MFSA direct orders and governance come under scrutiny

Malta’s Financial Services Authority (MFSA) has attracted renewed scrutiny over its procurement practices and financial governance following the latest government gazette records showing a substantial number of direct orders issued in the latter half of 2025. These direct orders, which circumvent standard competitive tendering procedures, have raised concerns among regulatory insiders observers and industry stakeholders about transparency accountability and value for money.

According to official procurement data published in the government gazette during the last six months of 2025 the MFSA issued 61 direct orders with a total value approaching €2 million. Typically direct orders are used in exceptional circumstances for urgent or highly specialised needs where competitive tendering is impractical or impossible. However the pattern of usage appears to diverge from these narrow criteria with many assignments that would commonly be expected to involve open competition awarded through direct agreements.

Historical context and leadership changes at the MFSA

The MFSA is Malta’s single financial regulator responsible for overseeing banks insurers investment firms pension schemes and other financial service providers. It was established by statute and plays a key role in maintaining market integrity consumer protection and overall financial stability. In recent years the authority has faced a series of controversies relating to spending practices internal governance financial performance and public perception.

A notable period of criticism occurred under the leadership of Joseph Cuschieri, the former chief executive who resigned amid allegations over conflicts of interest and controversial travel arrangements. In that period the authority was pressed over high-profile direct orders and elevated expenditure on communications events and consultancy fees. Following his departure Kenneth Farrugia was appointed as CEO to provide new leadership. However according to some MFSA officials close to policy implementation the ongoing reliance on direct orders suggests a return to earlier practices rather than reform.

According to one insider familiar with the matter: “it is back to square one” with approvals for incremental direct orders now being signed off by the authority’s current CEO Kenneth Farrugia who also serves as the head of Malta’s Financial Intelligence Analysis Unit (FIAU).

Analysis of direct orders in late 2025

The procurement records reveal a wide range of services and supplies acquired through direct orders often in circumstances where standard procurement practice would allow for competitive bidding.

Supplies and unusual items

One of the most striking examples involved a €7,000 direct order awarded to a private individual Mark Borg for the supply of milk. While routine office supplies might occasionally require prompt procurement the elevated cost of this particular order raised questions among observers about proper oversight and justification.

Events and industry engagement

A significant share of the expenditure was directed towards organising industry conferences seminars and related events. These events are integral to the authority’s engagement with practitioners and stakeholders but involve a highly competitive sector where a wide range of event management firms operate. Despite this the MFSA awarded multiple direct orders to individual suppliers without open calls for bids.

For example The Event Planner was paid substantial sums across three separate direct orders within six months for organising various MFSA hosted events. This repeated direct engagement with the same supplier drew concern from market participants who noted that similar services are widely available from numerous vendors.

Marketing and publicity initiatives

In addition to logistics and events a notable direct order valued at €39,000 was issued for the publication of an article about the MFSA in an international business magazine. Criticism surrounding this expenditure centres on whether such publicity contracts should be subject to competitive tendering given the broad availability of global and local marketing firms capable of providing similar services.

Catering and hospitality

The records also show substantial direct payments to high-end hotels and catering firms for hospitality services connected to MFSA events. Names of hotels appearing in the procurement list include Corinthia, Xara and The Phoenicia which were engaged for event hospitality and associated catering services. In addition specialist communications firm Celebrity Communications was similarly appointed through direct order for services relating to event hosting.

Concerns about political connections and supplier selection

Beyond the nature of the expenditures themselves critics have questioned the pattern of supplier selection. Some of the firms that benefited from direct orders have historical links or perceived proximity to the governing political party. Among these are companies such as Best Team Audio and advertising agency Pure Concepts which have reportedly engaged in multiple transactions with the regulator during the six-month period in question.

While the presence of political connections alone does not necessarily indicate improper conduct the repeated allocation of significant contracts without open competition can erode confidence in the impartiality of public procurement and the stewardship of public funds.

Financial performance and context

The scrutiny over procurement practices is further heightened by the MFSA’s recent financial performance. For the year 2024 the authority reported substantial financial losses despite receiving millions of euros in government subventions. According to official financial reports the MFSA posted a deficit which reflects deteriorating financial health following years of expanded expenditure. This loss occurred despite ongoing government financial support aimed at sustaining the authority’s regulatory operations.

The regulator’s financial position has been the subject of parliamentary and public debate with opposition figures raising questions about sustainability and fiscal discipline within the authority. The losses also occurred against a backdrop of efforts to rebrand the organisation and address earlier reputational challenges stemming from greylisting by international bodies critical of Malta’s anti-money laundering regime.

