Financial Crime World

Panama’s Banking Regulations Under Scrutiny for Money Laundering Compliance

A recent evaluation by the Financial Action Task Force (FATF) has shed light on Panama’s efforts to combat money laundering in its financial sector. The report, which assesses Panama’s compliance with FATF recommendations, reveals a mixed bag of results.

Progress Made in Combating Money Laundering

According to the evaluation, Panama has made progress in implementing several key measures aimed at preventing and detecting money laundering:

  • Strengthened national cooperation and coordination: Panama has improved its ability to share information and coordinate efforts with other countries to combat money laundering (R.2).
  • Comprehensive money laundering offense: The country has introduced a comprehensive law that addresses money laundering as a distinct offense, making it easier to prosecute and deter (R.3).
  • Enhanced record-keeping requirements: Panama has strengthened its record-keeping requirements for financial institutions, making it harder for them to hide or destroy records of suspicious transactions (R.11).

Areas for Improvement

However, the report also highlights areas where Panama falls short:

  • Targeting financial sanctions related to terrorism and terrorist financing: While Panama has made some progress in this area, it still needs to improve its ability to identify and freeze assets linked to terrorism and terrorist financing (R.6).
  • Correspondent banking: Panama’s regulations for correspondent banking are not yet fully compliant with FATF recommendations, which means that the country may struggle to prevent money laundering through correspondent relationships (R.13).
  • Regulation and supervision of DNFBPs: Panama has been deemed non-compliant in this area, meaning that the country needs to improve its oversight of designated non-financial businesses and professions (DNFBPs) to prevent them from being used for money laundering purposes (R.28).

Call for Reform

The FATF evaluation notes that Panama still needs to address issues related to:

  • Customer due diligence for DNFBPs: The country needs to improve its requirements for customer due diligence for DNFBPs, making it harder for them to hide or disguise suspicious transactions (R.22).
  • Transparency and beneficial ownership of legal persons and arrangements: Panama needs to strengthen its regulations on transparency and beneficial ownership of companies and other entities, making it easier to identify the true owners behind them (R.24 and R.25).
  • Regulation and supervision of financial institutions: The country needs to improve its oversight of financial institutions to prevent them from being used for money laundering purposes (R.26).

Conclusion

As the international community continues to grapple with the challenges of money laundering and financial crime, Panama’s efforts to reform its banking regulations will be closely watched. The country’s commitment to transparency and accountability is crucial in preventing the misuse of its financial system for illicit purposes.

The FATF has called on Panama to address these weaknesses and strengthen its regulatory framework to prevent money laundering and terrorist financing. By doing so, the country can help ensure that its financial system remains stable and secure for legitimate users while also contributing to global efforts to combat financial crime.