COVID-19

The onboarding and ongoing monitoring processes during COVID-19

Authors: Claire Scicluna, Manager and Clarissa Musu, Corporate Administrator

26th May 2020

It may be said that when the cat is away, the mice will play, but ensuring that a subject person having a robust and clearly outlined and implemented client acceptance procedure, as well as steady ongoing monitoring, would make it difficult for any criminal to carry out financial fraud, to find ways to exploit and filter through any weaknesses in a financial system. This is important at all times, especially more so in times of crisis where one needs to continue to adapt whilst facing unprecedented circumstances and challenges.

The Know Your Client (KYC) procedure implemented by a subject person prior to onboarding a client may be a lengthy and at times frustrating procedure, but a necessity in today’s world where risk tolerance levels are being drastically reduced. The ongoing changes in the EU’s AML directive are always aimed at closing gaps that allow criminals and terrorists to launder their ill-gotten gains. Since the first directive in 1990 the EU has been working at strengthening its fight against money laundering. As Gate keepers, subject persons are expected to fully implement the EU Directives as transposed into law and following guideline and procedures as published by the Competent Authority of each member state.

Customer due diligence collection, record keeping, ongoing monitoring and risk assessment involves the collection of documentation and information to enable the subject person to confirm the identity and verify the involvements within a structure and the beneficial owners, the activities and transactions undertaken by an entity, all in accordance with the subject person’s client acceptance policies and ongoing monitoring procedures. The process aids subject persons to identify and verify and prove true and lawful transactions and business dealings. This process is extensive and requires investment by a subject person and the training necessary to ensure internal policies are abided by.

The Financial Action Task Force (FATF) has outlined concerns and challenges which are linked to the ongoing global pandemic. The organisation has acknowledged that although as a result of such pandemic, there has been a shift from what was previously referred to as a ‘norm’ to the ability to work remotely, emphasis has been made for subject persons to ensure that AML/CFT efforts should remain resilient and encouraged regulators, financial intelligent units, law enforcement authorities and so forth to provide the necessary guidance and support to the private sector on ‘how national AML/CFT laws and regulations will be applied during the current crisis’. It has also been noted that other sources have stressed on this point as many argue that financial crime remains a serious threat and this pandemic might be the right time for criminals to strike.

Working in such conditions has brought about concerns and challenges.  Firstly, remote working has led to a significant reduction of face-to-face meetings which in turn may lead to subject persons needing to adopt an enhanced customer due diligence collection exercise. However, one is to argue whether with the advancement in technology to aid a subject person to virtually meet a client, would still be considered and regarded as having met the client. The FIAU Implementing Procedures outlines additional verification measures as listed in Section 4.3.1.2 that may be adopted by a subject person remotely. Subject persons might still come across difficulties when it comes to the collection of hard-copy documentation due to the limited access to courier services

Given the above, the FIAU has also noted that subject persons have felt the need to seek guidance as to how to conquer the obstacles which ongoing monitoring and onboarding processes may bring. Whilst noting that the global pandemic has shifted the way business is carried out, the FIAU has encouraged all subject persons to refer to the Implementing Procedures with great attention.

On the 6th May 2020 the FIAU issued a Guidance Note – Covid-19: Remaining Vigilant Against a Changing Criminal Landscape, which, as this name implies, provides guidance by (i) outlining examples on the manners and trends and the forms in which illicit behaviour and new criminal activities may come to light, (ii) mitigating money laundering risk by revisiting and also updating a subject person’s Customer Risk Assessment in line with the FIAU’s Implementing Procedures Part I and (iii) Remote Onboarding Procedures highlighting the importance that a subject person should be giving to adapt their policies and procedures to allow the subject person to continue fulfilling their regulatory obligations. The Guidance Note also concludes by encouraging subject persons to make use of non-face-to-face verification measures in line with the insisted practice of social distancing. One may agree that the switch to virtual verification may be risky, however, the FATF released a circular in March 2020, ‘FATF Guidance on Digital Identity in Brief’ which highlights the benefits of trustworthy digital identity for identifying people remotely for onboarding. However, before going forward, subject persons should ensure that the digital systems being implemented are robust and are authorised by the relevant authorities.

Over its years as one of Malta’s leading Corporate Service Providers, Fenlex has ensured and invested in robust KYC and Anti Money Laundering policies, procedures and platforms.

