The Malta Business Observer, 10th December 2020

NEWS Issue 117

| December 10, 2020

Distributed with Times of Malta

Financial services operators call for coordinated support from regulators

New business opportunities might open up between Malta and Britain, at the end of the UK’s Brexit transition period, according to the new British High Commissioner to Malta, Cathy Ward. see pages 5, 7 >

Ray Bugeja Coordinated support from regulators is of the essence as the financial services sector grapples with the economic downturn brought about by COVID-19 and charts the way ahead, operators say.

As the economic effects of COVID-19 became apparent, regulators introduced measures to ensure that banks can continue fulfilling their role in funding the real economy, Economist and Bank of Valletta Chairman Gordon Cordina said. Regulators also allowed for temporary measures on capital requirements that are normally applied to banks. In addition, they engaged with banks to agree individual measures that collectively allowed them to focus on supporting the needs of their personal and corporate customers.

Changes in the regulatory regime and reforms, introduced to address weaknesses identified following the global financial crisis of 2008, strengthened banks and, consequently, most of them entered the pandemic more resilient and well-placed to sustain support to the real economy, the Chairman pointed out.

Still, he noted, a prolongation of the pandemic may cause individ-

BUSINESS OPINION

Abigail Mamo, the Chief Executive Officer of the Malta Chamber of SMEs, says the entity remains hopeful that local businesses will benefit over the Christmas period. see page 9 >

ual banks to struggle to maintain their operations and, therefore, a continuation of strong and coordinated support by regulators is imperative. He also deemed it important that regulators provide reassurance that support measures will remain in place and strengthened as necessary.

It has been said there is the danger that risk-taking is shifted from commercial banks to the

capital markets. Dr Cordina remarked that banks and capital markets are considered as potentially complementary mechanisms to attract savings and channel them towards investment opportunities.

Moreover, he continued that the capital markets are not used to shift risks onto investors not sufficiently aware of the risk-return profiles of specific investments.

Acknowledging that regulation of the financial services sector has grown significantly since the 2008 financial crisis, Dr Cordina noted that Bank of Valletta experienced the necessity for regulatory reforms and the associated cost first-hand, deeming such measures essential to increase the resilience of financial continued on page 3

TECH

e Chairman of the Malta Digital Innovation Authority (MDIA), Dr Joshua Ellul, insists that Malta must remain at the forefront of innovative technologies. see pages 14, 15 >

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NEWS

Regulators should extend their scrutiny of non-bank credit institutions, industry stakeholders say continued from page 1 institutions, restore financial stability and rebuild trust in the financial system.

“However, this has led to more comprehensive, broader and more granular regulatory obligations, which have significantly increased the cost of compliance.

The number of requirements introduced are very onerous and we consider these not to be proportionate to the size and complexity of small European financial service operators such as Bank of Valletta,” he insisted.

“Moreover, these result in an even more disproportionate financial burden on smaller local banks and other licensed entities.

As financial services operators continue to grapple with the current and expected longer-term effects of COVID-19, the burden of regulatory cost will remain and, in some cases, increase. In this respect, we urge regulators to evaluate the cost drivers of compliance and implement measures to alleviate their impact,” the bank Chairman said, adding that the European Banking Authority (EBA) is looking for ways to optimise supervisory reporting requirements and reduce reporting costs by 10-20 per cent at least for small and non-complex institutions.

Taking a broad view, Joseph F.X. Zahra, Founder of SurgeAdvisory Ltd, a corporate and HR consultancy firm, noted there has been a marked departure from the prevailing austerity

policies of the European Central Bank (ECB) and the European supervisory authorities when responding to the pandemic.

It was clear from the start, he pointed out, that business would be badly affected by Government measures to control the spread of the infection. Indeed, both the ECB and central banks rolled out measures to facilitate the activities of banks under their supervision, including timing extensions for reporting deadlines and the possibility to operate temporarily with capital and liquidity ratios below the required levels.

Regulators, he insisted, need to continue working on the path of professional development, which also means that the contribution of expatriates is welcome as they temporarily solve the shortfall in skills and experience.

“However, this must be supplemented by a medium to longterm talent plan after measuring the existing and expected manpower gap. Add to this the soft skills of leadership ingrained in the values of integrity and transparency,” Mr Zahra, who chaired Bank of Valletta between 1998 and 2004, observed.

He stressed that the regulatory sector is in continuous change and that constant updating with regulations is a huge challenge. Furthermore, the pandemic unveiled the threat of cyber risk and security, which has to be accompanied by stricter internal controls and supervision, the economist advised.

He foresees much more activity on the Malta Stock Exchange next

year with new bonds being listed besides others being rolled over.

“Regulators have an important role to play in their acceptance of public offerings but also to supervise the intermediaries and investment management companies that channel these offerings to the public,” Mr Zahra explained.

Discussing the regulation of non-bank credit providers – regulation of which is imperative in order to prevent another debt crisis – he pointed out that “great work” is being done in this regard, referring to the progress made by the Malta Financial Services Authority, which has “a very wide span of supervision of financial services institutions,” he said.

“The challenges emerge from the rapid changes in these sectors with new or updated regulations. New risks are on the horizon, whether they are cyberrelated or result from more ingenuity in money laundering and fraud. The MFSA has an important educational and communication role to play in getting these new risks on the forefront.

Responding to regulation cannot be seen as a cost but as an investment in the context of these new risks,” Mr Zahra said.

Also weighing in, John Cassar White, a stalwart of the banking sector, said that banking regulation promotes pro-cyclical measures at a time when there is an economic downturn, , for, “when a country is in recession, banks are expected to raise their capital, stop paying dividends and increase their provisions for

doubtful debts. This, in turn, intensifies the recession as banks shy away from lending to preserve their capital,” he asserted.

