Financial Institutions are regulated by the Financial Institutions Act, Chapter 376 of the Laws of Malta.
Financial Institutions are authorised to carry out similar activities as credit institutions, with the main distinguishing feature being that financial institutions cannot take deposits from the public. Malta is an attractive jurisdiction in this market due to low license fees in comparison with other countries, and attractive tax rates.
Financial institutions can be classified into two categories:
Venture or risk capital;
Issuing and administering other means of payment such as traveller's cheques in so far as this activity does not constitute a payment service;
Guarantees and commitments;
Trading for own account or account of customers in:
Money market instruments;
Financial futures and options;
Exchange and interest rate instruments;
Underwriting share issued and participation in such issues; and
Malta was the first jurisdiction to introduce ad-hoc regulation of e-Money Institutions. In order to operate an e-money institution in Malta, entities must be granted a license by the Malta Financial Services Authority (MFSA). Such a license can be passported to the other Member States in the European Union and the European Economic Area.
EMIs are regulated by the Financial Institutions Act which defines e-Money as “electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions…and which is accepted by a natural or legal person other than the financial institutions that issued the electronic money”. EMIs are defined as “a financial institution that has been licensed in accordance with this Act and authorised to issue electronic money or that holds an equivalent authorisation in another country in terms of the Electronic Money Directive to issue electronic money”.
Some of the requirements for e-money institutions under the Maltese framework include:
Licensed e-money institutions may undertake, namely, the following activities:
Providing ancillary services in respect of the issuing of e-money or of providing payment services;
Payment Institutions, or Payment Service Providers (PSPs) are regulated by the Financial Institutions Act, which transposed the Second Payment Services Directive (Directive 2015/2366). Recently, the number of PSPs in Malta has markedly increased due to the growing i-Gaming and e-Commerce industries, coupled with an attractive tax regime.
PSPs may undertake, inter alia, the following services:
Enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;
Enabling cash withdrawals from a payment account;
Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider;
Execution of payment transactions where a credit line covers the funds for a payment service user;
Issuing and/or acquiring payment instruments;
Execution of payment transactions;
Account information services;
Payment initiation services.
PSPs may also carry out additional activities, including:
Services ancillary to payment services such as foreign exchange services;
Operation of payment systems;
Other business activities (subject to exceptions);
Granting of credit (subject to certain requirements).
Applications for a license must be submitted to the Malta Financial Services Authority (MFSA), subject to certain licensing requirements including:
At least two individuals in Malta must direct the business of the e-money institution;
Fitness and properness test must be carried out on senior staff;
Application fee of €3,500.
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