Financial Crime Risks Loom Large as Fintech Sector Grows in Panama

Panama’s fintech sector is experiencing rapid growth, with innovative companies offering a wide range of services including mobile payments, peer-to-peer lending, money transfer services, crowdfunding, wealth management, virtual currencies, and e-wallets. However, this growth comes with significant risks that must be addressed by national regulators and intergovernmental organizations.

The Risks Associated with Fintech

The fintech sector poses several risks to financial stability, including:

• Virtual currencies: Offer degrees of pseudonymity and anonymity, facilitating rapid international transfers that can benefit organized criminals.
• Fraud: Can occur through various means, including onboarding or sending money to sanctioned entities, facilitating bribery and corruption, and even tax evasion.

Mitigating Risks through Regulation

To mitigate these risks, regulatory bodies must keep pace with technological innovation and provide relevant guidance. This includes:

• European Union’s Internal Task Force on Fintech: An initiative that prioritizes partnership with the fintech and regtech sector.
• Financial Action Task Force (FATF): Has recognized the importance of collaboration between public and private sectors to ensure effective regulation.

Regulatory Framework in Panama

In Panama, the Superintendency of Banks must play a crucial role in regulating the fintech sector. The institution has already taken steps to create a regulatory framework for fintech companies, but it must continue to work closely with industry stakeholders to ensure that regulations are effective and proportionate.

Collaboration between Public and Private Sectors

Collaboration between public and private sectors is critical if standard setters and regulators are to avoid stifling innovation and keep pace with the rapidly evolving fintech landscape. The FATF’s Private Sector Consultative Forum has already recognized the importance of this collaboration, with a session on fintech and regtech to be held in Silicon Valley next month.

Conclusion

As Panama’s fintech sector continues to grow, it is essential that regulatory bodies prioritize the development of anti-financial crime standards that are relevant for today and tomorrow. By doing so, they can ensure that innovation is not exploited by criminals and that financial stability is maintained.