One challenge regulators face, he explained, is that credit risk is being shifted from banks to non-bank credit institutions that are not so well regulated. “A debt mountain is building up in these shadow banks and, if the recession in Europe persists for much longer, the risk of customers defaulting will grow bigger,” he warned.

Put simply, regulators should extend their intrusive and intensive scrutiny of non-bank credit institutions like stock exchanges, he stressed, adding that further regulation needs to be imposed on non-bank credit providers, like stock exchanges, to ensure that only creditworthy businesses have access to credit financed by retail investors.

In the meantime, Wayne Pisani, Partner and Head of regulatory and compliance at Grant Thornton and President of the Institute of Financial Services Providers, speaking in his personal capacity, pointed out that the EBA re-activated its guidelines on legislative and non-legislative moratoria, a regulatory measure acknowledging the crucial role played by banks in supporting ongoing liquidity and the challenges faced by European businesses.

“A balance is to be struck between the key financial services pillars of financial stability, investor protection and market integrity to sensibly imbue the

economy with the required stimuli while safeguarding the stability and integrity of the financial system and markets,” Dr Pisani asserted.

A spokesperson for the MFSA, in response to questions sent by The Malta Business Observer, said that COVID-19 demonstrated that financial regulation can and does adapt to address new realities, among them by allowing regulators to adopt a flexible, risk-based approach while still achieving the objectives of investor protection, market integrity and financial soundness.

Reacting to the pandemic, the MFSA took a number of measures, including adapting its work practices and approach to supervision, outlining its expectations on firms’ conduct, providing for regulatory relief and the extension of various deadlines, as well as issuing guidance to stakeholders.

“The current environment and the new landscape that will emerge after COVID will offer new and different opportunities. For those firms that are well managed and willing to invest in compliance, there will be financial and other benefits, including the enhancement of the international reputation of Malta as a financial centre and the strengthening and sustainability of that centre. Any regulatory effort should take proportionality into consideration.

The application of the principle of proportionality should ensure that the specificities of particular markets and sectors are catered for,” the spokesperson said.

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Britain’s EU exit might offer new business opportunities for Maltese companies – British High Commissioner Rebecca Anastasi While trading with the United Kingdom will change when the agreed Brexit transition period will come to an end on 31st December, new business opportunities might open up between Malta and Britain, according to the new British High Commissioner to Malta, Cathy Ward.

In an interview given to The Malta Business Observer, Ms Ward said, “the UK government remains committed to secure UK and global prosperity by promoting and financing international trade and investment.” To this end, the relationship between Malta and the UK, “which is decades long, might also offer new opportunities to local businesses, such as in the sector of green energy.”

Indeed, she continued, “the UK government is not only co-hosting the UN Climate Change Conference of the Parties (COP26) in November, next year, but also embarking on a Green Industrial Revolution which offers new opportunities related to clean energy, transport, nature and innovative technologies. This is a common area of interest for both Malta and the UK.” Ahead of the expiration of the transition period, and during the past months, the British High Commission has been very active in informing UK nationals and Maltese alike of the changes following 31st December 2020, Ms Ward insisted.

“is UK-Malta communication will go ahead, and we believe that the Malta-UK trade relationship will go from strength to strength.”

“The UK is already out of the EU but the agreed transition period will come to an end on 31st December, which does mean that there will be changes for both business and people no matter what the outcome of the current negotiations process.

The UK will be outside of the EU single market and customs union so businesses will need to prepare for that.”

To prepare local businesses for this eventuality, the British High Commission has “embarked on a major information campaign” and has also collaborated with TradeMalta, “with the aim of preparing local businesses to plan and prepare for the changes that will come into force next year when trading with the UK,” she explained.

This collaboration included a webinar, attended by officials from the UK Department for Business, Energy and Industrial Strategy (BEIS), who provided important information to local businesses. “The UK is and will remain an important opportunity for local businesses and we look forward to continued collaboration. This UK-Malta communication will go ahead, and we believe

that the Malta-UK trade relationship will go from strength to strength,” she affirmed.

Moreover, the British High Commissioner underlined her belief that Malta will not suffer around the European negotiating table, now that Britain is no longer party to discussions. “It is certainly correct that the UK and Malta had many shared priorities within the EU and we often worked together to tackle these shared challenges. In fact, we sat next to each other at the Council meetings and working groups. Having worked in Brussels myself, I appreciate the importance of the UK/Malta relationship, the friendship and close cooperation between our delegates,” she asserted.

The High Commissioner was also quick to add that the relationship between Malta and the United Kingdom has long predated the bloc – and will continue to garner momentum in the years ahead. For, the friendship between the two nations was not built “just through the prism of the EU. We have a far longer and stronger history which we continued on page 7

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British High Commission embarked on information campaign to prepare local businesses for Britain’s EU exit continued from page 5 should continue to build on going forward,” she explained.

Moving on from the issues surrounding Brexit, towards the urgent challenges in the arenas of security, migration and climate change – priority areas which are at the top of Ms Ward’s agenda – the High Commissioner said that the British High Commission (BHC) is already working closely with the Maltese Government.

“Sharing best practice and working in partnership is the best way to tackle these challenges. We are particularly excited, for example, with our current collaborative work on climate change. As hosts of COP26 in November 2021 we are working with Malta on green finance, water management, adaptation and resilience, hydrogen and clean oceans. We be-

lieve that our already strong relationship can be further strengthened if we tackle climate change together,” she said.

Furthermore, “there are many challenges the UK and Malta face together and we work very closely to keep our citizens safe. Threats come from terrorism, organised crime, malicious cyber activity, and international money laundering. I’m proud of the close cooperation I’ve seen and the excellent working relationship between UK and Malta law enforcement. I recently discussed two of the UK’s big priorities, organised immigration crime and financial crime, with the Commissioner of Police,” she continued.

