Panama improves compliance, but remains on FATF grey list
Unlike many of the other prominent offshore jurisdictions, Panama has been slow to adopt regulations to improve financial transparency and protection against money laundering. However, under pressure from the Financial Action Task Force (FATF), Panama is moving closer to international standards.
The FATF is an inter-governmental body established to protect the integrity of the international financial system, focusing particularly on fighting money laundering and terrorist finance. The Paris-headquartered organization has helped to improve governance in many of the world’s offshore financial centres, setting strong standards now followed in jurisdictions like BVI and Cayman Islands.
However, Panama has lagged those other jurisdictions, not committing to FATF reforms until June 2014. Although the Central American nation is now cooperating with the international community on these matters, it remains under ongoing compliance monitoring by the FATF as it designs and implements its reforms. Since making its FATF commitments last year, Panama has moved to strengthen its criminal laws around money laundering and terrorist financing, as well as to establish a framework to freeze terrorist assets.
Perhaps the most relevant update for Healy Consultants Group PLC and its clients is the introduction of stricter know-your-customer requirements, similar to those that our firm and its global affiliates are subject to in Singapore and elsewhere. These will apply to financial institutions as well as designated non-financial businesses and persons (DNFBPs), which includes lawyers, accountants and company formation agents. In addition, each of these is newly subject to an obligation to report suspicious transactions to Panama’s newly strengthened financial intelligence unit.
Although this will increase compliance costs for Panamanian businesses, it should have the benefit of improving the jurisdiction’s global reputation and making it easier for companies registered in Panama to conduct global business. As things stand, companies registered in Panama are having trouble accessing international banks and global financial markets, as foreign institutions deem the country as “high risk”. An FATF delegation will soon visit Panama to confirm that the required enforcement and processes are in place, overcoming previously identified shortcomings.
Pending this visit, Healy Consultants Group PLC therefore expects Panama to be removed from the grey list relatively soon, potentially within the next 1 or 2 quarterly FATF reporting periods. If and when that happens, Panama will be removed from the FATF’s ongoing monitoring, restoring its access to international markets.
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