Insights

At a time when serious long-term strategic decisions need to be taken to turn over a new leaf in the most effective and quickest manner, technology could well be Malta’s ray of hope.

The way technology is shaping and will continue to shape, every sector of society is evident for all to see. Taking one of Malta’s most prominent industries, financial services, as an example, ICT occupies a pivotal role, from payments, which have increasingly moved from cash and paper-based methods to the use of digital solutions, as well as securities clearing and settlement, electronic and algorithmic trading, lending and funding operations, peer-to-peer finance, credit rating, insurance underwriting, claim management and back-office operations.^[1]

But technology is not merely key to the industries that are at the forefront of Malta’s economy; it is, in itself, a facilitator and a formidable ally in any jurisdiction’s progress. Of course, it must be used well and wisely and brings with it its challenges, including change – but any delay in meeting these challenges and embracing the opportunities that technology offers is wasted time – a commodity that our island and its industries do not have.

In order to move away from the status quo, Malta must necessarily achieve three principal goals: Inspire Trust; Reduce Bureaucracy and Incentivise Technological Development and Uptake in all areas of society. Technology could and should be a common theme running throughout this narrative.

The first of these goals is the more difficult to achieve since it does not depend solely on dedicating focus and funds but entails a political commitment across the political divide to put partisan politics and personal agendas aside. Good governance, integrity and transparency at all levels of government and its institutions need to be assumed and cannot be rendered ambiguous. Very short-term thinking and a culture of nepotism that disregards skills and competence in the public service and the market in general, on many goods or services, is a recipe for disaster.

Technology can avoid manipulation, eliminate discrimination and political favouritism and many other bad habits. Technology executes objectively what it is coded to execute without favour or fear of losing votes; but to implement it on a nation-wide scale in a manner that is trusted, there must be audit and assurance systems that check out the technology for any in-built flaws and to ensure that it has been coded ethically. This is what was intended in the technology regulatory laws drafted in 2018 with the Malta Digital Innovation Authority set up to ensure that this tech-certification agenda is followed through. The importance of this Authority cannot be more critical.

Malta should do its utmost to lead in promoting these principles by, amongst others, rewarding those companies and operators that go the extra mile to ensure that they conduct business ethically and transparently through audited technology.

But one cannot effectively promote something unless he passionately believes in its qualities. This applies here too. The first to believe in the benefits of technology and adopt the solutions offered must be the Government. And this comes at the right time. It is clear for all to see that, despite any levels of good governance that may be implemented, decisions based solely on human intervention at an administrative level lead to subjectivity, bureaucracy and unfairness, amongst other negative outcomes. The current political climate may well lead to fear and indecision in the administrations when treating licence applicants and holders, which then translates into over bureaucratic processes and a disincentive to anyone who may be interested in setting up shop and investing in our island.

Technology, in particular regulatory technology (RegTech), could and should play a vital part of the Government’s strategy in trying to rebuild trust and confidence in our country, by implementing clear, transparent and objective measures, whilst at the same time minimizing bureaucracy to speed up setting up processes.

RegTech becomes even more critical with an ever-increasing shift towards a technology-powered financial industry. The vast amount of technology that is constantly released makes it impossible for humans to handle the due diligence processes efficiently in such a way that keeps up with the pace of development and the industry. The disproportion in areas of operation and capacities is already too great and every minute without RegTech in operation is an added minute of risk for us all.

This does not apply to Malta alone, and this is precisely where an opportunity lies for Malta to make its mark and rise to the occasion by recovering from the negative implications of grey-listing and be seen as a living example of how RegTech can really turn things downside-up. The need for hefty investment in RegTech systems to be used by the various public authorities, where the majority of the compliance assurances could be automated, thus shifting human intervention solely to those aspects that require subjective interpretation and more elaborate, less repetitive consideration, is a must. There are few compliance checks that Artificial Intelligence cannot effectively deal with and this is where the investment is needed. Of course, it is assumed that access to data is open to the AI platform and that data is free from manipulation. What AI can harvest and analyse in terms of data far exceeds what an officer at one of our regulatory authorities can and at much greater speed. Technology will not suffer from perception and bias, either.

The MDIA and MITA should be central to this effort, commissioning a central system for all public authorities to plug into.

Coupled with this, there should be a drive to centralize resources and data to avoid duplication. It is a constant frustration by operators in regulated industries to be required to provide copious due diligence documentation time and time again to different authorities and entities that very often are assessing similar risks by establishing the same facts. It is time to adopt a central repository of such information to which any authority that requires access for the purposes of its licensing requirements is given permission access, in full adherence to data protection laws. This is where a distributed ledger technology (DLT) based system will work effectively. But beyond this, a centralized RegTech system, which is audited to the highest Cyber Security standards, thus inspiring trust, will ensure that no two authorities duplicate the same compliance exercise.

This article was first published in the Times of Malta.

^[1] DORA – Preamble 2;