Source: panama-travel-bureau.com
The Republic of Panama continues to introduce legislation that will enhance its image as an international financial services centre or, to use the usual nomenclature, offshore finance centre. Legislation covering Private Foundations (an alternative to trusts) and Captive Insurance (first such legislation in Latin America) have been promulgated. Panama’s comprehensive banking law provides the last building block in a structure of services that makes Panama South America’s all-round offshore finance centre.
Panama introduced a comprehensive banking law (which covers local trust companies as well) in February, 1999, replacing one that had been in place since 1970. The National Banking Commission that previously issued licenses has been replaced by a Superintendency which comprises a Board of 5 Directors and a Superintendent. In addition to increased investigative powers, the new law has tightened general controls and regulations and brought the country’s supervision more in line with the regulatory standards found in the European and American banking centres. The new law uses the guidelines of the Basle Committee on Banking Supervision. The Superintendent oversees the soundness and efficiency of the banking system and endeavours to strengthen it as part of the continuing development of Panama not only as a regional, but as an international, banking centre. The Board of Directors of the Superintendency function as a policy committee and are responsible for the establishment and implementation of the general policies of the Superintendency. A bank must have a minimum of US$10 million in capital and the Superintendent, whose office is independent of central government, has wide powers of examination and investigation, but that authority is subject at all times to strict compliance with the country’s firm rules of confidentiality. Heavy criminal and civil sanctions can be imposed on bankers as well as the Superintendent for wrongful disclosures. Although, however, confidentiality is enshrined in the new law, a prima facie case proving funds are illicit will not protect criminals from exposure. The banking laws of offshore finance centres have to be especially mindful of concerns over confidentiality, which have to be balanced against the inherent risks of deposits being derived from illegal activities such as money laundering and drug trafficking, often via corporations registered in the same or another offshore finance centre. The law must be flexible, but should not allow licenses to be issued to a class of banks that, according to a United Nations report, are little more than “closets with computers” and are commonly known as brass plate banks. They are not permitted in Panama and the 80 or so banks that do operate are fully staffed and functional.
The Government of Panama recognises its responsibilities as a leading South American banking centre and has introduced stringent monitoring and vetting procedures that must be followed by the banking and trust company community and other related businesses as well. As a former offshore banking regulator for the United Kingdom government, I can appreciate the efforts which Panama has made. Each bank has a compliance officer who is responsible for ensuring that the controls put in place are followed and the Government has created a special financial intelligence unit. The country’s commitment to proper banking controls is reflected in the process for opening up a corporate account..
OPENING CORPORATE BANK ACCOUNTS IN PANAMA
Panama recognizes its responsibilities in support of the international concerns regarding drug trafficking, money laundering and other illicit funds activity. Stringent monitoring and vetting procedures have been introduced and both licensed trust companies and banks are required to comply with the appropriate provisions of the Panamanian banking law. Accordingly, the following information and documentation should be given when a local corporate bank account is to be opened:
1) Clear notarized copy of the beneficial owner/s passport/s (photograph page only) which will also be required for all signatories on the account.
2) Two commercial or personal references and two bank references are required for each beneficial owner and account signatory to be addressed to either the bank or yourself. The bank references should confirm the satisfactory conduct of the accounts and that the relationships have been of at least two years duration. Each bank letter must:
(a) Be provided within a month from the date it was issued.
(b) Mention the approximate account balance (for example: 5 low figures)
(c) Mention the period of the relationship.
(d) Mention if the relationship has been satisfactory
3) Brief details of the applicant/s business. This is reviewed by every local bank’s Compliance Officer who is required to vet all new account applications in accordance with the monitoring procedures laid down. The information needed is:
(a) The nature/line of the company’s business, or intended business, and the approximate annual volume of business which the company does or will do.
(b) The location/s of the business.
(c) The origin/source of the funds to be deposited in the new account.
(d) The reason for opening the new account in Panama.
(e) The approximate annual volume of funds which will pass through the new account.