If you need any assistance in understanding your obligations as a subject person or guidance on becoming compliant please feel free to contact us at compliance@fenlex.com

COVID-19: Directors’ Statutory Duties

Authors: Adrian Mercieca, Manager and Rebecca Degiorgio, Corporate Administrator
20th May 2020

The fiduciary obligation conferred upon a corporate Board of Directors (the “Board”) by Chapter 386 of the Laws of Malta to act in bona fide and in the best interests of the company, has gained critical importance in the face of financial difficulty and other economic disturbances arising from the COVID-19 pandemic. In the normal course of business, the Board is primarily responsible for the strategy, proper administration and supervision of the company’s state of affair.

In the face of adversity, the Board is forced to change the way it ordinarily operates by defining and implementing a strategy to help carry the company through this period of uncertainty, the efficiency of which is subject to ongoing assessments and monitoring as the situation continues to evolve. Whilst retaining the statutory duties ascribed to them as directors, the Board may choose to appoint a competent consultant to assist in approaching the challenge of change forced onto the business by the pandemic. Understanding the Board’s fiduciary duty to the company in normal circumstances may shed light onto the increased level of responsibility and complexity of any decision taken in extraordinary circumstances, whereby the interest of the shareholders may run counter to, and are given priority over the interest of other stakeholders such as employees and suppliers.

In the same way that health authorities seek to prevent the virus from spreading by imposing selective and economically-painful restrictions, the Board has to proactively secure the day-to-day functioning of the company by adapting to the volatile situation accordingly while still acting in accordance with their responsibilities and duties as directors. Naturally, the administrative duties of directors have been temporarily dislocated since most companies had, in a matter of a few days, to adapt, where possible, to remote working conditions whilst still seeking to give their clients the best possible service in a seamless manner. Other companies have been forced to shut down almost completely freezing their revenues. Governments, Regulators and Authorities have recognized the difficulties faced by businesses and action has been taken to lighten the burden on companies. A case in point is  the Malta Business Registry (MBR) who has sought to cater for this difficult period by effectively waiving the penalties ordinarily imposed in the case of non-submission of specific filings.

More importantly, there are special directors’ duties that also come into effect in the event that the company has lost an irrecoverable amount of capital and/or is at the onset of insolvency and unable to pay its creditors, the reality of which may be faced by many companies during these trying times. At the prospect of insolvency there’s an observable shift from the directors’ fiduciary duty to act in the best interests of the company and its shareholders to that of its creditors. In respect of this, the Board is entrusted with convening a general meeting with the object of examining the company’s financial position and resolving to determine a corrective plan of action. Therein, the Board may also consider placing the company into dissolution or legally applying for a Company Recovery Procedure (CRP), the choice of which is strictly dependent upon the extent of financial hardship as well as the future prospect of recovery.

It is of utmost importance that directors act diligently during this challenging period. Our professionals at Fenlex Group may provide practical boardroom experience in a variety of industry sectors. Should you require any further information or assistance on this matter, please do not hesitate to contact us personally on adrian.mercieca@fenlex.com or rebecca.degiorgio@fenlex.com.

COVID-19 UPDATE: The Processing of Documentation | Malta Financial Services Authority

Author: Rebecca Degiorgio, Corporate Administrator
16th April 2020

As a response to the restrictions emanating from the global pandemic, the Malta Financial Services Authority (MFSA) has issued an updated notice of interim measures for the processing of documentation. Thus, the original circular issued on the 24th March, 2020 has been amended to provide for the inclusion of regulatory submissions, such as audited Financial Statements, to be sent to the MFSA in a scanned format by the Chairman of the Board of a company, as opposed to the prior requirement for each Director of the company to send an email confirmation for the approval of accounts to the Authority. This update may provide for the lessening of any unnecessary bureau-cracy during this unprecedented period in time. However, whilst the Authority reserves the right to request all scanned copies to be sent by mail or courier service, all original signed documents and/or certified true copies of original documents that are typically submitted to the MFSA are still due for submission in hard copy upon the return to business as usual.

At Fenlex Group, we shall continue to closely monitor, assess and cooperate with any interim measures taken by the Regulators in view of COVID-19. For further in-formation and/or assistance, please do not hesitate to contact us personally on info@fenlex.com.

