Watch out for cybercrime during COVID-19 pandemic

Author: George Mangion
Published on Malta BusinessToday 23 April 2020

Watch out for cybercrime during COVID-19 pandemicAs most businesses on lockdown are relying on staff working remotely at homes, one regrets that the incidence of cybercrime is another unexpected headache. Across the globe, we notice how COVID-19 infections have increased over the past month, (albeit in South Korea, one is noticing a drop in the number of infected cases) yet we’ve seen an unsettling trend of cybercriminals taking advantage of this pandemic by targeting small businesses through phishing emails.

As most businesses on lockdown are relying on staff working remotely at homes, one regrets that the incidence of cybercrime is another unexpected headache.

Unfortunately, it is not common for small businesses to afford time and expertise to build a business continuity plan.  This is a roadmap that helps firms prevent and respond to cyberattacks or breaches. The same types of thefts using deception encountered during the COVID-19 crisis have existed before, but criminals have adapted their modi operandi to the current situation.

The number of attempts involving these types of thefts and scams is likely to increase in Malta. Ideally, as a means to defend local firms, they can be advised to engage a designated team of key personnel assigned to specific response roles to face such a breach scenario.  The best line of defense in any phishing attempt is to educate staff, now mostly working online at home: to take steps to increase your employees’ acumen in both recognizing and reporting phishing emails.  Staff should avoid using emailed links as much as possible.

The ability to conduct Incident response planning, including tabletop exercises, will help firms when such attacks occur. One may ask, is this a storm in a teacup? Not really watch how for instance, in the UK, phishing is becoming a common occurrence. One of the latest scams involve criminals asking for donations to help the National Health Service fight COVID-19, and total losses of those targeted had reached £1.6m as of the beginning of April.

Typically, one reads about advice given by security experts that cybercriminals are increasingly sending coronavirus-themed phishing emails designed to resemble reputable organizations such as the US Centers for Disease Control (CDC) or the World Health Organization (WHO).

As can be expected, ransomware operators have escalated the targeting of hospitals. Some darknet markets have become overcrowded with listings for PPE products and fraudulent COVID-19 cures.

One case involved the transfer of €6.6 million from a company to another company in Singapore to purchase alcohol gels and masks. The goods were never received. In another case, an EU company attempted to purchase 3.85 million masks and lost €300,000. The pandemic has overnight created a particularly high demand for certain types of healthcare and PPE products (masks, gloves, cleaning products, pharmaceutical products).

There is a risk that counterfeiters will use acute shortages in the supply of these goods to increasingly provide counterfeit alternatives. This may include sub-standard or counterfeit foods, hygiene items, and other everyday goods. This acute scarcity yields a fertile land for fraudsters to create a substantial market for product counterfeiters, fraudsters, and profiteers.  Some instances, such as the distribution of fake corona home testing kits, are particularly worrying from a public health perspective.

There is no limit for a scammer’s ingenuity on how to manipulate unprecedented fears surrounding the virus to fleece victims at every possible opportunity. The media has revealed how fraudsters are setting up fraudulent COVID charities, sadly, anything you can think of — cybercriminals can be quite creative. It comes as no surprise that fraudsters have been very quick to adapt well-known fraud schemes to target individual citizens, businesses, and public organisations.

These include various types of adapted versions of telephone fraud schemes, supply scams, and decontamination scams.  Fraud linked to the current pandemic is likely highly profitable for the criminals involved as they attempt to capitalise on the anxieties and fears of victims throughout this crisis period.

At this juncture, one may ask what is a phishing email? The answer is that it is a type of social engineering scam, that uses email or malicious websites to solicit personal information by posing as a trustworthy organization. Some phishing emails even offer health advice on how to protect yourself against the coronavirus from counterfeit health-care professionals.

This can be an ideal time for such criminals to play on the weakness of small firms and others to willingly donate funds to fake charities or even open up databases by malicious means. This is easily done. For example, by deceit one is encouraged to click a link in these fake emails which could potentially install malware on your computer, or land you on a phishing page where your credentials could be compromised.

It looks dangerously easy at a time when staff are working from home and do not benefit from immediate IT advice. Ideally, the staff at home should be aware of such pitfalls.  Experts tell us that the most effective response to a phishing attack should begin before any attack occurs. Most advise that if employees have access to sensitive data, they should be provided a company-controlled and secured laptop, inclusive of encrypted hard drives.

While ideally, everyone will have a secure laptop to work remotely, that may not be a financial reality for small firms. If you need to prioritize, focus on the high-risk employees based on the sensitivity of the data they need to access.

Try to limit the options for employees to save data out of secured locations to their own devices.

Ensure you establish and communicate clear expectations of the work-from-home strategy. While the rush to secure jobs and making use of remote access to company databases was the first priority, little regard was given to the risks the company will be exposed due to cybercrime.

Experts tell us that if firms may not be able to implement full technical controls to manage risk, then the next step in the circumstances is to start training employees on how to work efficiently and securely. In conclusion, a severe pandemic has paralyzed global business in many sectors with potentially devastating consequences to human life and the operational stability of the economy.

George Mangion


Author: George Mangion
Published on Malta BusinessToday 23 April 2020
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Medical cannabis taking the rhino by the horns

Author: George Mangion
Published on Malta BusinessToday 7th May 2020


Medical cannabis taking the rhino by the hornsGlobally, cannabis has undergone a normalising process given its wide adoption, social tolerance and generally speaking a broader cultural acceptance; going from being branded as a gateway drug to being used as a therapeutic alternative to conventional medicine.

The legalisation promulgated for medical cannabis represents a golden opportunity for licensed producers seeking to position themselves at the forefront of this emerging landscape.

In fact, the legal cannabis industry is attracting more and more investors to Malta. These want to diversify their portfolios since this industry is considered one of the most promising industries. Many countries are now realising the potential of this growing industry and have moved to legalise cannabis for medical use. Uruguay was the first country in the world to legalise cannabis, followed by Canada in 2018 and eight US states have authorised recreational cannabis.

Looking at the European context, cannabis production has been decriminalised in countries such as Spain, Germany, Belgium, Netherlands, Italy, Switzerland, Portugal, and the Czech Republic. In line with findings that people are more likely to maintain or increase consumption in the coming months, there have been numerous reports from North America and Europe that consumers have been bulk-buying cannabis from dispensaries, leading to record-breaking sales. Governments in regions like Quebec, Illinois, and the Netherlands will keep cannabis stores open despite regional lockdown measures.

This is intended to maintain the supply of medications to patients. Some revenue may yet be lost due to the incidence of lockdown factors such as disrupted supply chains, shop closures, restricted movement, and general economic slowdown.

However, this temporary setback may also prove an important time of innovation, planning and strategising for cannabis companies, the fruits of which will outlast the pandemic distinction must be drawn between recreational and medical use, as well as the legal and regulatory issues underpinning both issues.

Smoking cannabis should not be recommended by any medical professional. Nevertheless, trained medical professionals may reasonably consider the use of cannabis-based medicines – such as oils, capsules, or vaporised substances – for chronic neuropathic pain and stress relief.

