Published and draft legislation - Panama

AML legislation

Law 27th April 2015, amending Law 42/2000

This law was approved on 27th April 2015 by the Economy & Finance Commission of Panama’s National Assembly  It amends Law 42/2000, 2nd October, establishing Anti-Money Laundering (AML) measures.

Its aim is to adopt due measures to identify, assess and understand the risks and consequence of money laundering, and to establish appropriate controls to mitigate it, in order to protect the integrity of the country’s financial system and other sectors.

The law is divided into 12 sections. It classifies the main players in the nationwide AML coordination system: i) the high-level presidential commission, ii) the financial analysis unit (UAF in its Spanish acronym), iii) the supervisory bodies and iv) persons and entities subject to its regulation. It establishes their powers and competences, the mechanisms for preventing and controlling the risk (adequate identification and monitoring of customers’ businesses), and the criteria for imposing sanctions.

One of the main issues in this AML law is the introduction of a broader range of coverage. It defines 31 “entities subject to the regulation”, including lawyers, accountants, auditors, casinos, traders in precious stones and metals, foundations and non-profit associations.

Being subject to the regulation obliges professionals to report to the UAF any cash transactions over a certain threshold (10,000 Balboas), and to inform the unit of suspicious transactions or operations, regardless of their amount, that cannot be justified or where the control mechanisms can be shown to have failed.

The bill includes mechanisms to freeze the assets of persons or entities linked to money laundering or terrorism. A preventive freeze can be imposed by virtue of a notification sent out by the UAF. The entities subject to the regulation may not unfreeze their assets or goods unless a court ruling authorises them to do so.

The bill’s sanction regulations seem rather more controversial. It establishes that 20% of the total sanction should be earmarked for the staff working in the financial analysis unit (UAF). It is not clear that such a high percentage is necessary to encourage their productivity. Indeed, it could be counterproductive in practice and encourage UAF employees to abuse the powers of sanction they are attributed by law.

But for all its shortcomings, the bill would reinforce the Panamanian system for the prevention of money laundering and the financing of terrorism. It would create an effective legal framework in line with the highest international standards for avoiding such criminal activities...