Financial Crime World

Panama’s Anti-Money Laundering Efforts Fall Short, Experts Say

Panama Vulnerable to Financial Crimes Due to Lack of Effective Measures

A recent evaluation has revealed significant shortcomings in Panama’s anti-money laundering (AML) efforts, leaving the country vulnerable to financial crimes. The report highlights several areas where Panama falls short in its AML/CFT (Combating the Financing of Terrorism) regime.

Shell Banking Activities and Moderate Sanctions

  • There are no explicit provisions requiring banks to have meaningful management and supervision located in Panama, making it difficult to prevent shell banking activities.
  • Sanctions imposed on non-compliant financial institutions are often moderate monetary fines that may not be sufficiently dissuasive or proportional to the offense.

Designated Non-Financial Businesses and Professions (DNFBPs)

  • While trustees are subject to full AML obligations, other DNFBPs such as lawyers, accountants, and real estate brokers are only required to comply with customer due diligence requirements.
  • This systemic gap in coverage leaves the country vulnerable to money laundering and terrorist financing.
  • Panama’s legal persons and arrangements, including bearer share companies, lack adequate transparency and availability of information, making it difficult for law enforcement agencies to trace and locate assets held by these entities.
  • Resident agents, accountants, and attorneys are not subject to the AML law, limiting access to information on the ownership and control of legal entities.

Trusts

  • Trusts, a main form of legal arrangement in Panama, also lack adequate transparency and availability of information, making it difficult for competent authorities to access information on beneficial ownership and control.
  • The Superintendence of Banks of Panama (SBP) conducts AML/CFT supervision of trustees on a regular basis but does not fully extend to reviewing compliance with customer due diligence requirements regarding ultimate beneficial ownership and control.

Lack of Effective National Coordination Bodies

  • There is a lack of effective national coordination bodies for AML/CFT, which hinders implementation and cooperation between law enforcement agencies.
  • The Panama Financial Intelligence Unit (FIU) and other competent authorities do not have access to information held by resident agents, accountants, and attorneys, making it difficult to obtain information and trace assets.

Recommendations

  • Strengthen the supervisory requirements for physical presence of banks in Panama.
  • Improve the sanctions regime to make it more effective in preventing money laundering and terrorist financing.
  • Enhance the coverage of DNFBPs under the AML law.
  • Increase transparency and availability of information on legal persons and arrangements.
  • Establish effective national coordination bodies for AML/CFT.

Conclusion

Experts say that addressing these weaknesses is crucial to preventing financial crimes and protecting the integrity of Panama’s financial system. “Panama needs to take immediate action to strengthen its AML/CFT regime to prevent money laundering and terrorist financing,” said a leading expert in the field.