Americas > Central America > Panama > Panama tightens money-laundering regulations

Panama: Panama tightens money-laundering regulations

2015/07/18

A drive to combat money laundering in Panama took a key step forward in June, with the approval of legislation that the country hopes will accelerate its removal from the Financial Action Task Force (FATF) “grey inventory”.

The FATF is an influential, inter-governmental body tasked with tackling threats to the integrity of the international economy. Panama is one of 11 listed nations that have been judged by the task force to fall short of full “anti-money laundering and combating the financing of terrorism” (AML/CFT) compliance. The FATF as well holds a separate “black inventory” of jurisdictions deemed as “high-risk and non-cooperative”.

A lot of businesses have suffered in the wake of the decision by the FATF in June 2014, particularly those working with US institutions. This comes at a time at the same time as Panama − traditionally considered an attractive country for the registration of businesses − strives to accomplish its goal of becoming an international financial centre.

Isabel Fernández, chief of the government’s policy unit for the prevention of money laundering and the financing of terrorism, told journalists in April: “...it had become urgent for us to update these regulations.”
Supervision stepped up

The new law, known as Law 23, which was approved by the Panamanian Congress in June, has a pivotal part to play in the country’s push to meet international standards of protection against money laundering and the financing of terrorism or weapons of mass destruction.

Alongside the broader financial services sector, credit unions, lawyers, accountants and real estate agents will as well be subject to supervision under the new legal obligations, together with the Colón Free Trade Zone, the Panama Canal Authority and the country’s casinos.

The legislation has as well paved the way for a new regulatory body to cover the non-financial sector, the Intendencia de Supervisión y Regulación de Sujetos no Financieros. The body, which will monitor 13 different economic sectors, will operate initially as a unit within the Ministry of Economy and Finance, with plans for it to be from presently on given autonomous status.
Regulatory clampdown

Increasing supervision and transparency of bearer shares is an extra area that has been targeted by new legislation. Congress recently approved an amendment to Law 47 of 2013, with the aim of establishing the ultimate identity of shareholders. A deadline for Panamanian companies to deposit bearer shares with an authorised custodian has been brought forward to December 31, 2015, overriding a previous three-year timeframe. A separate regulatory change obliges all Panamanian companies to begin maintaining registries of minutes and shares.

As part of its commitment to cracking down on irregularities, Panama’s banking regulator, Superintendency of Banks of Panama (Superintendencia de Bancos de Panamá, SBP), suspended the operations of Banco Universal − a small commercial bank with deposits worth $345m – in early June. The regulator will take over administrative and operational control of the bank for 30 days next an inspection revealed a “high degree of weakness” and inadequate internal controls according to SBP’s chief Ricardo Fernández. Banco Universal is owned by the family of former Vice-President Felipe Verzi, currently under investigation for money laundering.

Efforts have as well before been taken by Panama in other areas of transparency, particularly in a bid to help it shed its image as a tax haven. Panama signed a host of tax data exchange agreements and double taxation treaties, which enabled it to be removed from the OECD’s grey inventory in 2011 for nations which had not implemented international tax standards on the exchange of tax data.
Time for change

However, hopes of being instantly withdrawn from the FATF’s inventory are unlikely. Analysts have pointed out that since the FATF for Latin America (El Grupo de Acción Financiera de Latinoamérica, GAFILAT) − responsible for certifying the evolution of the country − convenes three times annually in February, June and October, Panama will have to wait for the autumn conference at the earliest to present its statement on full FATF compliance. A country inspection by a GAFILAT delegation would as well need to be carried out, suggesting February 2016 would present the earliest opportunity for Panama’s removal from the inventory.

The deputy finance minister, Eyda Varela de Chinchilla, was realistic about the timeline. “We weren’t going approaching off the inventory in October... In fact, nations take about three years approaching off the grey inventory, and Panama will do it in a year and a half.”

The new legislation will as well impose several additional duties on companies operating in Panama. EY analyst Bismark Rodríguez said the changes would lead to higher costs, particularly for smaller companies. Some suggest the new law could set the scene for mergers and acquisitions over the next five years, particularly small businesses merging with larger companies, as firms look for ways of achieving economies of scale.

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