Financial Crime World

Panama Faces Challenges in Compliance with Financial Regulations

Panama, a major financial hub in Latin America and the Caribbean, is grappling with significant challenges in complying with anti-money laundering (AML) regulations. The country has been grey listed by the Financial Action Task Force (FATF) since 2019 and blacklisted by the European Union as a non-cooperative tax jurisdiction.

Grey Listing and Blacklisting

Grey listing and blacklisting are major concerns for Panama’s financial sector, which is seen as a key risk in money laundering. The country’s corporate services, real estate, and remittance services are often used to launder illicit funds. Foreign funds are more likely to be sent to the country and laundered than domestic sources.

Corruption

Corruption is another significant issue in Panama, with the country rated 111 out of 180 in the corruption perception index. Misinvoicing, or the practice of underreporting or over-reporting trade values, also plays a prominent role in generating illicit funds.

Estimated Annual Money Laundered

AN ESTIMATED $935 MILLION TO $2.3 BILLION IS LAUNDERED EVERY YEAR IN PANAMA

AML Laws and Regulations

Panama’s AML laws are often weak and rarely enforced, with a lack of inter-agency coordination and a poor rate of convictions. The country passed new AML laws in 2015, but implementation has been severely lacking.

Key AML Laws

  • Law 23 of 2015: Prevents money laundering and the proliferation of weapons of mass destruction
  • Law 11 of 2015: Deals with international judicial assistance in criminal cases
  • Law 21 of 2017: Regulates trusts under the supervision of the banking sector regulatory
  • Law 70 of 2017: Criminalized tax evasion as a predicate crime
  • Law 129 of 2020: Approved the creation of a beneficial ownership registry

Weaknesses in Panama’s AML Regime

Lawyers are seen as key facilitators in money laundering, while banking, real estate, international trade, and bulk cash smuggling are also significant weaknesses. Fake and fraudulent corporate structures are often used to conceal illicit funds.

US Criticism of Anti-Terror Efforts

The US has criticized Panama’s anti-terror efforts, saying that the country does not have comprehensive counter-terrorism legislation or a robust counter-terrorism framework.

Collaboration with UK and US

However, there are some strengths in Panama’s AML regime. The UK and US are working with the country on building investigative capacity to tackle money laundering. The US is also engaging with Panama through the Corporate Transparency Act passed in the US, which aims to improve collaboration on corporate structures and beneficial ownership.

Guide for Businesses

VinciWorks has created a guide designed to support businesses that currently operate in Latin America and the Caribbean, or are planning to, or seeking to expand to new countries in the region. This guide provides an overview of some of the key AML challenges and issues and includes a country-by-country assessment of AML risks and laws.