Can you give us an overview of BOV’s gaming portfolio and explain your stance on the gaming scenario?
BOV is one of the leading banks in Malta. We have a very strong market share in the region, of just under 47%, and service a number of economic sectors consisting of domestic and international personal and corporate clients. The gaming sector has become an important national economic enabler and a sector which is serviced by Bank of Valletta. We acknowledge that Malta has in effect become a centre of excellence for international iGaming business. Our focus is to provide a breadth of banking services to both the gaming operators and the gaming-related service companies that are based in Malta and provide their services in and from Malta.
There is only a handful of banks servicing this sector in Malta. Does this put certain challenges on BOV and does it prevent the bank from taking more gaming business?
When an economic sector is serviced by a limited number of service providers, this always creates a number of challenges in terms of the exposure that any bank would want to any one particular sector. Consequently, banks are very careful to maintain a balanced exposure. The iGaming industry poses its own challenges in view of the inherent risks associated with this industry and its fast-paced evolution. I sincerely feel that there is room in Malta for other banks to service this fast growing industry. This would be beneficial not only for the industry, but also for BOV, as any industry tends to grow at a much stronger pace when there is a commensurate increase in service providers.
"I strongly feel that there is a need for a holistic industry outreach programme, which needs to be driven by the key operators in the market, or through an association that represents the various industry stakeholders."
What can be done to improve the industry’s reputational image and risk profile?
I strongly feel that there is a need for a holistic industry outreach programme, which needs to be driven by the key operators in the market, or through an association that represents the various industry stakeholders. The industry needs to strengthen its communication to address and explain initiatives that they undertake to strengthen their business. These include standards on the way governance is organised within the organisation and how the risks associated with this industry, which include amongst others due diligence and AML matters, are being managed. A higher level of communication will instil greater confidence on both the regulatory and banking services fronts. Joint initiatives could also be organised by stakeholders, covering processes and procedures to combat financial crime and promoting know-your-client requirements. I appreciate that these operators are competitors but it is the concept of coopetition – cooperation between competitors.
The position of the gaming industry in Malta may be further strengthened through complimentary political and regulatory outreach initiatives that are, in my view, equally and highly important to sustain the continued growth of this sector. Such initiatives should be driven by the Government of Malta, the Malta Gaming Authority, as well as other relevant authorities, to ensure that Malta is constantly viewed as a highly reputable jurisdiction to conduct international business.
What does a gaming company that is considering entering the Malta market need to do to comply with banking standards here, and what do banks look out for when dealing with potential gaming industry clients?
We will only bank with an operator that has a licence. Consequently the processes and procedures governing the issuance of licences are of prime importance, as is the way the MGA monitors and supervises licensed entities. However, we do not just rely on the due diligence of the Authority. All banks are required to carry out their own due diligence, which amongst other things, will be driven by the assessment of the shareholders and ultimate beneficial owners, the governance structure of the organisation, their business plans and business model, target markets, location of the players, where the payment service provider is based and whether it is a regulated entity. The company’s client on-boarding procedures and money transmission mechanisms are equally assessed in the process.
Banking seems to be the biggest issue for the sector; however, Malta wants to grow this industry. What is the solution for this?
At Bank of Valletta we have clearly defined the gaming business we are ready to service and have in place robust on-boarding and ongoing monitoring procedures in this regard. However, disparities do exist between the risk appetites of various banks servicing this industry in Malta. Ultimately, I firmly believe that we all have a common objective to service legitimate business which fits with the respective risk appetite of each bank. On a general note, I sincerely feel that it is in the interest of all stakeholders of this growing industry to safeguard Malta’s reputation as a centre of excellence for the gaming business. Failing to do so will jeopardise the success we have achieved so far.
Often companies say that it is as if certain shutters come down the moment they mention gaming. They even seem to struggle to get bank accounts for their employees?
I am not in agreement that ‘shutters come down’ when it comes to the provision of banking services to gaming operators. Clearly the requirements to open and maintain a banking relationship have become more onerous given new and increased regulatory requirements. Industry practitioners need to ensure that the application and KYC documents for the opening of an account are executed in a proper manner, and that all documentation includes the necessary information to enable the bank to appropriately assess the requirements. This means that companies seeking banking services need to be fully prepared to provide the bank with all the necessary information.
How do you think that the fourth AML Directive will play out?
I believe it will play out positively, without any shadow of a doubt. Ultimately, serious operators want to be properly regulated. It goes without saying that the new obligations will prove to be onerous for all stakeholders. Nonetheless, I sincerely feel that this will enable companies operating in this industry to further strengthen their overall governance, with the end result that this will be more beneficial for the industry.
What would be your one piece of advice to the CEO of an iGaming company so that he can ensure a good relationship with his banker?
I firmly believe that a banking relationship is underpinned by four key principles: honesty, integrity, trust and transparency. At the outset, an application to initiate a banking service relationship needs to be prepared with the required information and documentation readily available to facilitate the process. However, it is important that the company and the bank maintain an open communication channel and dialogue at all times, thus ensuring that the relationship is nurtured and that the bank will continue to remain supportive as the business of the client evolves and grows.
Kenneth Farrugia joined Bank of Valletta in 1985 and has occupied various positions within the Bank. Kenneth currently holds the post of Chief Business Development Officer and sits on the Management Board. Kenneth is also the Chairman of FinanceMalta, Malta’s national promotional body for financial services, and serves as Chairman of the Malta Funds Industry Association. Additionally, Kenneth is the Chairman of Malita Investments which is listed on the Malta Stock Exchange.