PANAMA
Summary
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Sanctions

None

FAFT AML Deficient

No Longer on list

Higher Risk Areas

 

US Dept of State Money Laundering assessment

Compliance with FATF 40 + 9 Recommendations

Not on EU White list equivalent jurisdictions

International Narcotics Control Majors List

Offshore Finance Centre

Compliance of OECD Global Forum’s information exchange standard

Medium Risk Areas

 

Corruption Index (Transparency International & W.G.I.)

World Governance Indicators (Average score)

Failed States Index (Political)(Average score)

 

 

ANTI-MONEY LAUNDERING

 

FATF Status

Panama is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies

 

Latest FATF Statement - 19 February 2016

The FATF welcomes Panama’s significant progress in improving its AML/CFT regime and notes that Panama has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in June 2014. Panama is therefore no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. Panama will work with GAFILAT as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report.

 

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Panama was undertaken by the Financial Action Task Force (FATF) in 2014. According to that Evaluation, Panama was deemed Compliant for 1 and Largely Compliant for 3 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for all 6 of the Core Recommendations.

 

US Department of State Money Laundering assessment (INCSR)

Panama was deemed a Jurisdiction of Primary Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR).

Key Findings from the report are as follows: -

 

Perceived Risks:

Panama’s strategic geographic location; dollarized economy; status as a regional financial, trade, and logistics center; and lax regulatory system make it an attractive target for money launderers. Money laundered in Panama is believed to come in large part from the proceeds of drug trafficking due to the country’s location along major drug trafficking routes. Tax evasion, financial fraud, and corruption also are believed to be major sources of illicit funds. Numerous factors hinder the fight against money laundering, including the existence of bearer share corporations, a lack of collaboration among government agencies, lack of experience with money laundering investigations and prosecutions, inconsistent enforcement of laws and regulations, and a weak judicial system susceptible to corruption and favoritism. Money is laundered via bulk cash and trade by exploiting vulnerabilities at the airport, using commercial cover and free trade zones (FTZs), and exploiting the lack of regulatory monitoring in many sectors of the economy. The protection of client secrecy is often stronger than authorities’ ability to pierce the corporate veil to pursue an investigation.

Panama has 16 FTZs, including the Colon Free Zone (CFZ), the second-largest FTZ in the world.

 

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SANCTIONS

There are no international sanctions currently in force against this country.

 

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BRIBERY & CORRUPTION

 

Index

Rating (100-Good / 0-Bad)

Transparency International Corruption Index

38

World Governance Indicator – Control of Corruption

47

 

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INVESTMENT CLIMATE - Executive Summary (US State Department)

Panama boasts the Western Hemisphere’s fastest growing economy, with low unemployment, and a stable, democratically elected government. As the home of the Panama Canal and the world’s second largest free trade zone, and with an economy nearly 90% based on services, including sophisticated logistics and finance operations, Panama is heavily dependent on foreign investment and has worked to make the investment process attractive and simple for investors. Over the past several years, new trade agreements with the United States, the European Union, Mexico, and Colombia have further increased Panama’s openness to foreign investment and have provided new protections and privileges for foreign investors.

Despite these efforts, however, Panama is plagued by a poor educational system, high labor costs, a lack of skilled workers, and consistent reports of corruption, fraud, and a lack of judicial transparency. Foreign investors in Panama have also complained about a lack of transparency in the government procurement process. Because many investors have struggled to have cases addressed expeditiously by Panama’s court system, most lawyers recommend binding arbitration clauses in contracts.

Panama elected a new government in May 2014. The new President, Juan Carlos Varela, from the centrist Panameñista party will take office on July 1, 2014. His administration is not expected to make significant changes to the investment climate. Despite the challenges, Panama remains one of the safest and most investment friendly countries in Central America and continues to attract high levels of foreign direct investment both from around the region and around the world.

 

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FURTHER REPORTS

Extract from IMF Report: Panama: 2015 Article IV Consultation

The authorities have made substantial progress in Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT). An Action Plan agreed with the Financial Action Task Force (FATF) to strengthen Panama’s AML/CFT framework will be reviewed by that organization by end-June 2015. Key legal, institutional and legislative actions have been implemented to date, including:

-      An AML/CFT Policy Unit was created in the MEF last October. The unit has issued policy guidelines and strengthened coordination among anti-money laundering domestic institutions, including the Financial Intelligence Unit.

-      Budget allocations for the Financial Intelligence Unit tripled in 2015. This will significantly strengthen the unit’s technical capabilities, improve its response capacity, and enhance its cooperation with international counterparts.

-      New penal code legislation was approved in March this year classifying as crimes additional activities related to money laundering and financing of terrorism and also creating conditions for improved judicial assistance and cooperation with foreign institutions.

     New AML/CFT legislation was approved by the National Assembly on April 27, 2015 to strengthen controls and reinforce domestic and international cooperation a crucial measure in the Action Plan to allow Panama to exit the FATF’s grey-list.

This legislation also creates the Intendance of Supervision and Regulations, within the MEF’s structure, to exert surveillance on sixteen sectors of business activities and professions subject to controls on AML/CFT.

In addition, a new bearer shares law, also approved in April 2015, requires all common stocks to be registered with an authorized custodian by December 2015. The former law, of 2013, had a transition period until 2018 to enforce said registration. The new law also allows converting bearer shares into nominative shares. This measure and all other initiatives listed above show the determination of the Panamanian authorities in supporting the role and legitimacy of Panama as a banking center and in strengthening AML/CFT regulations and institutions.

Read Full Report

 

Extract from IMF Report: Panama: 2015 Article IV Consultation-Press Release

The authorities have made substantial progress in Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT). An Action Plan agreed with the Financial Action Task Force (FATF) to strengthen Panama’s AML/CFT framework will be reviewed by that organization by end-June 2015. Key legal, institutional and legislative actions have been implemented to date, including:

-      An AML/CFT Policy Unit was created in the MEF last October. The unit has issued policy guidelines and strengthened coordination among anti-money laundering domestic institutions, including the Financial Intelligence Unit.

-      Budget allocations for the Financial Intelligence Unit tripled in 2015. This will significantly strengthen the unit’s technical capabilities, improve its response capacity, and enhance its cooperation with international counterparts.

-      New penal code legislation was approved in March this year classifying as crimes additional activities related to money laundering and financing of terrorism and also creating conditions for improved judicial assistance and cooperation with foreign institutions.

-      New AML/CFT legislation was approved by the National Assembly on April 27, 2015 to strengthen controls and reinforce domestic and international cooperation – a crucial measure in the Action Plan to allow Panama to exit the FATF’s grey-list.

This legislation also creates the Intendance of Supervision and Regulations, within the MEF’s structure, to exert surveillance on sixteen sectors of business activities and professions subject to controls on AML/CFT.

In addition, a new bearer shares law, also approved in April 2015, requires all common stocks to be registered with an authorized custodian by December 2015. The former law, of 2013, had a transition period until 2018 to enforce said registration. The new law also allows converting bearer shares into nominative shares. This measure and all other initiatives listed above show the determination of the Panamanian authorities in supporting the role and legitimacy of Panama as a banking center and in strengthening AML/CFT regulations and institutions.

Read Full report