For MFSA-regulated entities in Malta, decisions around how control functions are structured are no longer viewed as purely operational or cost driven.
In practice, the Malta Financial Services Authority (MFSA) increasingly focuses on whether regulatory, risk and internal Audit functions are:
As a result, outsourcing has become a deliberate governance choice for many regulated firms particularly during authorisation, early growth, or periods of regulatory change.
Outsourced vs In House Control Functions: What the MFSA Expects in Practice
From a supervisory perspective, the MFSA does not assess whether a control function is in house or outsourced.
What matters is whether the function:
Operates independently
Has sufficient expertise and authority
Is properly resourced
Can challenge management effectively
Has direct access to the board or audit committee
In smaller or newly authorised entities, these expectations are often difficult to meet through in house appointments alone especially where individuals perform multiple roles or lack sufficient seniority.
Outsourcing, when structured correctly, can directly address these challenges.
Why Outsourcing Control Functions Is Often the Practical Choice
1. Faster regulatory readiness
During MFSA authorisation or licence extension processes, firms are expected to demonstrate that control functions are already operational, not merely planned.
Recruiting suitably experienced compliance officers, risk managers or internal auditors can take significant time. Outsourcing allows firms to achieve immediate regulatory readiness, avoiding avoidable delays.
2. Access to senior expertise
MFSA expectations increasingly extend beyond technical compliance to experience, judgement and regulatory insight.
Outsourced models typically provide:
Senior led oversight
Exposure to multiple regulatory frameworks, such as Electronic Money Institutions (EMIs), Payment Service Providers (PSPs), Funds, and EU Markets in Crypto-Assets Regulation (MiCA)
Practical understanding of MFSA supervisory priorities
This is particularly valuable for boards and audit committees seeking credible assurance.
3. Clear independence and objectivity
Independence remains a recurring theme in MFSA supervisory feedback.
In practice, in house control function holders in smaller firms often:
An outsourced function, reporting directly to the board or audit committee, can more clearly demonstrate independence of thought and action.
Senior Expertise, Independence and Proportionality: The Case for Outsourcing
A core principle underpinning MFSA supervision is proportionality.
Firms are not expected to replicate large bank governance structures. Instead, they are expected to implement control arrangements appropriate to their size, complexity and risk profile.
Outsourcing supports proportionality by allowing firms to:
Scale control effort to actual risk
Avoid over engineering governance
Focus internal resources on core activities
Maintain strong oversight without excessive fixed cost
For internal audit in particular, outsourcing often provides a more effective solution than maintaining a small, under resourced in house function.
When Outsourcing Is Particularly Appropriate
Outsourcing regulatory or internal audit functions is commonly appropriate where:
The firm is newly authorised or undergoing MFSA authorisation
The business is growing rapidly or changing scope
The regulatory framework is new or evolving (e.g. MiCA)
The board requires independent assurance
Recruiting suitably experienced personnel is impractical or delayed
In these scenarios, outsourcing is not a stop gap measure, but a deliberate governance decision.
A Balanced Perspective
Outsourcing is not always the right solution.
Larger or more complex entities may benefit from a hybrid model, combining in house knowledge with outsourced specialist support.
What ultimately matters from both a governance and supervisory perspective is that control functions are effective in practice, clearly accountable, and able to provide meaningful challenge and assurance.
Final Thoughts
For MFSA regulated entities in Malta, outsourcing regulatory, risk or internal audit functions has become a widely accepted and regulator aligned model when implemented correctly.
When designed around seniority, independence and proportionality, outsourcing can particularly in an environment of outcomes-based supervision:
How Trident Trust Can Help
Trident Trust supports MFSA‑regulated entities in Malta with outsourced and co‑sourced regulatory, risk management and internal audit services, delivered in a manner that is independent, proportionate and aligned with supervisory expectations.
Our services are designed to support firms at different stages of their regulatory lifecycle, including authorisation, early operations and ongoing supervision.
Our support includes:
Outsourced internal audit services: Risk‑based internal audit programmes designed to support board and audit committee oversight, focusing on governance effectiveness, control design and operating effectiveness in line with MFSA expectations.
Outsourced and co‑sourced regulatory and risk management functions: Providing experienced, independent oversight while ensuring appropriate escalation, reporting and access to the board or senior management.
Support during MFSA authorisation and licence extensions: Assisting firms in establishing proportionate control functions, governance frameworks and regulatory readiness, including where functions are outsourced as part of the proposed operating model.
Ongoing governance and assurance support: Helping firms demonstrate that regulatory, risk and control frameworks are operating effectively in practice, including through structured reporting and remediation tracking.
Support for non‑EU and growing firms: Providing practical solutions where in‑house resourcing is limited or evolving, while ensuring that regulatory expectations around independence, seniority and effectiveness are met.
Trident works closely with boards, senior management and professional advisers to ensure that outsourced arrangements are clearly defined, appropriately governed and fully integrated into the firm’s overall control framework.
Where required, services can be delivered on a fully outsourced basis or through co‑sourcing arrangements that complement existing in‑house capabilities.
To learn more, please contact Keith Zammit. or download our regulatory services brochure.