Given the ever-expanding medicinal capabilities of cannabis, Malta has followed suite pioneering countries such as Canada, and in March 2018we officially legalised the production and use of medicinal cannabis. The Maltese Parliament has approved the “Production of Cannabis for Medicinal Use Act”, which is an all-encompassing Act regulating which entities are eligible to distribute and produce cannabis under strict supervision.

The new law also allows all registered doctors to prescribe medical cannabis to patients, which can be acquired in local pharmacies. In order to produce cannabis, entities must first obtain a letter of intent from the Malta Enterprise and also a license from the regulatory authority. Such legislation gives our country an edge over other countries, as some countries still do not allow for the production and supply of medical cannabis.

For example, the use of medical cannabis is allowed in Germany, yet it is still in the first stage of granting its first licences and thus the first harvest is only expected in 2020. On the other hand, Malta Enterprise has already approved an area measuring 4,000 in square metres for cannabis cultivation.

Security systems must be in order to prevent unauthorised movement of cannabis material and only authorised personnel may be allowed to access specifically designated areas. Waste material must not be treated with negligence and has to stored in a lockable container. The production and use of medicinal cannabis may provide a newfound relief to people afflicted by illnesses, yet it also introduces a vast array of economic opportunities and positive spillover effects.

Naturally, cultivation requires a sizeable amount of professional staff to allow a smooth and orderly process. An increase in the number of companies operating from Malta to cultivate cannabis transpires into additional tax revenue for Government, besides increasing the amount of research and development.

Cannabis production in Malta is also expected over the next five years to increase the number of exports, resulting in an injection of funds into our local economy.

All of these factors are expected to contribute to a continued increase to our country’s economic growth. This is particularly important as the latest forecast issued by the European Commission indicates that whilst the growth momentum for the Maltese economy is expected to be badly hit by the pandemic.

The GDP growth is forecasted to drop this year to 3.1% or less. Total debt to service payroll subsidies for idle workers will possibly peak in the region of €8 billion. However, the net impact on the amount of jobs lost and reduced economic output created by the pandemic remains to be seen.

Another social aspect remains in place: the issue concerning the lack of information on the use of medicinal cannabis. Locally, patients often comment on the limited knowledge by medical practitioners, particularly as medical practitioners are sometimes reluctant to prescribe cannabis as a form of treatment.

Apart from this, the price of medicinal cannabis is quite costly for patients. Some patients have shown their dismay after discovering that some variants cost as much as €17 a gram, giving rise to a number of concerns regarding the affordability of this medicine by the general public.

Whilst progress by the Government has been made in this arena, the affordability issues of this effective medicine by the general public must not be underestimated. It is worth exploring, the possibility of offering this medicine to deserving patients at a subsidised price. Furthermore, one cannot separate the use of cannabis from its long history as an illegal substance, which is very often abused of.

Stigmatisation of the use of this drug is a strong deterrent for many healthcare providers and uncertainty will only slow down the use of medicinal cannabis. Indeed, the perception of the public needs to be better informed, with perhaps the introduction of frank discussions about the use of cannabis.

In addition, continuous educational programmes for medical practitioners are also a must, in order to remove the general stigma concerning its use. The opportunities for using cannabis goes beyond medical reasons.

The beauty industry is also jumping on the bandwagon, and at the moment Cannabidiol (CBD) is one of the most buzzed words one will find in the beauty spectrum. In fact, CBD oil is being used in a number of high-end creams, oils, and even make-up products.

Given this, the cultivation of cannabis in Malta provides an added opportunity for production to expand its use of oil by the beauty industry, thus enhancing the range of exports generated by the same industry.

George Mangion


Author: George Mangion
Published on Malta BusinessToday 7th May 2020
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Dream it, wish it, do it

Author: George Mangion
Published on MaltaToday 5 September 2018


One hopes that the budget speech reveals new initiatives – that is Logistics Malta and Innovation Malta. In my opinion, both are expedient if we are to catch up and coordinate our ecosystem where it concerns spatial planning, logistics, oil and gas storage, followed by research in engineering, Life Sciences, medical care and upgrading our knowledge in Blockchain, and last though not least Artificial Intelligence.

We are regularly reminded how Western countries have invested millions to build up centres of innovation yet as an island the concept so far has been a Cinderella. All along, we continue to invest heavily to buttress the tourism industry including a national airline and by subsidising low-cost airlines in their commendable efforts to attract tourists from new markets.

There is also a robust property construction lobby which is investing heavily in upmarket developments definably out of reach from first-time buyers – a single bedroom apartment will set you off by a six-digit figure. There is nothing wrong in the State supporting these sectors but one needs to keep the right balance. The market for luxury apartments calls for a steady flow of buyers (mostly foreign) which are attracted to the island. Just take note of the thousands applying for residence under the passport by investment scheme.

Surely this is a finite number. Again, expansion of tourism particularly of the lower end places a heavy strain on the infrastructure and inevitably adds to a densely populated country with a footprint of just 320 square kilometers.

Readers may ask,“Why seek change given that the economy is running at such a good rhythm + why look a gift horse in the mouth?” The answer is that our established pillars of the economy are peaking and having reached a plateau level there are early signs that diversification is recommended.

This poses an onerous burden on our political leaders. It is true, one cannot be complacent yet it is not all doom and gloom, considering how since independence 54 years ago, we made steady progress to shed off an image of a fortress economy.

Remember 2009 was a recession year yet we recovered since then, enjoying almost full employment. Still we cannot afford to rest on our laurels. The answer is – we need to lift our heads above the parapet and seek pastures green. Simply put we need to seriously explore how to diversify our economy.

There is nothing more befitting to inculcate change than if we turn our sights to attract talent to our shores to build a thriving logistics and innovation Malta. But many dream about this concept, wish it but in the end never succeed to do it. The Times of Malta this week commented favourably on a study prepared by Researcher Vangelis Tsiligiris which found that the island ranked very favourably on a number of education indices such as student mobility; unique education programmes as well international research. It also found Malta’s widespread use of English, good quality of human income and high quality IT services made it a good contender to attract foreign universities.

The report suggests that the government should focus on attracting high-value universities which can offer post-graduate programmes, such as Masters and PhDs in sectors relevant to the Maltese economy.

A textbook solution will consist of creating an ecosystem to nurture start-ups and help them with venture capital to research and develop their creativity. With this in mind, this year PKF had the pleasure and privilege to visit the CIC Thought Leadership centre in Rotterdam, The Netherlands. The Centre in Rotterdam is expected to house about 550 innovative companies and is built to synergise with an international community of entrepreneurs, investors, and established businesses.

Cambridge Innovation Centre (CIC) is based in Boston, US and has recently expanded to Europe starting with Rotterdam. Like Malta, the Dutch are fluent in English and Rotterdam prides itself to be a melting pot of different cultures. PKF thinks that its efforts to attract a world class organisation in his field do not come a moment too soon.

Alas, the objective of having an innovation and business accelerator centre of caliber will prove to be a true catalyst to anchor existing manufacturing community and attract new ones.