The role of British High Commissioner to Malta is a sensitive one, pivotal to the countries’ continued friendship. Cathy Ward, who has just stepped into the role, taking over from Stuart Gill – who

had been in the posting since 2016, and who has now retired – has a wealth of experience behind her, having worked within Britain’s Foreign and Commonwealth Office since 1994. “Malta has a special link with the UK, not only as a member of the Commonwealth, and due to a longshared history, but because there is a unique connection with the Royal family and HM the Queen,” Ms Ward said.

Elaborating on the unique challenges ahead of her, in this new appointment, Ms Ward cited three: staff well-being, “doing everything we can to ensure that our staff remain safe and healthy for as long as the pandemic lasts”; resources, since any “allocated to High Commission work could, inevitably, be affected by the impact of COVID19 on the UK economy”; and European Union Exit disruption, for which the BHC needs to

“We have a far longer and stronger history which we should continue to build on going forward.” “work with the Maltese Government to minimise disruption to citizens, business and government links due to the end of the transition period.”

These priorities were also outlined in the Queen’s letters of commission at the beginning of Ms Ward’s engagement. In these documents, the monarch highlighted the strong relationship between the Maltese and the British, and pledged her commitment to deepen bilateral relations, even in the context of Britain’s exit from the EU. HRH also underscored the need to

work for the common good of both nations, particularly in the arena of citizens’ rights.

Indeed, “the Withdrawal Agreement agreed between the UK and the EU protects the rights of UK nationals living in the EU by the end of the year and the rights of EU nationals in the UK. We greatly appreciate the steps that Malta has taken to implement the Withdrawal Agreement smoothly and for the clear communication they have provided to UK nationals living in Malta,” she said.

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EDITORIAL

A Christmas wish Without a doubt, this year has put many businesses through the wringer, and 2020 will be remembered as a period of strife, although resilience has also characterised some firms’ approach to the challenges. Indeed, towards the end of 2019, few of us could have even imagined what the next 12 months would hold: how it would reframe our priorities; push us to think of innovative ways to survive; and compel us to develop a thick skin in the hope this could prove the armour needed in the economic battle created in the fallout to COVID-19.

The war is, of course, not over, although there is a light at the end of the tunnel, as a result of the recent strides made in the development of a vaccine, with the United Kingdom already having given regulatory approval. Yet, although this Christmas will see companies still having to contend with a lower level of consumer confidence, as Abigail Mamo, the Chief Executive Officer of the Chamber of SMEs, says in this month’s Business Opinion, there is reason for businesses to keep their heads held high. For, while sales are not at their usual levels, retail and other

small enterprises have seen some movement, particularly in those cases where the companies have adapted and embarked on a digital transformation of their business.

Indeed, companies cannot expect to achieve results without changing the way they operate – and not only for the interim.

Next year is still uncertain, since, while Malta’s vaccine rollout plan has been announced, it will be months before there will be a semblance of normality, particularly if virus case numbers shoot up by mid-January as a result of carelessness over the holiday period. Indeed, it is incumbent on everyone on the island to take care and celebrate carefully, following the health guidelines which recommend marking Christmas together with members of the same household – and no more. It’s a difficult ask, particularly in the wake of COVIDfatigue, but a little bit of patience will go a long way to limiting case numbers and quickening the rate at which industries can get back to normal.

Collective responsibility should, thus, characterise this Christmas and New Year.

For, while some businesses may be tempted to throw a little caution into the wind – and there have been reports of office Christmas parties going ahead, and big lunches being organised – there needs to be an awareness that this may come at a price to their employees, their families and, ultimately, the companies’ bottom line should there be extended periods of sick leave, for instance. There will be a time and place to celebrate in the usual way. But this may not be it.

Looking ahead, into 2021, we must hope for a quick economic recovery, with health also taking priority. Indeed, while COVID19, won’t necessarily be behind us, there may be enough momentum in the dispensation of vaccines, and in the pick-up of investment to allow businesses to plan ahead, without worrying about cataclysmic disruptions which, this year, have sent them into a tail-spin.

So, let’s hope for better things for next year, and look forward to the time in which we can raise a glass and say, ‘we got through it’.

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BUSINESS OPINION

Our economy is a shared responsibility

Abigail Mamo Everyone had big and unpronounced concerns on Black Friday. Both we, as a Chamber of SMEs, and our members knew that Black Friday 2020 would be a difficult one, with all we were up against. Nobody, however, could afford to be disheartened as the day marks too much of an important milestone for businesses to just give it a miss. In fact, both ourselves and our members put in much more effort this year to engage consumers.

And, we were pleasantly surprised – as were many of our members – that Black Friday 2020 (somewhat) compared to that of the previous year. This is, of course, not true for all businesses, and the fact that clients are not keen on buying evening wear – not having any occasion to wear such clothing – is a result

of the current difficult scenario.

This was expected.

Black Friday 2020 results need to also be taken in context, with very managed expectations as a result of the worst year in history for retailers almost behind us.

Members, in fact, told us that with these realistic expectations, all in all, they couldn’t complain. Results are of course mixed, with the most popular and stronger brands doing better, as is always the case, but even smaller businesses gave us this kind of feedback.

What always stands out is marketing and preparing well in advance, as well as intelligently targeting offers. We can say this with a high degree of assurance because, year-onyear, the businesses that invest more in marketing keep doing better and they, themselves, realise this and commit to investing even more in marketing the following year. Consumers would be on the look-out for potential purchases and it’s up to each business to ensure they grab their attention.

Coupled with this, I am also very sure that the investments made in these companies’ digital transformation has led to local businesses winning more of what was spent on Black Friday. Consumers are more

aware of the need to support local businesses and they also know that shopping online from Malta is very convenient now, since getting their goods in a matter of a couple of days, maximum, is guaranteed.

