Panama Falls Short in Financial Crime Risk Assessment Tools

FATF Criticizes Panama’s Efforts to Combat Financial Crime

The Financial Action Task Force (FATF) has recently assessed Panama’s efforts to combat financial crime, revealing that the country has failed to meet several key requirements outlined in the FATF Recommendations. As a result, concerns have been raised about Panama’s ability to prevent and detect illicit transactions.

Key Findings of the FATF Assessment

Partial Compliance: Panama is only “partially compliant” with 20 out of the 40 recommendations outlined by the FATF.
Weaknesses in Customer Due Diligence, Record Keeping, and Transparency: The country’s laws and regulations are inadequate in preventing the misuse of shell companies and other legal arrangements to facilitate illicit activities.
Ineffective Regulations and Supervision: Panama has been criticized for its lack of effective regulations and supervision of financial institutions, DNFBPs (designated non-financial businesses and professions), and money or value transfer services.

Consequences of Failure to Address Weaknesses

Addition to the List of “High-Risk Jurisdictions”: If Panama fails to address its weaknesses, it risks being added to a list of high-risk jurisdictions by the FATF.
Severe Consequences for Economy and Reputation: Being labeled as a high-risk jurisdiction would have severe consequences for Panama’s economy and reputation.

Response from Panama’s Government

In response to the assessment, Panama’s government has vowed to strengthen its anti-money laundering and combating the financing of terrorism (AML/CFT) framework. The country has pledged to:

Improve Regulations and Supervision: Enhance customer due diligence and increase transparency in beneficial ownership arrangements.
Enhance Customer Due Diligence: Improve the collection, verification, and recording of information on customers.
Increase Transparency in Beneficial Ownership Arrangements: Ensure that companies and other legal entities are transparent about their beneficial owners.

Skepticism from Experts

However, many experts remain skeptical about Panama’s ability to implement these reforms effectively. The country’s history of lax enforcement and corruption makes it challenging to ensure that these measures are carried out successfully.

Future Prospects for Panama as a Reputable Financial Hub

As the FATF continues to monitor Panama’s progress, the country’s future as a reputable financial hub hangs in the balance. If Panama fails to address its weaknesses, it risks becoming a haven for illicit activities, with severe consequences for its economy and reputation.