This roadmap is an ambitious one and needs proper Government support possibly out of an innovation fund which we promised EU Commission to build reaching 2% of GDP. Which brings us as to the topic why PKF is keen to put its shoulder to the wheel and attract investment in this regard.

Three years ago, it pioneered a familiarisation trip to Massachusetts Institute of Technology (MIT) in Boston, USA to explore links to promote Malta as a potential business accelerator and/or Life Sciences hub for innovators, inventors and entrepreneurs.

It is interesting to note that the Massachusetts Institute of Technology (MIT) is a private research university in Cambridge, Massachusetts founded in 1861 – built in response to the increasing industrialization of the United States. While on the subject of innovation and start-ups one reads in latest edition of The Economist how US creativity has prospered particularly in Silicon Valley.

From 2010 to this year venture capitalists invested $168bn in firms in the Silicon Valley (Bay Area). It appears that Silicon Valley is still a place where new ideas can flourish, fortunes can be made and products that change millions of lives will get dreamed up and brought to market.

Malta is perhaps too small to try to catch up with giants like Silicon Valley which since the 1980s, has been the home to three of the world’s five most valuable companies: Apple, Alphabet (Google’s parent) and Facebook, valued between them at almost $2.5 trillion. The Valley hosts 57 unicorns – private start-ups valued at more than $1bn – including household names like Airbnb and Uber. The sins of its success are many but the top one is that it has become too expensive for average start-ups to thrive.

The report states that there is a gentle migration of start-ups seeking other hubs in USA, some going to Europe and China. Post Brexit, Malta can be vigilant and try to attract some of these companies if it first manages to have its own research hub supported by local universities and technical colleges.

Another reason accounting for this migration outwards to Europe is because technology has facilitated many Silicon companies to reduce their costs by keeping a skeleton staff and the rest migrate to cheaper venues while still keeping in touch using messaging, video-conferencing and collaborating online.

In conclusion, back to Malta our forefathers have always been vigilant to earn their daily bread and in the process have mastered many skills to survive over the centuries. It is up to us to dream about it, wish it and fashion our own destiny towards an improved lifestyle.

George Mangion

Author: George Mangion
Published on MaltaToday 5 September 2018
Get in touch: | +356 21 493 041

Budgets: beware the pitfalls of short termism

Published on MaltaToday 29 August 2018
Get in touch: | +356 21 493 041

Some predict oil price next year will reach $100 a barrel, particularly if US friction with Iran escalates.

The recent withdrawal from Iran by the French oil giant Total was caused by a reinstatement of US sanctions which cover foreign firms doing business with Tehran. In an ominous fashion, President Donald Trump tweeted earlier this month: “Anyone doing business with Iran will not be doing business with the United States”.

This unilateral move has been met with much chagrin from the side of the EU partners who collectively signed the nuclear deal with Iran. In 2015, the agreement had lifted heavy sanctions in return for a commitment from the Islamic Republic to abandon its nuclear enrichment programme.

President Donald Trump re-imposed Iran sanctions in a number of stages – the first one covering metals and cars. In June, the State Department called on buyers to stop importing Iranian oil or risk facing US sanctions.

Analysts contend that as full sanctions against Iran take effect, perhaps in combination with production problems elsewhere, maintaining global oil supply might be challenging. It creates pressure to maintain an adequate spare capacity cushion. This certainly powers the oil price upwards possibly next November when the next round of sanctions come into effect.

Readers may counter-argue that any shortage of Iran oil can be substituted by extra production from US fracking industry – lately this has seen great potential. Yet, this may not work out to achieve an equilibrium, so in the short term it could place more than two million barrels per day at risk.

US administration officials have said they might look at requests to stabilise the market on a case-by-case basis to avoid oil shocks, while also maintaining that the target is to cut Iranian oil imports to zero.

At the same time, global demand for oil goes on unabated such that the IEA raised its 2019 forecast for oil demand growth around the world by 110,000 barrels a day to 1.5 million barrels. Some predict oil price next year will reach $100 a barrel, particularly if US friction with Iran escalates.

How, does this economic prognosis affect us, being the smallest EU member?  Facts show that we still rely 100% on imported fossil fuel for our energy. Attempts to wean off the dependency and switch to green energy are welcome yet we still can only count on about 6% of energy from the sun.

But it is not all doom and gloom – consider how much progress we achieved since Independence. Since 1964, we have tried and succeeded to diversify our economy – to break the mould of a fortress island dependent on the British services.

Nostalgically, we managed over the years to diversify the pillars of production to include iGaming, financial services, manufacturing and mass tourism. Even so we must not forget how fragile these are, and subject to market and political oversight from Brussels.

Perhaps now that we have started to register a modest surplus it is a good time to diversify our vision by investing longer term. Our geographical location and maritime tradition yearn for new investment on logistics, transportation, LNG storage and hydrocarbon extraction.

While discussing the subject of diversification particularly in the energy sector, PKF is keen to share its dream that one day the island will reap oil discoveries as was the case with close neighbouring countries. A delegate from PKF has been invited to attend a three-day conference next October in Cyprus which focuses on such E & P issues.

The European Mediterranean Oil & Gas Summit will discuss the geo-strategic, commercial, technology and regulatory issues that will shape the management and future development and commercialisation of oil and gas assets and infrastructure in the European Mediterranean region. The agenda includes ground-breaking solutions to maximising return on investment on hydrocarbon transportation, storage, processing and extraction.

More than thirty international speakers will discuss latest developments while secondary topics include talent sourcing and managing health and safety issues. In attendance are a number of producing countries including Turkey, Croatia, Greece, Italy, Albania, Israel, Sweden, USA, Egypt, Cyprus, Norway and North Africa.

In this context, PKF will be presenting a paper discussing the potential for the island to become a future oil and gas servicing hub. History tells us how our past attempts in exploration were not complimentary.

It was 1954, when the first onshore concession was awarded to a company called D’Arcy Exploration (BP) to drill a well in Naxxar. Since that fateful attempt all other drilling attempts were unsuccessful. Over a 60-year stretch we only test drilled 13 wells which experts consider as too little but is never too late to try regaining parts of our Continental shelf boundary claimed by others.

Yet, it is encouraging to know that the island’s main source rock for the oil is expected to be rich in the organic Streppenosa oil shale unit which is designated world class in its prolific oil generating capabilities. No wonder the nearby offshore Sicily Vega oil field, with an estimated resource of one billion barrels of oil in place, is only 20km away from the northern border of the latest zone in Malta’s exploration efforts.

Needless to say, experts predict that the proximity of similar concessions and similarity in geology to the producing basins of Tunisia and Sicily lend support to the theory that oil strikes for Malta cannot be excluded. The “intra-basin” ridge trend offers a new and highly prospective oil strike in our waters provided we reach bilateral agreement on contested areas.

The good news is that a National Oil Company has been incorporated to help promote upstream business so can we hope that behind closed doors the authorities are devising plans to kickstart the drive to attract foreign investment. Another harbinger is the prediction mentioned earlier that oil price will rave on an upward trajectory.