Moreover, I believe that businesses will continue to refine and develop how they use digital tools. We are still not where we need to be in ideal terms, yet these companies have made great strides in this regard and this type of development should never stop.

Black Friday’s results have given us a sign of encouragement for the festive season. People have much more money than usual saved, and they will seek to treat themselves and their loved ones. With all the restrictions and frustrations, people will surely look for a means to entertain themselves in the safest way possible. This is a reality as vivid as all the challenges we are facing.

What we recommend is the same thing that worked for Black Friday, for we believe these recommendations will work for Christmas too. Whether it is attracting clients with a festive themed experience, or with special offers, we are convinced that consumers will be on the lookout

“Black Friday’s results have given us a sign of encouragement for the festive season.” for how to spend their holidays and what to spend their money on so it is up to the businesses themselves to think up strategies to gauge their interest.

As a Chamber of SMEs, we have started our own campaign to ask consumers to support local – this year more especially.

Supporting local businesses means saving jobs and support-

ing our own families. What we are going through is very difficult, in some instances even worse than what Malta went through during a war. Our economy needs everyone’s contribution, it is a shared responsibility.

Abigail Mamo is the Chief Executive Officer of the Malta Chamber of SMEs.

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TECH

Developing the IT profession in Europe is imperative Carm Cachia The ICT sector is seen as a trendy, buoyant sector which is always changing in line with rapid technological developments, and without which most of the other sectors in the economy cannot operate effectively and efficiently.

The sector is well-known for its highly paid jobs, and this is due to the fact that there are many more vacancies than the available human resources. Indeed, the gap between the number of ICT professionals and practitioners required and those supplied is between 3.2 per cent and 3.5 per cent, and this has been the case

for quite some time now. This situation is the same all over the world, and the forecast for the long years to come is that it will continue to remain the same. By 2030, around 1.7 million ICT professionals will be required by the European ICT industry, although this figure could be adjusted downwards, due to the global efforts currently being made in developing more ICT specialists through different routes other than formal education. This is also due to European Commission initiatives such as the Digital Skills for Jobs campaign.

But in the midst of all this, one may be sceptical about the level of professionalism being adopted by those working in the ICT sec-

tor. After all, one may think that the sector is developing so fast that it does not give enough time for the idea of IT professionalism to be discussed and elaborated upon. However, this is an incorrect, short-sighted view.

At national level, many European countries have an academic and professional educational system working to develop professional ICT specialists, through colleges, universities, and many professional bodies. In 2006, the country members of CEN – the European Committee for Standardization – in collaboration with each European member state, agreed to develop a European e-Competence Framework (e-CF). This framework is a common reference

“At national level, many European countries have an academic and professional educational system working to develop professional ICT specialists, through colleges, universities, and many professional bodies.” of ICT knowledge, competencies and attitudes that are required by the European ICT industry.

Eventually, in April 2016, e-CF became a European standard. In

accordance with CEN rules, a technical committee was set up for the further development of Digital competences and ICT Professionalism. This Technical

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Committee, entitled CEN TC428, develops and maintains thes eCF standards. As a result, various versions have been issued over the years. The latest version of the e-CF was launched towards the end of 2020. In this last iteration, several additional ICT roles and the emergent transversal skills were introduced.

The eSkills Malta Foundation was appointed by the Malta Standards Authority, MCCAA, to represent Malta on this committee.

Following this, the foundation set up a local mirror committee to participate, review, and give regular national feedback on the further development of this standard.

The members of this committee come from the education, as well as the public and private sectors.

More importantly, on January 2017, following a study, the Framework for IT Professionalism was launched by the European Commission. The EU framework for the IT profession is intended as a comprehensive durable guide that is updated regularly to adapt to new technology, jobs, competences, skills, and attitudes in the ICT industry.

Technology outfits use it to measure the staff capabilities and as an appraisal and succession planning tool. In recruitment the e-CF is used by HR, for example, to harmonise job descriptions to ensure applicants clearlt understand the competences associated with the job roles. Training companies use it to develop specialised courses. The framework involves a set of complementary pillars – namely, Body of Knowledge, Competences, Education and Ethics – together creating a synergy in sync with the continuously evolving information technology. This framework was officially launched in Malta during a pan-European conference organised by the eSkills Malta Foundation in June 2018, during Malta’s EU Presidency.

The components of the European Framework of IT Professionalism include the following elements.

■ The pan-European IT Body of Knowledge references the foundational knowledge required from IT professionals. It is a ‘goto’ reference for IT in Europe which provides the fundamental basis on which to set standards, qualifications and certifications.

It should inspire educational providers for IT curriculum design and development, a basis for IT certifications, as well as for IT professional associations to promote the sector, and for HR to use in supporting their talent acquisition and development.

■ Continuous professional development is essential for IT professionals in a knowledgebased economy, and life-long learning is the main ingredient

for the development of an IT professional’s career. Formal, non-formal, and informal learning, together with industry certifications can give a picture of an individual’s IT competences and skills, and are the main components for the maturing of the IT profession.

■ Ethical behaviour is an element sometimes taken for granted in the IT sector, and professionalism dictates that this is as important as all the other pillars mentioned earlier. Agreement amongst the relative ICT stakeholders was reached for the first version of the European Ethical Guidelines for IT professionals. The application of IT has the potential risk of harming industry, commerce and society.

Therefore, these guidelines should fill the gap between those ethics taught at universities and those in the workplace.

The European Framework for IT Professionalism is more than the sum of its parts and presents a flexible approach for all those

involved in ICT. The framework components can also be adapted to cater for the rapid change and advancement in technology.

Emerging technology has changed a number of the above components, and this compels us to keep any frameworks and standards updated.