Governance and transparency issues

Policy analysts industry observers and some current and former MFSA staff have raised broader concerns about governance transparency and oversight. The use of direct orders outside narrowly defined exceptional circumstances raises questions about adherence to procurement rules designed to promote fairness value for money and competitiveness.

A transparent procurement process typically ensures that a range of suppliers can compete on pricing quality and service delivery. When this process is bypassed through direct orders it can limit competition and potentially lead to perceptions of insiders benefiting at the expense of taxpayers and regulated entities alike.

Some MFSA insiders suggest that the uptick in direct orders reflects institutional inertia and a preference for expediency over structured procurement. Others argue that the current regulatory leadership needs to strengthen internal controls and demonstrate a visible commitment to good governance practices that align with international standards expected of a national financial regulator.

Responses from the MFSA

In response to enquiries the MFSA has emphasised its commitment to fulfilling its statutory mandate and upholding regulatory standards within the financial services industry. In published statements the authority highlights its regulatory achievements including enforcement actions and licensing activity as evidence of ongoing operational focus.

The MFSA also notes that direct orders may be justified in specific instances where specialist expertise urgent requirements or confidentiality concerns are involved. However critics counter that without clear published criteria detailing why direct orders were necessary in each case there remains a perception of opaque decision making.

International scrutiny and implications

The matters of governance and public trust at the MFSA have implications beyond domestic policy. As Malta seeks to maintain and enhance its standing in international financial markets regulators global partners and supranational bodies place significant emphasis on strong internal controls transparent procurement practices and robust accountability frameworks.

The use of direct orders has been highlighted in past assessments of public agencies when evaluating adherence to good governance awards and procurement integrity. Given the authority’s central role in supervising complex financial markets and firms the optics of its own procurement behaviour carries reputational weight.

Moving forward

In light of the controversies surrounding direct orders and financial performance many commentators and stakeholders are calling for enhanced transparency and governance reforms. Suggestions include clearer public reporting on procurement decisions adoption of competitive bidding processes as the default for service acquisition and strengthened internal audit functions to review and justify exceptions.

Industry representatives have also encouraged the MFSA to engage more openly with stakeholders and civil society on matters of public interest governance. Such engagement could help strengthen confidence in the regulator’s commitment to accountability and prudent use of public resources.

As Malta’s financial services sector continues to evolve and face both domestic and international challenges the effectiveness and credibility of its regulator remain central to investor confidence market integrity and sustainable development of the financial ecosystem.

Conclusion

The recent pattern of direct orders by the MFSA has reignited longstanding concerns about procurement practices public accountability and financial stewardship. While direct orders can serve legitimate operational needs there is broad consensus among critics that their increasing use demands greater transparency and stronger justification. Balancing operational efficiency with robust governance will be critical for the MFSA as it navigates its regulatory responsibilities and public expectations in the years ahead.

FAQs

What is the MFSA and what does it do?
The Malta Financial Services Authority is the single regulator of financial services in Malta responsible for supervising banks insurers investment firms pension schemes and other financial service providers to protect consumers promote market integrity and maintain financial stability.

Why are direct orders controversial?
Direct orders bypass standard competitive procurement processes and when used frequently on routine services they raise questions about transparency accountability and whether taxpayers are receiving value for money.

Who is Kenneth Farrugia?
Kenneth Farrugia is the current chief executive officer of the MFSA and also serves as head of Malta’s Financial Intelligence Analysis Unit.

How much did the MFSA spend on direct orders in late 2025?
During the last six months of 2025 the MFSA issued 61 direct orders with a total value near €2 million in procurement that would typically be expected to follow open competition.

How does the MFSA justify direct orders?
The MFSA asserts direct orders can be warranted when specialist expertise urgent needs or confidentiality issues are present but critics say clearer published criteria are needed to justify them.

What was one unusual direct order that drew attention?
A notable example was a €7,000 direct order for the supply of milk which many observers questioned as an ordinary procurement that did not appear to meet exceptional criteria.

Has the MFSA faced financial losses recently?
Yes the MFSA reported significant financial losses for 2024 despite receiving government subventions highlighting concerns about fiscal sustainability.

Why are hospitality and event services under scrutiny?
Substantial amounts were spent using direct orders on event planning hotels and catering for industry events in a competitive market where open bidding might achieve better pricing.

Do political connections feature in the controversy?
Some of the companies receiving direct orders are perceived as having links to the governing political party raising questions about impartiality and fair procurement.

What reforms do observers suggest?
Proposed reforms include stronger internal controls clearer public reporting on procurement decisions and making competitive bidding the default approach for the acquisition of services greater transparency would help restore confidence.