The subject is a taboo. Pragmatists argue exploration is a pipe dream fit for visionaries hoping to attract countries such as China as part of its One Belt-One Road investment policy. Operators now use modern technology and Artificial Intelligence – this may surprise us with good tidings.

It is fair to say that our politicians know that any success in the extraction sector may take decades to be monetised into cash.  It is a long gamble to appease voters. It is a slow return when contrasted to dividends earned from mass tourism, iGaming and financial services.

This may be true; yet all incumbent sectors took a decade or more to reach optimisation.

Sadly, in any democracy, thinking short term when forging macro-economic policies resonates a populist ring but left unchecked, this policy can harm the enlightened self-interest of current generations.

George Mangion

Author: George Mangion 
Published on MaltaToday 29 August 2018
Get in touch: | +356 21 493 041

EU ushers in new rules on cross-border insolvencies | PKF Malta

Author: George Mangion
Published on MaltaToday 22nd August 2018

The essential ingredient for successful insolvency proceedings and protection of creditors is that courts co-ordinate between them.

The EU has come to the rescue in simplifying rules where companies or small firms suffer insolvency and their assets are located in a number of jurisdictions. Where insolvency proceedings relate to two or more members of a group of companies in different member states, under the new rules, an insolvency practitioner/liquidator must cooperate with other appointed liquidators/insolvency practitioners in the same group to the extent that such cooperation is appropriate to facilitate effective administration and is not incompatible with the rules applicable to each proceeding and does not entail any conflict of interest.

There are various instances where Malta is used to serve as a principal location with a company holding various shares enjoying a controlling percentage in subsidiaries located outside Malta. This is a common feature both in the FinTech sector, funds, insurance, hotels and Igaming clusters.

The rules contemplate that liquidators/insolvency practitioners and the courts should be under an obligation to cooperate and communicate with each other. Such cooperation is aimed at finding a solution that would give the best outcome across the group. It is interesting to note that this obligation may also entail the opening of “group coordination proceedings” after the liquidator/ insolvency practitioner has obtained necessary authorisation.

A most important distinction in the new rules regards the establishment of the main place of business within the group. Thus, we now find that the presumptions that the registered office, the principal place of business and the habitual residence are the centre of main interests should be rebuttable.

Therefore, one notes how in the case of a company, it should be possible to rebut this presumption where the company’s central administration is located in a member state other than that of its registered office.

In the case of an individual who is not carrying on a business or professional activity, it should also be possible to rebut this presumption. An example can be quoted where it can be established that the principal reason for moving was to file for insolvency proceedings in the new jurisdiction and where such filing would materially impair the interests of creditors whose dealings with the debtor took place prior to the relocation.

The new rules have been termed RECAST and this regulation contains a codification of the method of determination of centre of main interests (COMI). The establishment of COMI is a unique concept of RECAST.

It determines whether the Recast Regulation applies to a debtor and the jurisdiction for the opening of main insolvency proceedings. COMI will be presumed to be at the registered office, but as stated earlier this can be rebuttable if the central administration is located in another Member State and one conducts a comprehensive assessment of all the relevant factors.

For example, if it is proven that the company’s actual centre of management and supervision and of the management of its interests is located in another Member State, then the registered office presumption will not apply. This also applies if the move in registered office happens within three months of insolvency proceedings.

Readers may ask how and where can such regulations help local companies which are registered as a parent of various subsidiaries located outside Malta. How does “RECAST” works.

First one must establish the three conditions necessary for it to apply.

These are: 1) The proceedings must be collective. It means all creditors seek satisfaction only through these insolvency proceedings. 2) Proceedings may only be opened in connection to the debtor’s insolvency. It is expected issues of insolvency, pre-insolvency and reorganization proceedings all fall within the scope of Article 1 of Regulation 2015/848. 3) Proceedings should be under the appointment of an insolvency practitioner/liquidator. One of the salient issues of cross-border insolvency proceedings is to choose the applicable law.

As it were, it may be challenging to determine the competent court for commencing insolvency proceedings when a business organisation is operating in a number of MSs and has premises, assets, and employees in multiple MSs. Article 3 of Regulation 2015/848 provides the solution. It states that the courts of the MS where the debtor’s centre of main interest (COMI) is located shall be the place of the ‘main insolvency proceedings’. As can be expected, the establishment of the COMI is the first step in establishing the competent court.

In practice determining the COMI is not always obvious. Moving on we realise that it is the unsecured creditors who suffer most in such insolvencies. There are situations where there can be a conflict between the rights of creditors. The underlying principle of rights in rem vis-à-vis creditors as understood by Regulation 2015/848 is that third parties’ rights in rem need to be respected.

The salient rights in rem granted to creditors are: i) the disposal of assets or income from those assets, particularly by virtue of a lien or mortgage, ii) demanding assets or their restitution from anyone having possession of them in conflict with the in rem creditors’ wishes, and iii) the use of assets. It is not clear from this provision how other creditors in various MS who may not be known will acquire knowledge about the relevant insolvency proceedings’ opening.

To address this issue, the insolvency practitioner/liquidator or the debtor in possession shall request that notice of the judgment opening insolvency proceedings and, where appropriate, the decision appointing the insolvency practitioner/liquidator to be published in any other Member State where an establishment of the debtor is located in accordance with the publication procedures provided for in that Member State.

The essential ingredient for successful insolvency proceedings and protection of creditors is that courts co-ordinate between them. Thus, a court shall cooperate with any other court before which a request to open insolvency proceedings is pending, or which has opened such proceedings, to the extent that such cooperation is not incompatible with the rules applicable to each of the proceedings.

It goes without saying that a linchpin of cross-border insolvency proceedings is the appointment of a liquidator and the powers s/he has throughout the MSs. Naturally, it must be mandated that all debtor’s assets are identified even if located across a number of MSs.

In conclusion, the new insolvency rule referred to as Regulation 2015/848 is more than a ‘cosmetic’ innovation as it tries to facilitate cross-border issues but some lawyers think it does not substantially achieve the appropriate unification of EU insolvency law.

George Mangion


Author: George Mangion 
Published on MaltaToday 22nd August 2018
Get in touch: | +356 21 493 041

MGA Publishes Directive on the Calculation of Compliance Contribution

Source: MGA
Published on 13/08/2018

Directive on the Calculation of Compliance Contribution
In exercise of the power conferred by article 7(2) of the Gaming Act, 2018 (Cap. 583 of the Laws of Malta), the Malta Gaming Authority is hereby issuing the following directive in order to clarify the manner in which applicable fees are calculated in terms of the Gaming Licence Fees Regulations.

Part I – Preliminary
1. The short title of this Directive is the Directive on the Calculation of Compliance Contribution 2018.
2. This Directive is applicable as of the date of entry into force of the Gaming Licence Fees Regulations.

Part II – Definitions
3. (1) In this Directive, save as provided in sub-article (2) of this article, all words and phrases shall have the same meaning as prescribed in the Gaming Definitions Regulations or the Gaming Licence Fees Regulations.

(2) In this Directive, unless the context otherwise requires:
“Shared progressive jackpot” means a prize pot shared across multiple licensees and operators, which prize pot increases by each additional contribution by players of the relevant licensees and operators.