4) Resumé of each beneficiary of the account as well as all signatories on the account. The resumé should be brief, providing academic and work experience details.
5) An initial minimum deposit should be wired transferred to your bank account in Panama via a corresponding bank in the US that your Panamanian bank of choice deals with. Here is an example of what this looks like:
The Chase Manhattan BankNew York, N.Y.ABA xxxxxxxxxCHIP, xxxSWIFT, CHASUSxx.For credit: Your Bank In Panama, Account No.xxx-xxxxx-xxx. For further credit to: Your Account No. xxx-xxxxx-xxx Ref. Your Company Name or Initials
It is recommended that you include an additional $100 with the minimum deposit to cover any bank transfer charges.
The transfer and processing fees as well as the time required for fund clearance depend on your bank of choice. Please, check with your personal banking officer for details.
IMPORTANT NOTE: These requirements are subject to change without notice by the banks and/or the Panamanian banking authorities and whilst every effort is made to ensure that they are current, it is recommended that you contact your Panamanian bank of choice before proceeding. We cannot guarantee that an account will be approved as this is solely at the discretion of the bank.
Following several major international banking scandals in recent times, it is recognized that bank regulators need to have much closer liaison with their counterparts in other jurisdictions and one crucial element in this closer working relationship is consolidated supervision. The new law contains comprehensive provisions stipulating that foreign banks licensed in Panama must comply with the liquidity requirements, capital adequacy and other technical obligations that are imposed by the law of the country in which the main branch of the foreign bank is domiciled. The law goes further than this and permits a foreign regulator to make inspection visits to any related foreign banks in Panama. One of the grounds for revoking a licence in Panama can arise when a foreign regulator investigates a foreign bank’s main branch. The importance of international co-operation is underlined in the law by requiring the Superintendent to establish areas of co-operation with international supervisory bodies in order to strengthen control mechanisms, develop appropriate regulations and exchange information pertinent to the supervisory function. The law also confirms that the Panamanian Government cannot impose any restrictions, including attachments or withholding measures, upon funds deposited in Panama by central banks, or similar deposits representing the reserves of sovereign states.
Panama’s location makes it a natural conduit for banking between North and South America, besides being home to the Panama Canal which generates a considerable amount of bank-related international shipping business. Panama’s confidentiality laws are also a magnet for some, particularly when similar laws in some other offshore financial services centres now offer less assurance of privacy. In recent times, worries over tax revenue losses and terrorism have begun to rival concerns over drug trafficking and money laundering. The United Kingdom, as an example, has several dependencies which are offshore financial services centres (including the Cayman Islands, the British Virgin Islands and the Channel Islands) and they have experienced regulatory and supervisory changes that align them closer with the systems found in the European Union. Consequently, the strict privacy which has been the backbone of their offshore business for decades is going to be diluted to a point which will displease a vast number of honest individuals and corporations who have, for many years now, taken for granted the right to privacy.
Only those offshore financial services centres which are not bound through sovereignty to the political and social agenda of another country will be able to counter the inevitable pressures which will be applied. Panama is one of those jurisdictions. The debate about offshore confidentiality is too complex to either discuss or summarize in this brief summary, but it is fair to say that many feel that Panama’s position reflects a balanced approach. It is an approach that is undoubtedly going to continue to attract more and more business to this offshore banking centre. Our newsletter, Offshore Pilot Quarterly, will keep you up to date with developments related to offshore financial matters. Letter from Panama, also issued quarterly, provides a brief summary covering Latin America. Visit our website or ask to be placed on our mailing list for one or both publications.
In conclusion, we quote below from an International Monetary Fund report which discusses Panama’s money laundering controls:
“The authorities and the banking industry are very aware of the prudential risks associated with money laundering and have in place adequate safeguards to deter improper use of the banking system for illegal purposes. While no system is infallible, the mission team concludes that the legal, regulatory and supervisory systems in place in the banking sector compare favourably with internationally accepted prudential supervision practices… The legal and regulatory requirements are strict and many requirements exceed those in place in industrial countries.”