Extension of Gaming Compliance Contribution, Gaming Tax & Licence Fee Deadlines

Author: Christian Farrugia, Senior Corporate Administrator
14th April, 2020

Due to the ongoing global situation with respect to COVID-19, many sporting events and competitions have either been suspended until further notice or cancelled entirely. This has in turn affected operators licenced by the Malta Gaming Authority (the “MGA”) which offer Type 2 games, defined as “games of chance played against the house, the outcome of which is not generated randomly, but is determined by the result of an event or competition extraneous to a game of chance, and whereby the operator manages his or her own risk by managing the odds offered to the player”.

As a result, the MGA has announced a number of measures in relation to several payment obligations typically due to the MGA under normal circumstances for Type 2 providers.

The obligation to pay compliance contribution and gaming tax for the months of March, April and May 2020 has been extended by three (3) months for each of these months. For exclusive Type 2 providers whose fixed annual licence fee is also due in one of these months, the same extension applies.

Licenced operators are also reminded of the option to voluntarily suspend a vertical until sporting events and competitions return back to action to mitigate any costs which may have outweighed the yields from that vertical as a result of little to no betting activity available.

Should you require any further information or assistance on the matter, please do not hesitate to reach out to us personally on karl.diacono@fenlex.com.

©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.

COVID-19: The Processing of Documentation & Filing Deadlines | Malta Business Registry
  1. The Processing of Documentation

As established under the Subsidiary Legislation 595.27, the Malta Business Registry (the “MBR”) is an Agency regulated by the Malta Financial Services Authority (the “MFSA”). Interestingly, contingency plans in light of the COVID-19 pandemic seem to differ when comparing the MFSA’s approach to the processing of documentation to that of the national business registry. For an interim period, with effect from the 24th of March 2020 and until further notice by the MFSA, all documentation is to be submitted using the MFSA’s online portal or sent by electronic mail (if applicable). Notwithstanding this, original signed documents and/or certified true copies of original documents are still due for submission in hard copy to the MFSA upon the return to ordinary working circumstances, a hitherto unknown date.

The MBR has taken a business-as-usual approach to the processing of documentation, primarily focusing on the continuity of services in accordance with ongoing recommendations from the National Health Authorities. Therefore, whilst paper documents are set to be processed on the first working day after 72 hours from date of receipt, authorised users may continue to complete, digitally sign and submit select documentation online via the MBR’s portal.

  1. Filing Deadlines

In light of the implications of COVID-19 on corporate governance, the penalties ordinarily imposed by the MBR on a company for the non-submission of the annual return and/or financial statements shall be effectively waived if the submission date falls within the period between 23rd April 2020 and 31st May 2020. More importantly, this provision is subject to the filing of the annual return and/or financial statements by the 31st July 2020.

Furthermore, this limited time period of waiving penalties ordinarily imposed on a company for non-submission is also applicable to any other notification/return to be submitted to the MBR. An email including all relevant information (i.e. name and registration number of company, type of notification/return and cause for non-submission) must necessarily be sent to the MBR on info@mbr.mt. In the event that a company fails to circulate such information to the MBR, penalties for non-submission of notification/return are to be imposed as per usual.

At Fenlex Group, we shall continue to closely monitor, assess and cooperate with any interim measures taken by the Registrar and Regulators in view of COVID-19 whilst maintaining a clear channel of communication with our clients. For further information and/or assistance, please do not hesitate to contact us personally on info@fenlex.com.

©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.

Extended FATCA & CRS Filing Obligations in light of COVID-19

Author: Christian Farrugia, Senior Corporate Administrator
6th April 2020

The Office of the Commissioner for Revenue has, through the issuance of a new notice, announced an extension of Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) reporting deadlines by two months from the 30th of April, 2020 to the 30th of June, 2020. The purpose of this extension is to provide reporting institutions with additional flexibility considering the current global situation with respect to COVID-19.

This extension is only valid for 2020 filings related to the 2019 reporting year. Failure to submit the required information by the specified deadline will result in imposition of penalties in terms of Regulation 44(1)(d) of the Cooperation with Other Jurisdictions on Tax Matters Regulations.

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

©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.

Temporary Submission Measures with Respect to COVID-19

Author: Christian Farrugia, Senior Corporate Administrator

27th March 2020

Through several notices issued on their official website over the course of this week, the Malta Gaming Authority (the ‘MGA’) informed all licensed entities that the MGA will temporarily be accepting all submissions which are typically required in hard copy, in soft copy. Hard copies may still be sent in the meantime and will be processed when resources are available. The MGA stressed the importance of adhering to certification requirements which remain unchanged.