Part III – Basis for the Calculation of Gaming Revenue
4. In calculating the compliance contribution due in terms of the Gaming Licence Fees Regulations, licensees shall refer to the definition of gaming revenue within the same regulations, and, for the avoidance of doubt, licensees shall refer to the below formula in calculating gaming revenue:
(A + B) – (C + B) = Gaming Revenue
A = totality of real money wagers1;
B = totality of bonus wagers and other player financial incentives, as per the definition in article 8 of this Directive; and
C = totality of withdrawable winnings, which for the avoidance of doubt excludes bonus winnings or other winnings that are not instantly redeemable.

1 This includes real money deposits or winnings held in the player’s account but does not include any amounts falling within the definition of B. However, items falling under the definition in article 8(ii) shall still be included under A, if, after they’ve been received by a player (at which point they are required to be listed as B), they are subsequently wagered by the player.

5. In calculating the compliance contribution due in terms of the Gaming Licence Fees Regulations, licensees operating Type 3 and Type 4 gaming services shall refer to the definition of ‘charge’ within the same regulations, and, for the avoidance of doubt, licensees shall calculate the ‘charge’ as follows:

a. If the licensee’s revenue is derived as a part or percentage of the player’s contribution, then the ‘charge’ shall constitute that part or percentage of the totality of real money wagers by players playing in terms of the MGA licence after deducting any player financial incentives wagered which fall under the definition in article 8(ii) below; and/or
b. If the licensee’s revenue is derived in any way other than the above, then the ‘charge’ shall constitute the gross portion of monies that are economically retained2 by the licensee after only deducting any player financial incentives wagered which fall under the definition in article 8(ii) below.

6. The licensee shall, upon request by the Authority, provide data relating to:
a. the totality of real money wagers;
b. the totality of player incentives, which include jackpot contributions and bonus wagers and other player financial incentives;
c. the totality of real money winnings, excluding bonus winnings or other winnings that are not instantly redeemable; and
d. jackpot winnings constituting a seeded amount, and/or jackpot contributions listed as player financial incentives.
7. Real money winnings also include winnings awarded other than in fiat currency denomination, such as movable or immovable property, trips, tournament entry fees, virtual goods and currency amongst other things, which prizes shall be valued according to the lower of the market value at the time of the winning and the price paid by the licensee to purchase said prize, and in the absence of a purchase price, the deemed value shall be the market price at
the time of the winning:

Provided that the licensee may, at any time, be requested to provide a breakdown of all winnings not paid out in fiat currency and included as part of real money winnings, including a description of each item, and the appropriate value:
Provided further that incentives given to players which are not directly related to game winnings, such as prizes awarded as part of a marketing scheme, shall not be included as part of ‘real money winnings’ for any purposes of this Directive.

For the avoidance of doubt, the direct cost of tickets incurred in pursuit of the provision of lottery messenger services shall not be considered part of the monies economically retained by the licensee. This reasoning shall not extend to direct costs of tickets incurred as part of a risk hedging strategy for a secondary lottery offer.

8. For the purposes of this Directive the phrase ‘bonus wagers and other player financial incentives’ is restricted to include player incentives (such as promotional gaming credits, free bets, bonus bets, bonus wagers and other forms of player credit or player credit equivalents) where:
(i) the use or consumption of the player incentive by the player is effectively equivalent
to a real money wager by the player in that it may directly result in real money winnings that are instantly redeemable by the player 3;
(ii) where the player financial incentive is, in the hands of the player, immediately
equivalent to a real money winning which is instantly redeemable by the player,
at the time when they are used or consumed by the player (for items falling under (i) above) or received by the player (for items falling under (ii) above
4) as the case may be, and the term ‘bonus wagers’ and / or ‘player financial incentives’ shall, wherever used in this Directive, be read and construed accordingly.
Provided that where a licensee offers jackpots containing a portion of the prize which is seeded capital, the portion of the jackpot prize that is seeded capital shall, if won, be included as part of the totality of real money winnings, and in the case of a shared progressive jackpot, if won, the licensee shall only deduct the portion of the seeded capital which it contributed directly itself, if any. Provided further that any portion of real money wagers that is contributed towards a
local jackpot or a shared progressive jackpot shall be excluded from real money wagers for the purposes of articles 4 and 5 of this Directive but shall be included as part of player financial incentives for all purposes of this Directive. Similarly, therefore any local jackpot and shared progressive jackpot winnings derived from the contribution referred to in the preceding sentence shall be excluded from real money winnings for the purposes of articles 4 and 5 of
this Directive:
For the avoidance of any doubt the reference to ‘any portion of real money wagers that is contributed towards a jackpot or a shared progressive jackpot’ above shall not be interpreted to refer to any amounts of the real money wagers which are payable by way of royalties or by way of any other fees due to any other person and shall only be interpreted to refer to any portion of the real money wagers contributed to the prize pot.

9. No portion of the real money wagers, or of the gaming revenue that is attributable to any portion due in terms of gaming tax, VAT, income tax, corporate tax and other taxes, shall be excluded from the calculation of the totality of real money wagers, or the totality of gaming revenue, as applicable.

3For example, a bonus wager, a free spin or a free bet, whereby any winnings derived therefrom would be directly and immediately redeemable by the player.
4 Following this, any use or consumption of the financial incentive by the player within the context of a wager, shall be equivalent to be a real money wager as per the definition of A in article 4 of this Directive.

10. There shall be no deductions allowed other than those specified in this Directive.
Part IV – Minimum Compliance Contribution

11. The minimum compliance contribution shall start accruing on the day when the relevant game type approval is issued, as applicable.
12. With respect to the payment of the minimum compliance contribution in terms of regulation
6(1)(a) of the Gaming Licence Fees Regulations, the minimum amount payable on the twentieth (20th) day of that month commencing immediately after the month in which the licence period commences shall be deemed to be the minimum stipulated in the provisos to regulations 3(2), 3(3), 3(4) and 3(5) of the Gaming Licence Fees Regulations, pro-rated accordingly for that specific month, and for the avoidance of doubt, the full minimum amount shall not be due until a full licence period elapses.

13. Without prejudice to the provisions of regulation 27(3) of the Gaming Authorisations Regulations, the compliance contribution shall continue accruing until the day that the licensee informs the Authority that following the applicable termination procedures, the gaming operations under the purview of the applicable licence or approval have halted, and that the Authority is able to confirm the same:

Provided that if the amount due is the minimum compliance contribution, it shall be pro-rated accordingly according to the number of days of that particular month during which the gaming activity was still operational.

14. Licensees approved by the Authority as being start-up undertakings shall refer to regulation 9 of the Gaming Licence Fees Regulations, and to the Directive on Start-Up Undertakings (Directive 1 of 2018) for the applicability of the compliance contribution towards the same.

