"One of the most important footprints that the Ministry of Economy and Finance will leave after the end of the administration in 2024 is the exit from the FATF gray list."
Héctor E. Alexander H., Panama Minister of Economy and Finance, talks to TBY about the country’s removal from the FATF grey list.
What steps did the Ministry take to achieve the goal of getting out of the grey lists?
Panamá took many steps to be excluded from the FATF gray list. The first one was to express commitment at the highest level to address the strategic deficiencies that were cited to the country in June 2019. Since July 1, 2019, the authorities and technical team immediately began to address the 15 actions of the action plan and participated in all the meetings with the Joint Group, obtaining progress reports for actions taken at each meeting. The National Coordination (NC) was strengthened, and through the NC, the strategy to address the strategic deficiencies and achieve exclusion was developed. This included a depth analysis of all our AML/CFT legislation, the adoption of amendments to our laws, the enactment of new laws and regulations, issuance of guidelines, and the strengthening of capacities and knowledge, among other things implemented. The main items of the action plan were:
- Risk Assessments: Updating of Chapter V of the National Risk Assessment, related to the Financing of Terrorism (TF), which has been approved and disseminated, covering the relevant threats, vulnerabilities, and mitigation measures of TF in the country; increase in personnel, both in the Financial Analysis Unit (UAF) and in the Public Prosecutor’s Office in charge of the analysis and investigations of terrorist financing; development of guidance on identified risks and potential mitigators for the non-financial sector; increased development of risk-based oversights, including FT analysis as part of oversights; and the adoption of a risk-based supervisory plan for non-financial obligated entities (SONFs), demonstrating significant progress in its implementation. Likewise, the issuance of the Sectorial Risk Assessment related to legal persons and trust, as well as the sectorial risk analysis of all the non-financial sectors.
- Supervision and sanctions: The adoption of a risk-based supervisory plan for non-financial obligated entities (SONFs), demonstrating significant progress in its implementation; the completion and implementation of the supervision manual of the Superintendence of Non-Financial Subjects (SSNF); the regulation for the prevention of money laundering and terrorist financing (AML/CFT) was modified, increasing the penalties for non-compliance to 5 million balboas (Law 254 of 2021), contemplating the factors of proportionality and dissuasiveness in the application of sanctions, as well as elements related to addressing the seriousness of the offense, the degree of recidivism, the extent of the damage and the size of the subject; and the 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 with AML/CFT prevention.
- Identification of Beneficial Owners: The Single Registry of Final Beneficiaries (RUBF) was adopted, through Law 129 of 2020, which currently has an advance of 82% of the population of information and the verification of the corresponding information is also implemented. Likewise, the country issued the Final Beneficiary Guide in order to strengthen the knowledge and awareness of the obliged subjects to improve the identification and transparency of final beneficiaries; and the lawyers’ agreement was strengthened, strengthening the SSNF’s supervisory capacity.
- The role of the Financial Intelligence Unit (UAF) and Investigations: There was a significant increase in Technical Assistance from the UAF, and it was demonstrated that the country can provide information through international requests related to tax crimes involving sums of less than 300,000 balboas, evidencing that the threshold for internal 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 Crimes in Panama” was adopted; the number of money-laundering investigations related to preceding offences other than drug trafficking, including foreign offences, increased; and a Guide for the Investigation of Tax Fraud was developed
- In conjunction with these actions, the following AML/CFT laws were enacted since 2019: 70, 116 and 123 of 2019; 124 and 129 of 2020; and 254 in 2021. In addition, the issuance and publication of the Executive Decrees promulgated from 2019 to date: 905 of 2019, 721 of 2020 and 13, 15 and 35 of 2022.
What consequences will this achievement have in the long term?
Panama’s exclusion from the FATF grey list will have a positive impact on multiple aspects of the Panamanian economy and the international financial community:
- 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 not only nationally but also internationally, which will facilitate international economic and financial relations.
- Increased foreign investment and job creation: With the recognition of the progress made in preventing money laundering and countering 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.
- More accessible lines of credit: Cheaper and expanded lines of credit, which will benefit individuals and businesses seeking financing.
- Improved Banking Correspondents and International Relations: It will lead to a significant improvement in the relations between Panama’s local banks and their international correspondents. The basic links required for financial operations will be strengthened.
- Less pressure on the financial system: With the removal of the pressure associated with special reviews, Panama’s financial system can operate more effectively and with greater confidence.
- Benefits for the insurance and securities industry: Panama’s removal from the grey list will attract the world’s leading reinsurers, who 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.
What is the main footprint this ministry’s recent efforts will leave behind?
One of the most important footprints that the Ministry of Economy and Finance will leave after the end of the administration in 2024 is the exit from the FATF gray list. Having achieved compliance with the AML/CFT regime not only allowed for the strengthening of institutions, but also positioned Panama as a country committed to fight organized crime. The creation of the Registry of Beneficial Owners is highlighted as a commitment to national and international transparency that helps to strengthen the country’s transparency. Additionally, the investigative work of Panama’s Public Prosecutor’s Office demonstrated its ability not only to investigate money laundering with tax evasion as a predicating offense to money laundering, but also to obtain convictions. Undoubtedly, the exit from the FATF list marks a before-and-after reality for the country, and is a very positive and important achievement for Panama.