Where documents are to be certified as true copies, certification must be carried out by an independent natural person who is authorised to do so under the laws of an EU/EEA jurisdiction or other jurisdiction approved by the MGA, such as legal professional, accountancy professional, notary or Registrar of Companies or other registry (or equivalent). The certifier must make a written statement in the English language confirming that the document is a true copy of the original document and that he/she has seen and verified the original document. Furthermore, the certified true copy must be dated and must include the full name, designation and contact details of the certifier.

If the document is composed of more than one page the certifier can either certify each page individually or certify the top of the first page and add a statement detailing the number of pages of the original documentation seen.

Due to the fact that not all documents have specifically allocated fields in the relevant application on the online MGA portal, any documents that do not have such field may be uploaded in the ‘Other Documents’ section.

Furthermore, for licensees whose last concluded financial year ended, or ends, between December 2019 and March 2020, the deadline for submission of the audited financial statements envisaged in Article 41 of the Gaming Authorisations and Compliance Directive (the “Directive”) is hereby extended to the end of October 2020. Nevertheless, by not later than 180 days after the end of their financial year, licensees are obliged to submit unaudited accounts, in order for the MGA to retain continuous visibility over their financial standing.

Should you require any further information or assistance on the matter, please do not hesitate to reach out to us personally on karl.diacono@fenlex.com.

©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 Prime Minister announces the third financial aid package in light of the COVID-19 outbreak

In addition to the two financial aid packages announced in recent weeks, yesterday evening the Prime Minister unveiled the third financial aid package, which was unanimously agreed with employers and social partners involved, aimed at supporting the business community in a more direct manner against the negative effects of the COVID-19 pandemic.

First financial aid package

In order to ease pressure on the cashflow of businesses arising from the economic impact of the coronavirus pandemic, the Government of Malta introduced the following two incentives:

  1. Postponement of payment of certain taxes; and
  2. Call for the Facilitation of Teleworking Activities.

Both schemes are administered by Malta Enterprise

Postponement of payment of certain taxes

A deferral from the payment of provisional tax, employee taxes, maternity fund payments and social security contributions, social security contributions of self-employed persons and value added tax.

Companies and self-employed persons operating in specific sectors and who, as a result of the economic constraints arising from the coronavirus pandemic, suffer a significant downturn in their turnover and therefore, face substantial cash flow difficulties, may benefit from this measure.

Companies and self-employed persons not adversely hit are advised and encouraged not to avail themselves of this scheme.

The period covered by this incentive are those eligible taxes which fall due in March and April 2020.

Eligible taxes (excluding VAT) are to be settled in four equal monthly instalments in the four-month period between May and August 2020. On the other hand, VAT dues are to be settled in two equal instalments with the two quarterly returns immediately following the quarter in which the dues would have been deferred.

Call for the Facilitation of Teleworking Activities

Employers and self-employed persons are being called upon to provide teleworking arrangements to their employees who can carry out their work from their home. The call shall support employers/self-employed in all sectors to invest in teleworking equipment.

In order to be eligible to benefit from support in terms of this incentive a formal teleworking agreement must be in place which connects the employee to the workplace.

The support shall be awarded in the form of a cash grant which shall be awarded against 45% of eligible costs. The total support under this call is limited to €500 per teleworking agreement and €4,000 per undertaking, capped at €2 million at a national level.

This call covers costs incurred between 1st March and 30th March 2020, covering:

  1. Purchasing and/or leasing of computer hardware (included operating systems) which are considered portable including installation and setting up of connectivity software.
  2. Communication solutions (hardware and software) that allows different users to connect to their place of work (VPN, Point-to-point connection etc.)

This call is being extended to 8 May 2020.

Second financial aid package

In the second financial aid package, the Government of Malta announced an initial €1.8 billion package of measures, which is equivalent to circa 12.9% of Malta’s GDP in 2019, with a view to help businesses struggling to cope with the impact of coronavirus.

The following is a summary of the announced measures

General economic measures

  • Liquidity injection and bank guarantees of up to €1.6 billion consisting of:
    • Deferral of tax payments as announced earlier, i.e. covering VAT, provisional tax, maternity fund and social security contributions
    • €150m worth of bank guarantees
    • €750m worth of soft loans
  • Provision of Government guarantees of up to €900m thereby making credit of €4.5billion available.
  • Option to request a 3-month moratorium on business and personal loans.
  • €210m of funds to be made available to cover COVID-19 related expenditure.
  • An additional €35m injection into the Health budget to fund health related equipment and supplies required to fight the virus, with said budget to be augmented further if necessary.

