In an earlier post, I wrote about the reputational harm the current Satabank crisis is causing among end clients of our financial services activity.
An expert in the gaming industry pointed out to me in a conversation this morning that I am underestimating the impact on the end users of the gaming industry as well.
In an even earlier post, I explained how expat employees of the gaming industry have been immediately impacted by the account freeze as many of them hold their daily current accounts at Satabank.
On top of this, several gaming operators bank at Satabank because other Malta-based banks refused the custom of gaming operators. The expert, who has worked in the gaming industry in Malta for several years, suggested Satabank might actually hold the operating accounts of up to around 80 different gaming companies. I have not yet been able to confirm this detail.
In any case, apart from the operational accounts, gaming operators are required, as a condition of their license, to hold a separate bank account where funds belonging to players — the end users of the industry — are held. These accounts are ring-fenced to avoid players’ funds being used by the gaming operator for any other purpose.
Gaming companies licensed in Malta and banking at Satabank also hold the ring-fenced accounts of funds belonging to players at Satabank. The Malta Gaming Authority has failed to reassure concerned gaming operators this morning as it confirmed that the Malta Financial Services Authorities’ freeze of Satabank accounts does not exempt player funds in regulated ring-fenced accounts.
This means that the freeze in place since last Saturday also affects players all over Europe and beyond who cannot access their winnings or funds now frozen at Satabank. Also affected are affiliates who provide marketing services for local gaming companies and whose fees are also ring-fenced in accounts, in some cases at Satabank.
This has a very significant impact on Malta’s reputation as a jurisdiction for gaming. Players have so far held Malta-licensed gaming operators as reputable as the Maltese regulator is trusted to protect their interests.
In this episode, however, the MGA appears to be helpless to protect player interests. This is not some breach of an impeccable record. The MGA failed to clamp down on Italian crime gangs laundering money through Malta’s gaming business. And legitimate players have also suffered when operators vanished with funds that were supposed to have been protected for players.
Assurances from the MFSA that there is no issue of liquidity at Satabank and that clients will be in a position to acquire their funds once the present crisis is resolved is not appeasing all customers.
Most gaming operators held their operating bank accounts as eMoney accounts at Satabank which, as confirmed by the MFSA (and reported on this website yesterday), are specifically excluded from the scheme that guarantees depositor funds in case of a crisis at their bank.
Satabank will not have been required to deposit into the insurance scheme covering the deposit guarantee for funds held in eMoney accounts.
But as with the financial services concerns explained in an earlier piece I wrote this morning, the gaming industry is also assessing the medium-term impact of the present crisis.
Satabank accepted the business of employees, operators and indirectly the clients of the gaming industry. HSBC do not touch this business. BOV and Banif accept gaming business but clients often find their onboarding processes discouraging. Sparkasse has gone as far as telling inquiring customers it would not consider accepting the business of anyone who banked at Satabank in the past.
Industry insiders told this website that with the complete loss of credibility of Satabank, even in case of its eventual release to continue business if that could ever happen, Malta’s offer as a jurisdiction for this industry will be tarnished. Apart from the loss of confidence in the ability of the MGA to protect players, Malta’s ability to attract new business might falter if businesses find it near impossible to find banking services here.
Licensing Satabank in 2014 in spite of the record of its owner Christo Georgiev and ineffective regulation and enforcement before this point, as well as a virtual dependence on Satabank for the functioning of the gaming industry that alone amounts to 12% of our economy, has exposed massive vulnerabilities in our economic framework.
None of which were even remotely touched upon yesterday by the Minister of Finance in his public auto-fellation in Parliament.