In this respect, the e-CF has been updated. As we speak, CEN TC428 has started several projects centred on the set of standards known as the European IT Professional Ethics and the European Foundational Body of Knowledge (BoK) for ICT Professionals. Other projects were approved by the CEN TC428 members and are currently in progress. These include the ICT Curriculum Guidelines for eCompetence and Digital Leadership, and the Assessment of ICT Competence.

Malta stands to benefit from all this work, and the eSkills Malta Foundation is working towards the national and local implementation of these four impor-

“The EU framework for the IT profession is intended as a comprehensive guide to orient and support IT practitioners throughout their professional life cycle, from graduation to senior roles in industry.” tant pillars of the IT profession; Body of Knowledge, Competences, Education and Ethics.

However, this mostly depends on the industry giving enough importance to IT professionalism. In the short-term, qualifications and experience acquired by an ICT professional and practitioner could be seen to be enough for the ever-growing expansion of the digital economy.

But, in the long-term, unless the

IT professionalism is given its due recognition, like all other regulated professions, the ICT sector will never be balanced with the required social and professional accountability.

Carmel Cachia is the Chief Administrator of eSkills Malta Foundation. More information on the European e-Competence Framework (e-CF) can be found at www.ecompetences.eu

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BUSINESS UPDATES

MCA takes a leading role in BEREC For the past 10 years, the Body of European Regulators for Electronic Communications, also known as BEREC, has consistently worked towards the effective implementation of electronic communications regulation across the EU. On the national front, in its efforts to promote Malta’s position and advance the broader European agenda, the Malta Communications Authority (MCA) has always maintained an active role within BEREC, now all the more so with the MCA’s Chief Executive Officer, Mr. Jesmond Bugeja, being elected as ViceChair within the BEREC Board of Regulators for the year 2021.

As the established independent regulator for the telecommunications sector, BEREC is composed of high-level representatives of National Regulatory Authorities (NRAs) of the Member States, including the MCA. It assists these authorities and the European Commission in implementing regulations, as well as providing expert advice to the European Parliament and Council when it comes to enacting new policies and rules in the electronic communications sector.

Within its scope of tasks, BEREC regularly issues guidelines on several topics, reports on technical matters, delivers opinions, recommendations, common positions, and best practices. Furthermore, in order to ensure a targeted approach, BEREC organises its activity based on its main strategic priorities and allocates tasks accordingly, to different working groups composed of experts nominated from each NRA. As BEREC Vice-Chair for 2021, MCA’s Mr Bugeja will support the Chair and work alongside other elected ViceChairs in directing BEREC’s work, ensuring the implementation of the BEREC Work Programme, and partaking in official interactions with EU institutions and other stakeholders. His appointment further strengthens the MCA’s commitment to BEREC during a year which is expected to deliver a highly demanding and ambitious work programme.

Mr Bugeja welcomed his new appointment as Vice-Chair.

“This is the first time that the MCA and Malta shall be occupying such an esteemed position within BEREC. It is a challenge which we face with a high degree of responsibility, commitment, and determination. I consider this appointment as a sign of trust from our European colleagues, in the regulatory work that the Authority is doing in both the national and international spheres.”

The ongoing COVID-19 pandemic has made us all recognise

the crucial aspect of communication networks, and how much we rely on these to stay connected. In this regard, BEREC plays a crucial role to continue to strengthen Europe’s digital capabilities by tracking developments in the dynamic electronic communications sector and adjacent sectors, which must be capable of matching up to present and future challenges such as the COVID-19 crisis.

In light of this, BEREC’s work programme for 2021 is very much focused on promoting full connectivity, supporting

sustainable and open digital markets, and empowering end-users. During their first meeting in November, the various Vice-Chairs were each tasked with overseeing the delivery of specific tasks for the upcoming year.

One of the activities falling under Mr Bugeja’s remit as Vice-Chair 2021 will concern the European Commission’s review of the Roaming Regulation. The Commission is expected to publish its legislative proposal for the Roaming Regulation in 2021. Following

this, BEREC will participate in legislative negotiations, contribute to the discussions and provide its Opinions. In this aspect, Mr Bugeja will hence be overseeing BEREC’s input to the review process.

Another key deliverable assigned to Mr Bugeja, is BEREC’s Opinion on a draft text outlining the Commission’s review of Access Recommendations.

This initiative in the field of Access regulation involves the updating of existing recommendations so as to more accurately reflect legislative, regulatory, economic and technological developments.

The year’s work programme also includes an Implication Assessment on BEREC guidelines, which will be supervised by Mr Bugeja. This will focus on analysing specific legal developments introduced in the new European Electronic Communications Code (EECC), which could possibly lead to a review of the existing BEREC guidelines. These measures will also ensure that such sources of reference are effectively aligned with the EECC. Furthermore, Mr Bugeja will be also be overseeing BEREC’s Communication Strategy which sets out an overall approach on how BEREC connects with its stakeholders on key strategic priorities, and the annual BEREC Communications Plan for various deliverables in the coming year.

These initiatives, along with many others being undertaken

by BEREC, are aimed at fostering independent, consistent and high-quality regulation of digital markets for the benefit of Europe and its citizens.

The MCA is committed to engage actively on all BEREC initiatives along with the other NRAs, not only to maintain Malta’s place at the forefront of digital progress in the EU, but to continue steering the discussion and shaping the European agenda towards a gigabit society. The role of Mr Bugeja as BEREC Vice-Chair, as well as the ongoing participation of the MCA as a whole, will be essential contributors to the continued realisation of this goal.

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TECH

Malta must be a digitally enabled island, MDIA chief says Ray Bugeja Malta must remain at the forefront of innovative technologies, the Chairman of the Malta Digital Innovation Authority (MDIA), Joshua Ellul,, has insisted.

Elaborating, the Chairman said that the MDIA’s mission is to raise the levels of technology assurances within innovative technology arrangements.