Measures linked to employment

  • A capped €350 grant per employee to businesses that have had employees on mandatory quarantine (quarantine leave scheme).
  • Government will cover 2 days’ salary per week (based on a monthly salary of €800) of employees of businesses that have suffered from a complete suspension of operations (e.g. hospitality, language schools, entertainment venues).
  • Self-employed individuals operating in these said industries will also receive a grant equivalent to 2 days’ salary per week (based on an assumed monthly income of €800). Self-employed individuals who are also employers shall, however, receive a grant equal to 3 days’ salary per week (based on an assumed monthly salary of €800).
  • Employees of businesses whose operations have suffered a minimum 25% decline are to benefit from a grant equal to 1 day’s salary per week (based on a monthly salary of €800).
  • Individuals whose full-time employment is terminated with effect from 9 March 2020 shall benefit from a temporary increase in unemployment benefits of up to €800 monthly.
  • Measures relating to employment of third-country nationals:
    • Businesses terminating active employment contracts of said nationals shall not be permitted the possibility of recruiting additional third-country nationals;
    • Going forward only applications for highly skilled third-country workers shall be considered;
    • In the event of job termination of third-country nationals residing in Malta, assistance shall be provided to find alternative employment.

Other social measures

  • €800 Government benefit per month (for up to 2 months) for families with school-aged children where both parents work in the private sector and are unable to work remotely and who require additional leave to take care of the children.
  • Persons with disabilities, being particularly vulnerable to COVID-19 and having had to stop working following the outbreak, shall be given a €800 monthly benefit for a period of time should they be unable to work remotely.
  • Increased in rent subsidies by Government where a family member living in subsidised accommodation has his/her employment terminated.

Third financial aid package

In the latest financial aid package, the Government of Malta, has introduced further measures to help minimise the effects of the current instability in relation to COVID-19 and encourage the retention of employees.

All measures announced are applicable as from 9 March 2020. Furthermore, Malta Enterprise is set to launch a dedicated online portal to help businesses identify, according to the VAT registration number and NACE code, the measures which are applicable to them.

The following is a summary of the measures introduced:

Wage Supplement to critically hit business sectors

  • All employees and self-employed individuals working on a full-time basis in sectors who were hardest hit by the Coronavirus outbreak or had to temporarily suspend operations on the order of the Superintendent of Public Health, will receive €800 monthly Government subsidy through their employers. This Government subsidy is calculated on a five days’ salary based on a monthly wage of €800. Part-time employees will be eligible up to €500 per month.
  • The list of business sectors who were critically hit can be accessed through this link.
  • Furthermore, in cases where the employee’s salary is in excess of €1,200 per month, employers will guarantee a minimum payment of €400 per month per employee, thereby ensuring a minimum monthly payment of €1,200. If an employer is not able to sustain the additional payment so that the particular salary reaches at least €1,200, then an agreement has to be reached with the involvement of the unions, the employees and the Department for Industrial and Employment Relations.
  • Employers who can provide the full salary to the employees, in cases where the employee salary exceeds €1,200 per month, are encouraged but not obliged to do so.

Wage Supplement to less critically hit business sectors

  • Full time employees of enterprises in other adversely effected sectors, including wholesale, manufacturing and warehousing will be entitled to one day’s salary per week (instead of five day’s salary), equivalent to €160 per month. Part-time employees will be eligible to one day’s salary per week, equivalent to €100 per month.
  • The list of business sectors who were less critically hit can be accessed through this link

Gozo

  • Companies and self-employed businesses established in Gozo operating in other adversely effected sectors, will have two day’s salary per week covered immediately (equivalent to €320 per month), extended to three days for those self-employed businesses who employ people with them (equivalent to €480 per month).

How can we help?

The details of these measures are still being communicated and further clarifications will need to be sought. We will continue to provide updates as more information becomes available. Meanwhile, should you require any assistance relative to any of the above financial aid packages, please do not hesitate to contact us.

For more information, please contact William Cassar, on taxenquiries@fenlex.com

©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.

Extension to the Submission Deadline of the MicroInvest scheme (Self-Employed)

Due to disruptions caused by COVID-19, Malta Enterprise is extending the primary deadline for self-employed persons to submit their MicroInvest application from 25th March 2020 to 30th April 2020. Applicants are still urged to submit their applications at the earliest possible so that the evaluation process can still function efficiently. For further information on this scheme, kindly contact us on taxenquiries@fenlex.com