Panama Removed from FATF Grey List: A Boost for International Image and Investment Opportunities

In a significant development, Panama has been removed from the Financial Action Task Force’s (FATF) list of jurisdictions under increased monitoring, also known as the “grey list.” This decision is expected to have a positive impact on Panama’s economy, improving its international image and regaining access to investments.

Background

Panama was first placed on the grey list in 2014-2016 due to poor performance in its mutual evaluation report. The country scored 75% for technical compliance with FATF recommendations but only 30% for effectiveness of its measures. Specifically, Panama struggled with understanding money laundering and terrorist financing risks, transparency of beneficial ownership information, and financial intelligence.

Progress and Removal from Grey List

In January 2021, Panama missed its deadline to deliver on an action plan aimed at addressing these deficiencies. However, the country made significant progress in implementing reforms, including major amendments to its legal framework, development of guidelines, and improvements in risk-based supervision. The FATF confirmed that Panama had fulfilled its action plan in June 2023, paving the way for its removal from the grey list.

Benefits and Expectations

Panama’s government has high expectations following its removal from the grey list. The Minister of Economy expects improved international image, increased foreign investment and job creation, cheaper and expanded credit lines, better correspondent banking relationships, less pressure on the financial system, and benefits for the insurance and securities industry.

Challenges Ahead

However, Panama still faces challenges in tackling serious corruption and deficiencies in judicial capacities, particularly independence of judiciary. The country’s further progress will depend on addressing these issues.

Basel AML Index

The Basel AML Index uses FATF data from mutual evaluation reports and follow-up reports to score a jurisdiction’s money laundering and terrorist financing risks. Information on a jurisdiction’s categorization as being “under increased monitoring” or “high-risk jurisdiction” is included in the Basel AML Index Expert Edition for information or decision-making purposes.

Conclusion

Panama’s removal from the grey list is expected to have positive implications for its economy, including improved international image, increased foreign investment and job creation. However, the country still needs to address serious corruption and deficiencies in judicial capacities to further strengthen its anti-money laundering and combating the financing of terrorism (AML/CFT) systems.