In a momentous decision with positive implications for the Panamanian economy, the Financial Action Task Force (FATF) excludes Panama from its grey list, following a process initiated in June 2019, in which essential measures have been implemented to combat money laundering and terrorist financing.
This announcement comes during the FATF plenary meeting held in Paris, France, where it was determined that the Republic of Panama has strengthened its system for the prevention of money laundering and against the financing of terrorism and implemented substantial standards and actions that have allowed the country to take an essential step towards international transparency. The decision was supported by countries in the Latin American region, Asia and the European Union, as well as international organizations and the Latin American Financial Action Task Force (GAFILAT), of which Panama has been a member since 2010.
The work carried out in this inherited situation began in June 2019, when Panama had 15 actions identified as unfulfilled. After several technical meetings with the FATF group of expert evaluators in June 2023, the actions were completed mainly.
Actions Completed
The fulfilment of these actions included:
The updating of Chapter V of the National Risk Assessment related to Terrorist Financing (TF), which has been approved and disseminated, covering the relevant threats, vulnerabilities and mitigation measures of TF in the country;
Increase of personnel, both in the Financial Analysis Unit (UAF) and in the Public Prosecutor's Office, in charge of the analysis and investigation of terrorist financing;
Development of guidelines on identified risks and possible mitigators for the non-financial sector;
Increased development of risk-based supervisions, which include TF analysis as part of the supervisions;
Adoption of a risk-based supervision plan for regulated non-financial entities (NFS), demonstrating significant progress in its implementation;
Completion and implementation of the supervision manual of the Superintendency of Non-Financial Entities (SSNF), among other aspects.
In addition, the standard for the prevention of money laundering and financing of terrorism (AML/CFT) was modified, increasing the penalties for non-compliance up to 5 million balboas (Law 254 of 2021), taking into account the factors of proportionality and deterrence in the application of sanctions, as well as elements related to addressing the seriousness of the offence, the degree of recidivism, the magnitude of the damage and the size of the subject; imposition of sanctions by the Superintendency of Banks of Panama (SBP), Superintendency of Insurance and Reinsurance (SSR), Superintendency of the Securities Market (SMV) and SSNF, given non-compliance concerning AML/CFT prevention.
Also, the Single Registry of Final Beneficiaries (RUBF) was adopted through Law 129 of 2020, which currently has an advance of 82% of the information population, and the verification of the corresponding information is also implemented. Likewise, the country issued the Final Beneficiary Guide to strengthen the knowledge and awareness of obligated subjects to improve the identification and transparency of final beneficiaries, and the attorney agreement was reinforced, strengthening the supervision capacity of the SSNF.
In addition, Technical Assistance by the FAU increased significantly, and it was demonstrated that the country could provide information through international requests related to tax crimes involving amounts of less than 300 thousand balboas, showing that the threshold for domestic tax evasion does not negatively impact the ability of the Republic of Panama to cooperate.
On the other hand, the "Guide for the Investigation of Tax Crime in Panama" was adopted; the number of money laundering investigations related to predicate offences other than drug trafficking was increased, including foreign predicate offences and a Guide for the investigation of tax fraud was developed.
In conjunction with these actions, the following AML/CFT laws were enacted in 2019: 70, 116 and 123 of 2019; 124 and 129 of 2020; and 254 of 2021. In addition, the issuance and publication of the Executive Decrees enacted from 2019 to date: 905 of 2019, 721 of 2020 and 13,15 and 35 of 2022.
Benefits Obtained
The exclusion of Panama from the FATF grey list will have a positive impact on multiple aspects of the Panamanian economy and the international financial community:
1. Improves the international image: With the exclusion of Panama from the grey list, the country's image at the international level is strengthened, and its commitment to transparency is not only national but also international, which will facilitate international economic and financial relations.
2. Increase in foreign investment and job creation: with the recognition of the advances in the prevention of money laundering and against the financing of terrorism implemented by the country, foreign investment is expected to increase, which will boost tourism, trade and the creation of new and more jobs, as well as opportunities in the country.
3. More accessible lines of credit: Reduced cost and expansion of credit lines, which will benefit individuals and companies seeking financing.
4. Improved correspondent banking and international relations: This will lead to a significant improvement in relations between Panama's local banks and their international correspondents. The primary links necessary for financial operations will be strengthened.
5. Less pressure on the financial system: By eliminating the stress associated with special reviews, Panama's financial system can operate more effectively and confidently.
6. Benefits for the insurance and securities industry: The removal of Panama from the grey list will attract the world's leading reinsurers, which will be able to establish themselves in Panama and serve the Latin American market.
Panama's removal from the FATF grey list represents a crucial milestone in the country's economic development.
Panama has demonstrated its commitment to the fight against money laundering and the financing of terrorism. However, it also continues to develop timely and practical actions that allow it to maintain an equitable and competitive position in the international financial community. This achievement results from the joint work of Panama's National Coordination for the Prevention of Money Laundering and Financing of Terrorism, together with the Panamanian authorities, the private sector and the international community.
Panama's Minister of Economy and Finance, Héctor Alexander, the director of International Financial and Tax Strategy of the MEF, Panama's AML/CFT national coordinator and technical secretary of the National Commission against Money Laundering, Financing of Terrorism and Financing of Weapons of Mass Destruction Proliferation (CNBC), Isabel Vecchio Arófulo represented the country before the FATF, together with representatives of other Panamanian institutions that are part of the CNBC, who participated in this historic plenary meeting.
Source: Ministry of Foreign Affairs of the Republic of Panama
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