With the advent of blockchain, DLT and smart contracts, a new type of digital paradigm emerged, a paradigm that is decentralised, where there may not necessarily be an identifiable owner and developers behind systems and developers may decide to join or leave a project as they wish, a paradigm in which software bugs cannot be fixed or require substantial or infeasible amount of time to fix, Dr Ellul noted.

“Now consider that this technology is often used for applications that manage cryptocurrency and ownership of digital assets that may represent real-world physical assets, such as property ownership, and can provide veracity of cer-

tificates that have been issued, say, that individuals have acquired particular educational certificates. In such use cases, irreparable bugs can be detrimental,” he explained.

“Therefore, one driving factor to the need for a regulator in this space is to ensure that adequate levels of diligence have been applied and high levels of assurances have been implemented. A national regulator is required to ensure the standards and qualities of system auditors and audits they conduct,” the MDIA Chairman asserted.

After developing guidelines for the blockchain sector, the MDIA moved on to Artificial Intelligence (AI). This is another paradigm that poses different types of problems, he pointed out, adding that while technologists know how to build AI-based systems, it is often the case that it is impossible to know what decision the AI system will make.

“Therefore, it is crucial that high levels of assurances are applied when such systems are used in applications that could result in substantial losses, material damage or loss of life and the MDIA has developed guidelines

“Industry and education need to work hand in hand.” for undertaking system audits on AI-based systems,” he said.

The regulatory framework, the MDIA Chairman continued, is voluntary, in that entities may seek to certify their innovative technology arrangement (ITA) to provide comfort to potential consumers and stakeholders.

Levels of technology assurances are ascertained through independent system audits conducted by MDIA-approved system auditors. The regulator vets and scrutinises system auditors and their various subject matter experts to ensure the levels of quality of audits undertaken.

Although the MDIA’s regulatory framework is voluntary, other authorities may mandate technology system audits through the MDIA’s framework, Dr Ellul said, giving an example to illustrate his point.

“When financial systems could cause substantial monetary

losses, it would be ideal that assurances on such technology is provided and, therefore, the financial services regulator could mandate an MDIA system audit and certification,” he said.

The same could apply to health-based systems where lives are on the line. “Really, such assurances are ideal in any systems that are safety-critical in nature,” the Chairman noted.

He explained that, rather than focus on the technologies, like blockchain and AI, the MDIA provides a regulatory framework for ensuring technology assurances. “Indeed,” Dr Ellul remarks, “we started with blockchain and then AI. However, the MDIA-related laws now include safety-critical systems as well, which will allow for nonblockchain and AI based systems to also seek certification and audits to ensure adequate levels of technology assurances.”

The certification framework, he went on, requires adequate levels of auditing and processes that could be onerous for smaller start-ups. Thus, the MDIA has been working on developing a technology sandbox that will allow for smaller operations to provide various levels of assurances to enable them to build up towards certification.

The plan, according to Dr Ellul, is to launch the technology sandbox in the immediate future with the aim of encouraging and promoting the local start-up innovative technology sector.

In the meantime, the MDIA will continue to work towards the EU harmonisation of related regulatory frameworks; support and advise the Government and various entities on innovative technologies; and also monitor the national AI strategy as well as the various projects being implemented by other entities.

In addition to his role at MDIA, Dr Ellul is also Director of the Centre for Distributed Ledger Technologies and also a Senior Lecturer at the University’s Department of Computer Science.

He is, therefore, best positioned

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“A lot of what has been done in Malta’s recent digital innovation laws is being replicated in other jurisdictions.” to underscore the necessity for industry and the education sector to work together.

“Most educational programmes should provide students with the toolset to be able to continue on to work within a particular sector,” he explained.

However, the MDIA Chairman added, more than teaching industry-specific processes or tools or, rather, programming languages, educational programmes should also enable students to become self-sufficient with regards to undertaking future endeavours to learn more within the particular industry.

“From the perspective of computer science, while we do, through various units, cover specific programming languages used in industry, we aim to empower students by teaching them the fundamentals that will enable them to use any programming language or technique required,” Dr Ellul asserted.

“Industry and education need to work hand in hand. Particularly in the area of blockchain and DLT, this may be more inherent since cutting-edge developments are being made in academia and these technologies are being used in industry.

Therefore, we designed a Master’s in Blockchain and DLT, which has a strong industry-focused aspect.”

Getting them young ensures Malta will have the skills necessary for the future and, although Dr Ellul is reluctant to make any forecasts as to where he thinks Malta will be in a decade’s time in terms of innovation technologies, he does articulate what he envisages.

“I do not typically like making such predictions as so many different factors are at play that make it hard to do so.

However, looking at the trajectory of Malta over the past decades, it is becoming increasingly clearer that its sectors are moving towards knowledge and desk-based industries.

Malta has also been quick to react with regards to ICT infrastructure and also digital innovation-related regulatory frameworks. In fact, a lot of what has been done in Malta’s recent digital innovation laws is being replicated in other jurisdictions,” he explained.

“We can definitely rule out Malta being left behind with re-

gards to digital innovation and advancements. I would go further and say that, due to our agility, we will likely play a role in helping steer such a European harmonised future,” he said.

Malta has many benefits that attract companies to operate from here, although Dr Ellul feels there is still work to be done when it comes to a start-up and investment ecosystem. This, the Chairman pointed out, has been acknowledged and efforts are being made to identify the issues related to building a startup ecosystem.

In his opinion, “Malta should aim so that, in 10 years’ time, it would have nurtured a unicorn – a start-up company valued at $1 billion”, he explained, quickly adding that, to get there, more of an entrepreneurial spirit is required.

Elaborating on how this can be achieved, Dr Ellul observed that most start-ups fail but “that is fine because the individuals involved would have learnt many lessons and even helped others ignite their entrepreneurial desire to start their own venture,” he insisted.

