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Panama’s Financial Regulations Under Scrutiny: Compliance with FATF Recommendations

Introduction

In a recent assessment, Panama has been evaluated on its compliance with the Financial Action Task Force (FATF) recommendations. The ratings, which reflect the extent to which the country has implemented technical requirements, show mixed results.

Progress and Areas for Improvement

Panama has made progress in certain areas, such as assessing risk and applying a risk-based approach, where it received a “largely compliant” rating (LC). This suggests that Panama has taken steps to identify and mitigate potential risks associated with money laundering and terrorist financing.

However, other sections of the report highlight areas where Panama falls short:

• Confiscation and Provisional Measures: Panama was rated as “partially compliant” (PC), indicating that it has not fully implemented laws and regulations aimed at seizing assets linked to illicit activities.
• Regulation and Supervision of Financial Institutions: The country received a rating of LC, suggesting that while Panama has established some regulatory frameworks, they may not be sufficient or effectively enforced to prevent money laundering and terrorist financing.

Strengths in Other Areas

On the other hand, Panama received higher ratings in areas such as:

• Customer Due Diligence: Largely compliant (LC)
• Record Keeping: Largely compliant (LC)
• Reporting of Suspicious Transactions: Partially compliant (PC)

These results indicate that the country has implemented measures aimed at preventing illicit activities and ensuring transparency in financial dealings.

Areas for Further Improvement

The report also highlights areas where Panama needs to improve:

• Regulation and Supervision of Designated Non-Financial Businesses and Professions (DNFBPs): The country received a rating of LC, indicating room for improvement.
• Powers of Supervisors: Panama was rated as “conditionally compliant” (C), suggesting that it must enhance its powers to effectively prevent money laundering and terrorist financing.

Key Findings

Recommendations

• Improve regulation and supervision of DNFBPs
• Enhance powers of supervisors
• Strengthen enforcement mechanisms to prevent money laundering and terrorist financing

By addressing these areas, Panama can further improve its compliance with FATF recommendations and reduce the risk of illicit activities in the financial sector.