Source: MGA
Published on 13/08/2018

A budget proposal: reduce VAT on dining

Author: George Mangion 
Published on MaltaToday 8th August 2018

The PKF model clearly shows that forfeited VAT revenue is easily recouped by better tax compliance and a healthy multiplier effect on the general economy

Returning from a trade visit to Japan, the Prime Minister was full of positive vibes saying that new opportunities with Japan may now include improved air links, more students coming to learn English, facilitating tourism flow and of course new linkages to the blockchain industry. In his opinion, the country is experiencing economic growth and as the harvest is rich why not give back more benefits to the community.

A cornucopia of new benefits is being touted, this may consist of improved pensions, social benefits, better government services such as social housing and rebuilding the fragile road infrastructure. All this while the banking sector has been shocked by the closure of Pilatus bank where millions of depositor monies are still at risk and where the EBA has chided FIAU for not being diligent enough in its investigations.

On its part, FIAU has admitted that with hindsight more attention was needed where Pilatus bank is concerned yet it followed recommendations provided by internal reports commissioned from the bank’s auditors KPMG and a prominent law firm.

But a swallow does not a summer make since the Pilatus incident concerned a small private bank and in spite of all its political overtones, the international agency Fitch Ratings has confirmed Malta’s credit rating as A+ stable. It says inter alia, “The report noted that banks in Malta have a good rate of capital, while loans are being handled prudently”.

With a government surplus of 3.9%, this gives more impetus to the finance minister to loosen his tight grip on the public purse. All the more, when one recalls that Fitch experts expect a 5.6% real GDP growth for the coming year for Malta. Definitely, this is the right time for budget proposals to be made to the government via links to the constituted bodies and other social partners. Government is expected to introduce a second tax annual refund payable to most taxpayers as a way to mitigate tax burden. This averages from €200 up to €340 per taxpayer.

This is a classic move since it effectively reduces personal taxation and will generate additional cash flow for about 190,000 taxpayers, however, this one-time refund may be further improved if tax on consumption is mitigated. A recent PKF study illustrated the possible consequences on the elasticity of demand should the government reduce the VAT rate on food from 18% to 7% and beverages to 13% on a two-year experimental period as was successfully done in Greece.

Indeed, competitor countries such as Spain and Italy both charge 10% on restaurants and on the provision of meals and beverages to be consumed immediately, even if they are made after the recipient’s order, while the Netherlands charges 6% on restaurants (excluding alcoholic beverages), take away food; bars, cafes, and nightclubs. Poland charges 8% on food and 23% on all drinks including coffees.

We are more expensive than our competitors in Europe. The sector consists of around 2,000 entities of varying size and employs thousands of workers. It has been resilient throughout the 2007-2013 world austerity cycle and really and truly one can say that it never received any Government subventions during the downturn as was the case with some manufacturing firms.

Guess where in EU you can eat at the lowest tax? The prize goes to Luxembourg as it charges the lowest rate of 3% on food and 17% on alcoholic beverages. Needless to say, in Malta, there is a discrimination in the application of VAT. This means diners are charged a full rate of 18% albeit a lower 7% on hotel accommodation and on meals served in hotels in case of combined all-inclusive food and drink packages.

It is no secret that most restaurant owners are facing problems which include increasing rents, a severe lack of entry-level staff and competition from foreigners setting up fast food outlets. These combined factors may push owners to either abuse the system or trade on low margins while the inevitable happens – quality suffers.

It is evident from restaurants located in prime sites that pay high rents so in reality, the landlord earns more than the catering operator – the latter risks so much time and energy to meet all the health and safety requirements and to retain an adequate number of experienced staff.  It goes without saying that such a scenario creates a two-way structure – those who abide by the fiscal rules and suffer a lower return on capital and the rest who in varying degree abuse of the system by indulging in tax evasion, not declaring salaries, or employing non-EU workers at low wages.  Naturally, the government is aware that abuse exists.

Moving on, the PKF study is based on a regression model set to predict future figures for gross value added generated by restaurants of various grades and categories as well as gross value added generated by such eateries under both the current 18% rate and the suggested reduced rates.  Due to lack of information in certain areas, a number of assumptions were made to estimate a host of variables.

One may argue that reducing taxes on restaurants will render them more viable yet there is a risk this reform may not result in lower menu prices or an immediate and much-desired improvement in quality. The answer to this conundrum is that by motivating restaurant operators to face external challenges this stimulus will attract larger volumes of tourists and there is a good chance they would improve services and invest in training better staff.

The PKF model clearly shows that forfeited VAT revenue is easily recouped by better tax compliance and a healthy multiplier effect on the general economy. It is a sign of times that cost of living is marginally rising – so introducing cheaper food and drink in restaurants will help solve the problems of social exclusion felt by the 60,000 persons on a lower income.

As a conclusion, I wish to reproduce an extract from an interview of Jesper Svensson, Betsson’s CEO published by Vanessa McDonald in the Sunday Times of Malta. According to Betsson, which is the largest iGaming company, “We are still attracting and hiring people – quite a few here and in other centres – but Malta is getting more and more expensive.”

The writing is on the wall that rents and the cost of living are getting expensive even for the higher paid iGaming workers let alone for those on a lower salary. A copy of the study may be requested by writing to the author.

George Mangion

Author: George Mangion 
Published on MaltaToday 8th August 2018
Get in touch: | +356 21 493 041

Hitting a $100 per barrel – a new interest in oil exploration

Author: George Mangion 
Published on MaltaToday 1st August, 2018

Talking to the media on the future of oil and gas sector in Malta most will quietly admit the disposition for risking money in the oil and gas sector is weak. Why tempt heavens, when we are blessed with full employment and our economic sectors appear to be firing on all cylinders.

This short-termism is a weakness which is haunting our political leaders. In theory this policy works out in this way – why bother to provide for the future when we are doing so well at present? A typical example is the lack of long term planning in the area of a weak R&D ecosystem and perhaps the need to explore oil and gas prospects now that the oil price has risen. Some predict it will soon reach $100 a barrel, particularly if US friction with Iran heats up.

Realistically, we can name our economic pillars of production to include iGaming, financial services, manufacturing and tourism. All these sectors are fragile and are subject to market and political fluctuations. Why not diversify our interests by investing longer term?

Our geographical location and maritime tradition calls for new investment on logistics, transportation, storage and hydrocarbon extraction. An interesting three-day conference is planned to be held next October in Cyprus to discuss issues relating to this growing sector. The European Mediterranean Oil & Gas Summit will discuss the geo-strategic, commercial, technology and regulatory issues that will shape the management and future development and commercialisation of oil and gas assets and infrastructure in the European Mediterranean region.

Exploring the technical, political and economic challenges that lie ahead, leading companies, government representatives, and legal experts will meet to discuss the challenges in energy resource development in the region while exploring the latest innovative technologies and ground breaking solutions to maximising return on investment on hydrocarbon transportation, storage, processing and extraction. One of its aims is to help global industry players make the right strategic connections.

It will discuss the geo-strategic, commercial, technological and regulatory issues that confront the hydrocarbon industry in the European Med region by giving advice to delegates on how to make best use of technological advances in exploration techniques such as sub-sea and remote well intervention.