“I hope that, in a decade, we have a vibrant start-up ecosystem.” Noting that Malta has made active strides towards implementing emerging technologies, he envisaged that, in 10 years’ time, Malta would be a digitally enabled country, having many services that are digitally enabled, using AI and other forms of automation, and others making use of DLT, where transparency is a requirement. “By immersing citizens in such emerging technologies, we will become a digitally enabled island and we are on this path,” he underscored.

He also thinks that Malta will be making more use of automation, with more sensors and IoT devices integrated into various business processes and services.

“In an age of post-truth and fake news, I would hope that, within 10 years, we would have found a suitable solution to establish what systems should be decentralised and how they should be designed in order for the public to better inform themselves regarding the veracity of information,” Dr Ellul continued.

Moreover, and insisting it is only a guess, he added that, in 10 years’ time, he could see

Malta looking into alternative forms of computational devices and materials, which could include DNA based ones, as well as alternative forms of interacting with systems, potentially including brain computer interfaces (BCI).

However, the MDIA Chairman remarked, the exciting aspect

about innovative technologies is that they are constantly emerging and changing. Thus, a particular technology deemed to be world-changing could end up not being adopted, while a breakthrough in another technology could only be a few months away and potentially bring about massive change.

“Irrespective of what technologies will emerge, Malta should continue to strive to be at the forefront of innovative technologies by supporting its citizens and industry in these areas, by continuing to investigate various technologies and by providing adequate safeguards,” Dr Ellul asserted.

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Schemes and incentives extended to keep family businesses running Rebecca Anastasi Support schemes and financial incentives aiming to support family businesses have recently been initiated or extended, the Family Business Office Regulator, Dr Joseph Gerada, has said.

This is in line with Government’s objective “to ensure the continuity of family businesses,” the Regulator specified, underlining the pivotal importance of these Small and Medium Enterprises (SMEs) to the entire Maltese economy. “75 per cent of Maltese SMEs are family businesses, either due to investment or direct ownership. I call them

“When it comes to family businesses, we know they need a little bit of an extra hand, so we’ve catered the standard schemes accordingly.” the backbone of the economy,” he said.

Elaborating on the schemes on offer, Dr Gerada clarified that while 99 per cent of the incentives fall under the auspices of Malta Enterprise – and are thus accessible to all companies on the island – family businesses are being given additional facilities.

“The main difference is that, when it comes to family businesses, we know they need a little bit of an extra hand, so we’ve catered the standard schemes accordingly. Therefore, if, for instance, the Micro Invest Scheme usually has a capping of €50,000, the capping for these SMEs is higher, at €70,000.”

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Through these schemes, family businesses can also access financing, whether this is in the form of the loan debt facility administered by Bank of Valletta and Malta Development Bank – allowing companies to gain access to up to €750,000 in cash flow loans – or through fiscal incentives, such as the Family Business Transfer. Indeed, this latter allows firms to benefit from reduced stamp duty – down from 5 per cent to 1.5 per cent – when parents transfer their company to their children.

Similarly, the Immovable Property Scheme also offers a reduction in duty when transferring the property of a family business: here, duty is only chargeable on the first €500,000 of the value of the property at the rate of €3.50 per €100.00.

“The Education and Training Scheme has also been extended,” Dr Gerada continued.

“It’s been going on since 2017, but, now, we’ve split it into two parts and it’s focusing on issues which family businesses face directly – such as preparing for succession, and establishing the right governance – as well as training courses in relation to VAT, accounting and the more generic aspects of running a business.”

For, he asserts, the main concerns of family businesses are not necessarily access to finance, but more practical and longterm worries centring on the day-to-day running of the enterprise and how to ensure the company’s longevity.

“These businesses tend to look long-term, so what we’re also doing – together with the Malta Chamber and its Family Business Committee – is trying to work out the specifics of what they need and how we can continue to help them,” Dr Gerada said.

One idea which has emerged, the Regulator said, was the possibility of encouraging mergers and acquisitions “in those cases where family businesses cannot be passed down to the next generation, either because there is no next generation or because no one wants to take over the company. These are realities which also must be confronted,” he insisted.

And, as a result of COVID-19, these solutions have been put into high relief. “Things are not as they were one year ago and we, as a Government, also need to adapt and change our objectives and plans to be able to support these businesses, whatever the circumstance,” he underlined.

Despite this, however, Dr Gerada said he has seen positive developments in the ability of businesses to react to the challenging circumstances. “Due to

necessity, a lot of businesses have embarked on a process of digitisation: going online and opening up to e-commerce, for they have realised that if customers cannot go to them, they will have to go to their customers. In fact, those who had already set up a website realised that demand far exceeded supply,” he explained.

And, this year, the Family Business Office has striven to be on hand to come to the aid of family businesses needing guidance, and support. Indeed, the entity recently participated in SME Week, an initiative taking place all across the European Union, aiming to provide information and build a network of contacts for companies which may struggle to find access to new avenues.

“It’s actually become more of an SME month, since there were 11 events which took place over a few weeks, one of which was directly organised by our office.

This was a webinar – titled Support incentives for Family Businesses - 2021 and beyond – aiming to outline the incentives

“We need to incentivise family businesses, and to show them how to transfer the fruits of their hard work from one generation to the next.”

available to such SMEs to date, and those of the future, in order to also generate a discussion,” he says, adding that the event saw 155 registrations.

“We need to incentivise family businesses, and to show them how to transfer the fruits of their hard work from one generation to the next,” Dr Gerada explained, outlining the motivation for the event.

Communicating with companies likely to benefit from the schemes is central to what the Family Business Office is trying to achieve. “We actually conducted a survey pre-COVID and the results weren’t very positive, revealing that many didn’t know

what the Office did. Then, the pandemic came along, and we had to focus on other ways to ensure outreach.”

