, online transactions using such payment methods have been limited to a maximum of €50.

Unless they were issued in jurisdictions implementing legislation equivalent to the EU’s AML and CFT framework, prepaid cards issued outside of the realm of the EU are now proscribed under the 5AMLD. Obliged entities must analyse the manner with which they manage prepaid card payments and establish procedures to recognise – and decline accordingly – transactions utilising cards from non-EU origins. This might potentially require considerable revision of systems and procedures already in place internally.

High-Risk Third Countries

The Directive now provides specific guidance on harnessing systemic enhanced controls in member states with regards to the application of enhance due diligence measures in respect of customers  hailing from high risk jurisdictions. The list of checks has now been harmonised and include:

  • Collecting information on clients and the ultimate beneficial owners, including the purposes of proposed transactions, and details on the client’s respective sources of wealth and of funds.
  • Reporting transaction specifications to senior management and acquiring consent to establish or continue the business relationship.
  • Increasing regulations on business relationship and appropriately identifying transactions which would require further inspection.

Traders of Art

5AMLD further extends the breadth of legislation in respect of persons trading in art who will be considered as “obliged entities” and will therefore have AML/CFT reporting obligations. . For the first time, the new directive expressly tackled art masterpieces. The regulations will apply in so far as transactions involve art that amounts to or exceeds the value €10,000.