More than thirty international speakers will discuss latest developments in the Adriatic, Balkans, Eastern Med, North Africa and the Middle East. Other interesting topics include talent sourcing and managing health and safety issues. In attendance are a number of countries including Turkey, Croatia, Greece, Italy, Albania, Israel, Sweden, USA, Egypt, Cyprus, Norway and North Africa. In this context, it is interesting to note that PKF will be presenting a paper discussing the potential for the island to become a future oil and gas servicing hub.

It was 1954, when the first onshore concession was awarded to a company called D’Arcy Exploration (BP) to drill a well in Naxxar. Since that fateful attempt all other drilling was not successful. Yet, it is surprising to know that the island’s main source rock for the oil is expected to be rich in the organic Streppenosa oil shale unit which is designated world class in its prolific oil generating capabilities.

No wonder the nearby offshore Sicily Vega oil field, with an estimated resource of 1 billion barrels of oil in place, is only 20km away from the northern border of the latest zone in Malta’s exploration efforts. Needless to say, experts predict that the proximity of similar concessions and similarity in geology to the producing basins of Tunisia and Sicily lend support to the theory that oil strikes for Malta cannot be excluded.

The “intra-basin” ridge trend offers a new and highly prospective oil strike in our waters. Mediterranean Oil and Gas (MOG) a company which in 2005 was awarded a licence to explore for oil and gas had commissioned a specialist operator to shoot seismic surveys and it succeeded to interpret an extensive long-offset 3D view over the area which looked promising (yet no official announcement has so far been issued).

It is undisputed that this part of offshore site which is geologically analogous to the Libyan Sirte Basin, appears to contain analogues to proven producing fields in Libya in addition to those offshore Tunisia.

It is interesting that experts have identified a portfolio of prospects in the Lower Eocene/Paleocence sequence. The powerful scientific survey has developed imaging of the Cretaceous and Jurassic sequences, enabling several large leads to be defined at this stratigraphic level. Concurrently it is pertinent to quote Peter Gatt, a qualified geologist who had conducted his own study.

These studies are an important tool for any investor who can use them in conducting business analysis now that the oil price is gradually increasing. A recent announcement that an application for permits to link Malta’s gas network grid to Gela in Sicily is certainly well timed. This gas pipe when completed will eventually link us with the rest of Europe. The environmental studies will begin this year, followed later on by a public call for tenders.

Last year, a National Oil Company was incorporated to help promote upstream business so we can hope that behind closed doors the authorities are devising plans to kick start the drive for exploration. Another harbinger is the rise in the price of oil now reaching over $77 a barrel.

There is no forgetting that as an island we rely 100% on fossil fuel for electricity generation albeit now using LNG given that our dependence on renewable energy is under 7% and it does not look as if it is going to triple in the short term – so the global price of oil is an important factor for us as an importing country. Some may say exploration is a pipe dream fit for visionaries yet realists assert that provided sufficient capital is invested, exploration using modern technology may permit us to be successful.

Gas in modest quantities can be exported to Europe via a submarine pipe connected to Sicily. PKF augurs that the Euromed conference will succeed to attract investors to try their luck in exploring our relatively untapped continental shelf.

A successful discovery will trailblaze a bright future for a new servicing industry.

George Mangion

Author: George Mangion 
Published on MaltaToday 1st August, 2018
Get in touch: | +356 21 493 041

Cryptocurrencies – are they a wolf in sheep’s clothing?

Author: George Mangion 
Published on MaltaToday 25th July, 2018

There is tide of legislation in a growing number of countries such as Malta, Gibraltar, Switzerland, Isle of Man and India which are paving the way for use of virtual currencies and mandating the rules concerning due diligence and AML basic requirements for coin offerings.

Blockchain is an innovative platform – it is distributed over a number of servers thus avoiding the risks of having all our eggs in one basket. Which leads to more transparency linked to digital asset ownership for users. The disruption from this wave of technology is forcing operators to redefine their branding in a new market of Millennials who expect a new experience in an ever changing digital environment.

Can the entertainment, gambling and possibly financial sectors resist the challenge of users armed with virtual reality headsets?  These render a wholesome experience complete with onsite holograms articulated by the uniqueness of Artificial Intelligence. We all agree that hiding away or taking an ostrich attitude is not advisable as one hopes to avoid the experience of Kodak which collapsed by not keeping up with advances of digital photography. Locally, the media reported about the position taken by the Malta Financial Services Authority which is still trailing behind to issue full guidelines when compared to Switzerland with its faster passing of the Blockchain laws.

Only recently MFSA has been cautioning enthusiasts to wait until a formal public announcement to operators is issued.

It is telling applicants not to send requests for approvals and authorisations because the regulator is not ready. In its endeavour to baptise the island as the pioneer in Blockchain, the MFSA last month started gathering stakeholder opinions on various topics and as can be expected it is busy sifting the data. Fair enough, perhaps the situation will improve and become more user-friendly when a new regulatory body is appointed by the end of this year.

This is branded as the Malta Digital Innovation Authority – fully empowered to decide and monitor inter alia, cryptocurrency exchanges and companies under the auspices of the Innovative Technology Arrangement and Services Act.

One hopes that the appointments at the board of governors will be fully qualified and technically proficient members. Many ask if cryptocurrencies are a cover up for ill-gotten gains. A kind of wolf in sheep’s clothing ready to scowl at hapless investors who are lured to the club which offers superior returns. Is there a shady veil of deception that shields Bitcoin and other tokens? Can you blame the doomsayers given that the price of one Bitcoin, valued at over $19,000 in December, now fell to a low of $5,947.

Really and truly, Bitcoin can be defended as having a solid online verification which is handled through algorithms and consensus among multiple computers so that the system is presumed immune to tampering, fraud, or political control. Undoubtedly the jargon is complex and as can be expected the technology is prone to rapid change so that it is difficult to predict what shape it will ultimately take.

As it moves into the mainstream, it will be important to actively manage the risks that arise from its use.

It is possible to register on a Blockchain different kinds of activities but the most common is the settlement of financial transactions. An early starter in this sector is Switzerland. Crypto start-ups have been attracted to Switzerland by its efficient regulatory and tax environment, within the tiny canton of Zug, close to Zurich. Like Malta it proudly promotes itself as the heart of “crypto”.

One notes, how a platform recently built by the Six exchange is designed to be used for cryptocurrencies such as bitcoin, and other digital assets, and will be operated on Blockchain distributed ledger technology. This is not a stand-alone feature since apart from the Six initiative, Swiss regulators are promising to remove obstacles in the near future which prevent conventional banks from providing services to crypto companies. Finma, the Swiss financial supervisor has set out guidelines to help local initial coin offerings, where start-up companies can start to sell digital tokens to investors.

Cryptocurrency exchanges in Switzerland are beginning to copy the safeguards commonly used by their securities and derivatives counterparts after a sad story of multi-million hacks and asset thefts. Equally interesting is how a major private bank in India has launched its inaugural accelerator program for Fintech start-ups with 12 chosen candidates from an international screening process. The 12 start-ups stand to gain access to funding up to $1 million through Venture Capital partners associated with the programme, without any commitment to upfront equity for capital.