One of the ways in which the Family Business Office sought to reach out to stakeholders was through company service providers, such as lawyers and accountants. “These are usually the first point of contact for many family businesses, so we reasoned they’d be more likely to listen to advice coming from trusted collaborators,” Dr Gerada said.

Furthermore, he insisted, “businesses also had more time to stop and look at ways and means to find further support,

but we also branched out into collaboration with producers working with the national broadcaster, for instance, in order to get our message across,” he added, pointing to the Office’s collaboration with the television programme, Wirt u Eredi, screened on PBS. These efforts have not gone unnoticed, Dr Gerada continued. “We’ve actually had very good feedback from this and, as a result of this initiative, we’ve had more and more businesses contacting us to find out about our incentives and about how we can help them – more have gotten in touch than ever before,” he said.

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e Malta Business OBSERVER

| December 10, 2020

BUSINESS UPDATES

Key challenges financial institutions face when tuning AML transaction monitoring software Financial institutions across the globe are under unprecedented regulatory pressure to improve their AML transaction monitoring systems and ensure they are correctly tuned to detect money laundering and terrorist financing. Recent fines given to institutions who failed to detect suspicious activity and, therefore, meet regulatory standards have served to demonstrate the importance of having an effective compliance program and the right rule-tuning in place.

FINDING THE RIGHT BALANCE IN RULE-TUNING Getting the tuning right can be challenging without the appropriate configuration. Solutions can either generate too many false positives, or the scenarios can be “turned down” so that genuine suspicious activity goes undetected. While triggering ex-

cessive false positive alerts costs both time and resources – as compliance teams struggle to handle the high number of alerts in depth – doing the opposite and performing tuning to reduce the amount of false positives can lead to officers overlooking suspicious activity, thus undermining the efficacy of the compliance program and potentially subjecting the company to regulatory scrutiny and eventual penalties.

THE VARIOUS AML TRANSACTION MONITORING RULES Rules can vary in complexity depending on the monitoring needs of the institution in question and are designed to monitor customer activity outside the scope and ability of profile-based monitoring. For example, a structuring rule is used to identify attempts to avoid regulatory

reporting of a large cash transaction by breaking the transaction into smaller amounts that fall below the reporting threshold.

Likewise, the aim of a velocity rule is to identify suspicious activity and flag accounts where there is rapid movement of funds into and out of an account, such as a large part of a deposit which is debited from an account in a short period of time. The challenge with most rules is that they require continuous fine tuning to identify potential new risks that are not covered by the current monitoring process in place.

ENSURE EFFECTIVE AML TRANSACTION MONITORING WITH COMPLYRADAR ComplyRadar minimises false positives by tailoring scenarios to customer or transaction risk. It enables you to increase effectiveness over time by fine tuning rules

through back testing without the need of technical personnel.

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banking partners confidence with a clear audit trail of monitoring and investigations visit www.comply-radar.com or email info@computimesoftware.com

HSBCnet is simpler, faster and smarter

Fuelling awareness Supporting local motorsports, and providing a wide range of opportunities to its employees, are not the only factors that make Enemed the strong and supportive brand it is, but its CSR initiatives are also as powerful!

Enemed has always used their platform to bring awareness to several local initiatives and organisations, including supporting Pride month and joining the awareness campaigns of Pink October and Movember, amongst others.

Christmas will be no exception, as Enemed will be holding their yearly 12day initiative, which, this year, will focus on giving a financial helping hand to local organisations, including Foodbank Lifeline Malta, Hospice Malta, Fondazzjoni Sebħ, SOS Malta, MSPCA and Malta Red Cross, as well as lunch deliveries to a selection of Units at Mater Dei Hospital as a gesture of gratitude to the island’s doctors and nurses.

Visit www.enemed.com.mt for more information.

Keeping up with changes in technology, regulation, and the economic environment can be demanding. That’s why HSBCnet brings powerful, intuitive online tools that help commercial customers manage even their most complex banking needs.

HSBCnet puts users in control of their cash flow. With real-time access to information on their accounts from anywhere in the world, at any time, HSBCnet tracks customers’ day-to-day activity and delivers updates. Customers can review real-time and intra-day account transactions, as well as balance and statement details for all their global accounts in their HSBCnet portfolio, including both HSBC and selected third party accounts.

In addition, consolidating accounts and making informed forecasts is made more accessible by the full range of standard HSBCnet reports. Users can also create

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The HSBCnet Mobile app is available on iPhone and Android smartphones by downloading through the App Store and Google Play Store. With the help of the downloaded app, clients can see their banking account information, authorise pending payments and track payments and receive My Alerts notifications.

To log on the HSBCnet platform, visit hsbcnet.com.

For more information on HSBCnet, call HSBC Bank Malta’s Contact Centre on 2380 8000, visit www.business.hsbc.com.mt/hsbcnet or connect with the HSBC representatives via Live Chat by logging on HSBCnet.

Unlimited data, unlimited calls, no speed limits: GO’s new business mobile plans Over the past few years, organisations everywhere have embraced new, flexible ways of working to improve productivity, cater to today’s digital-first customers, and boost their bottom line. But to stay flexible, you need the right solutions in place – including the right mobile plan for everyone in your team.

GO wanted to do their part to help people and the businesses they work for stay flexible. That’s why they recently launched new mobile plans that can help your business get the agility it needs.

Here are three ways GO’s Infinity Mobile plans can help you and your business stay responsive.

Create your own plan: Tailor plans for individuals to provide them with the agility they need.

Get unlimited data and calls: GO now provides a mobile plan offering unlimited data, as well as unlimited calls and SMS messages.

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Learn more about GO's new Infinity Mobile plans at www.go.com.mt/business/ infinitymobile