Financial Crime World

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Banks in Panama Take Measures to Prevent Financial Crime

Panama’s reputation as a financial hub in the region has been marred by significant challenges in preventing financial crime. Despite efforts to improve anti-money laundering (AML) regulations and laws, the country remains vulnerable to money laundering and other illicit activities.

Grey Listing/Blacklisting: A Key Risk

According to experts, one of the key risks facing Panama is grey listing/blacklisting. The Financial Action Task Force (FATF) grey listed Panama in 2014, removed it from the list in 2016, but returned it to the list in 2019. Additionally, the European Union has blacklisted Panama as a non-cooperative tax jurisdiction.

Lack of Political Will and Inter-Agency Coordination

Another significant risk is the lack of political will to progress on AML reforms, stemming from political stalemate and inadequate inter-agency coordination. This lack of cooperation hinders efforts to implement effective AML measures.

Financial Sector Risks

Panama’s financial sector, which includes corporate services, real estate, and remittance services, is a key channel for money laundering. The country’s financial sector is vulnerable to illicit activities due to the lack of robust regulations and enforcement mechanisms.

Corruption: A Major Driver of Dirty Money

Corruption is also seen as a major driver of dirty money in Panama. According to the corruption perception index, Panama ranks 111th out of 180 countries. Misinvoicing in trade transactions amounts to at least $2.6 billion annually, generating significant illicit funds.

Estimated Annual Proceeds from Criminal Activities

Estimated annual proceeds from criminal activities range between $935 million and $2.3 billion, highlighting the need for effective AML measures.

Weak AML Regime

Panama’s AML regime is considered weak, with laws on paper rarely being enforced due to a lack of inter-agency coordination and poor conviction rates. The country has recently adopted beneficial ownership registries, but significant loopholes and slow implementation mean corporate ownership structures remain vulnerable to money laundering.

Main Money Laundering Laws in Panama

The main money laundering laws in Panama include:

  • Law 23 of 2015: aims to prevent money laundering and the proliferation of weapons of mass destruction
  • Law 11 of 2015: deals with international judicial assistance in criminal cases
  • Law 129 of 2020: approves the creation of a beneficial ownership registry

Challenges Persist

Despite these laws, weaknesses persist, including:

  • Involvement of lawyers in money laundering schemes
  • Banking, real estate, international trade, and bulk cash smuggling
  • Fake and fraudulent corporate structures used to conceal illicit funds
  • Unlicensed money remittance services and nominee shareholders pose additional vulnerabilities

International Cooperation

The US is working with Panama to build investigative capacity and improve collaboration on corporate structures and beneficial ownership through the Corporate Transparency Act. The UK and US are also engaging with Panama to address AML risks.

Guide to AML Challenges and Laws in Latin America and the Caribbean

For businesses operating or planning to operate in Latin America and the Caribbean, it is essential to understand the key AML challenges and laws in each country. VinciWorks has created a guide to support these efforts, providing an overview of AML risks and laws in the region. Download your free copy today.

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