It is encouraging to note that two Indian start-ups named Signzy and R Imo, are leveraging Blockchain technology. However, India is itself living in a state of denial. Only recently the government’s intention is hellbent to crack down on the use of cryptocurrency as a means of payment. Officially the Reserve Bank of India (RBI) stated that “the government will take steps to make crypto illegal as a payment system.”

Hot on the heels of an issue of a circular, RBI gave commercial banks three months to comply with its directive to ban the virtual currency motivated with its duty to protect consumers and prevent money laundering. At this stage when questioned why the complete ban cannot be lifted, the Central bank stated that it was caught unaware and admitted it had done no proper research into cryptocurrencies before issuing its circular. To add salt to the wound, the tax department is very suspicious that tax evasion is prevalent due to undeclared gains of investors dealing in such currencies.

In India, it is common knowledge that the Income Tax Department had conducted numerous surveys into the operations of India’s cryptocurrency exchanges in order to ascertain the scale of the tax evasion being conducted. Bona fide operators had put the crypto business on hold. They have taken the authorities to court and expect an early decision from government to effectively introduce legal requirements particularly for know your customer procedures and regarding ways how to record transactions.

These guidelines are now reputed to be issued by a Court decision expected at the end of September. So, who knows, perhaps India may actually have a full set of guidelines very soon. One waits to see who will be the first to open the doors to cryptocurrencies, Coin exchanges, ICO’s and related business.


George Mangion

Author: George Mangion 
Published on MaltaToday 25th July, 2018
Get in touch: | +356 21 493 041

Sweden on its way to court migrant iGaming operators

Author: George Mangion 
Published on MaltaToday 12th July, 2018

Attending the World Gaming Executive Summit held last week at the prestigious W hotel in Barcelona, the common feeling among iGaming decision makers was that the industry is facing exciting times. Gone is the curiosity about whether poker will be overtaken by another game master since the talk of town was centred about the exciting future that millennials will bring to the digital revolution.

With talk about digital wallets, blockchain platforms and the advent of virtual currencies that are creeping in the vocabulary, many operators were looking for the next talisman that can signal the key to the quantum leap in the gambling arena. Without reducing the merit of bread and butter topics such as players’ protection, regulatory oversight, new anti-money laundering and terrorist funding rules and customer retention, the three-day summit was spectacularly focused on the digital marvels hitting the radar.

Last but not least, topics centred around the latest announcement by Sweden to regulate the business by issuing licences.  Perhaps the feeling of déjà vu came back reminding me of the excitement when 14 years ago after many months of expectation, Malta itself gave birth to four types of iGaming licences.

Since 2004, when practitioners introduced the first trickle of small and medium sized gambling operators to a nascent team at Lotteries and Gaming Authority, we can proudly state that we never looked back.  Malta managed to access players resident in other European domiciles, offering them a regulated and protected set of fair games.

It was expected that various state monopolies (such as France) did not take lightly to losing gaming and tax revenue when their citizens surfed over the internet to play on sites managed and controlled from Malta.  It was then that Malta being a full member of the EU sought protection at ECJ level to fight for its rights to offer services unhindered by state monopolies that acted as a Colossus guarding the gate letting no player surf the iGaming games offered outside its territory.

In this fashion, over the years the island secured footholds in both English, Spanish but predominantly Scandinavian markets. In the latter region we were blessed with the presence of the crème de la crème of major Swedish operators who set up their castles in Malta, employing thousands. The industry supports 10% of our GDP.

Yet the race to attract more quality operators continues as the island has recently attracted notable first tier operators serving the UK market based in Gibraltar amid fears that a hard Brexit will block their entry to EU players. Back to the surprise news that Sweden decided to open up its market to local and foreign operators this has created quite a stir among the delegates attending the Barcelona Summit.

Under the new set of regulations, due to take effect on 1st January 2019 the doors are fully open for bona fide operators to apply for licences from Lotteriinspektionen – the Swedish Gambling Authority. Lotteriinspektionen is the regulatory body that is charged with issuing permits for the provision of gambling services as well as with ensuring that such services are made available to gambling customers in a safe and responsible manner.

The icing on the cake is that new licences will be valid for a period of five years and carry a fee. This varies but on average reaches €60,590 for a combined online casino and sportbetting licence. At present, the state-run operator Svenska Spel is the only gambling company authorised to operate gambling services in the country, including online gaming and betting. However, foreign operators licensed in other EU countries have been targeting local players for years.

As proposed, the Swedish gambling market will be divided into three sectors: a competitive sector, primarily including online gambling and betting; a sector reserved for non-profit purposes, including lotteries and bingo; and a sector reserved for the central government, including state-owned casinos and gambling on token machines.

Gambling subject to licensing will be taxed at 18 per cent. Gambling for non-profit purposes will continue to be tax exempt. Corporate tax is set at 22% and is vat exempt in Sweden. The proposals are still not as competitive as Malta’s current conditions. Malta has a maximum €8,500 annual licence fee and a remote gaming tax capped at €466,000 per licensee, and tax at just 0.5 per cent of the gross amount of bets for a remote fixed-odds betting licence.

Lotteriinspektionen will request that internet service providers in Sweden display a message warning gambling customers should they opt to access unregulated gaming websites. On the other hand, as can be expected, to reduce tax leakages service providers may be ordered to block transactions between Swedish residents and unlicensed operators.

Another commendable rule (which has recently been introduced in Malta) concerns responsible gambling provisions. Under one such provision, all players will be obliged to set deposit limits which will be observed religiously across all operators to ensure that services are provided in a socially responsible environment.

This piece of legislation effectively means that anyone operating in the Swedish gambling market must have an authorised licence and this has fired the starting gun for interested companies to collect application forms expected to be released from 10th July this year.  Such forms can be submitted beginning of August 2018.  Rumours at the Barcelona conference have it that over 100 new applications will shortly hit the regulator’s desk.

The rules call for stronger consumer protection gambling, and introduce a new offence, gambling fraud. To tighten on abuses there will be a special cooperation council to tackle match fixing.

Another unique rule is that operators can only offer a one-off bonus offer to any player.  One may ask why a relatively small country like Sweden can attract so much attention? The answer is given in statistics provided by Lotteriinspektionen which show that Sweden’s regulated gambling operations generated the total amount of SEK8.2 billion in gross gambling revenue during the second quarter of 2016, reflecting a 4% increase from the previous year.

This compares to a figure of SEK2.3 billion for black market business during the second quarter of 2016 even though one may not be 100% certain since it is not easy to quantify unregulated business. One may expect an orderly regularisation of the Swedish gambling market next year where foreign operators will be able to compete shoulder to shoulder with Svenska Spel – the state monopoly.

This can be seen in perspective when one notes how in 2016, major operators including Unibet, bet365, and Betsson recorded a 16% rise in their turnover while Svenska Spel and the other locally regulated entities grew only 2% in 2016.  In conclusion, expect a congregation of Swedish girls at Lotteriinspektionen dressed in yellow and blue traditional costumes to welcome with a smile the migration of bona fide applicants.

George Mangion

Author: George Mangion 
Published on MaltaToday 12th July, 2018
Get in touch: | +356 21 493 041