The Financial Action Task Force (FATF) has removed Panama from its so-called grey list in what its government called "a momentous decision with positive implications for the Panamanian economy."

In a statement this afternoon (27 October) the government said that the FATF decision came "after a process that began in June 2019, in which that important measures have been implemented to combat money laundering and the financing of terrorism".

This announcement during the FATF plenary meeting, held in Paris, France, determined that the Republic of Panama had strengthened its money laundering and counter-terrorism financing prevention system and implemented substantial standards and actions that allowed the country to take an important step towards international transparency. 

The full FATF statement covering the complete outcome of its meetings this week can be found here. The Cayman Islands also exited the FATF grey today, read the reaction statement from Cayman Finance here.   

The decision on Panama was supported by countries from the Latin American region, Asia and the European Union, as well as international organizations and the Latin American Financial Action Group (GAFILAT), of which Panama has been a part since 2010. 

The work carried out in this situation, inherited, began in June 2019, when Panama maintained 15 actions identified as not fulfilled. After various technical meetings with the FATF group of expert evaluators, in June 2023, the actions were considered largely completed.

Panama further said that compliance with these actions included the update of Chapter V of the National Risk Assessment, related to the Financing of Terrorism (TF), which has been approved and disseminated, covering the country's relevant threats, vulnerabilities and TF mitigation measures.

  • increase in personnel, both in the Financial Analysis Unit (UAF), and in the Public Ministry in charge of analyzes and investigations of terrorist financing
  • development of guidelines on identified risks and potential 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 non-financial reporting entities (SONF), demonstrating significant progress in its implementation; the completion and implementation of the supervision manual of the Superintendency of Non-Financial Subjects (SSNF), among other aspects.

The statement continued: "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 offense, 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 with regard to 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, in order 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.

"Additionally, Technical Assistance by the UAF increased significantly; and it was demonstrated that the country can provide information through international requests related to tax crimes that involve sums less than 300 thousand 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 Crime in Panama' was adopted; the number of money laundering investigations related to predicate crimes other than drug trafficking, including foreign predicate crimes, was increased; and a Guide for the investigation of tax fraud.

"In conjunction with these actions, the following laws on AML/CFT were enacted since 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 promulgated from 2019 to date: 905 of 2019, 721 of 2020 and 13,15 and 35 of 2022."

The government added that the exclusion of Panama from the FATF gray list will have a positive impact on multiple aspects of the Panamanian economy and the international financial community:

  1. Improves international image: With the exclusion of Panama from the gray list, the country's image at the international level is strengthened, and its commitment to transparency 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: Lowering and expanding credit lines, which will benefit individuals and companies seeking financing.
  4. Improved correspondent banking and international relations: Will lead to a significant improvement in relations between Panama's local banks and their international correspondents. The basic links necessary for financial operations will be strengthened.
  5. Reduced pressure on the financial system: With the elimination of pressure associated with special reviews, Panama's financial system can operate more effectively and with greater confidence.
  6. Benefits for the insurance and securities industry: The removal of Panama from the gray list will attract the world's main reinsurers, who will be able to establish themselves in Panama and serve the Latin American market.

Panama's withdrawal from the FATF gray list "represents a crucial milestone in the country's economic development".

"Panama has not only demonstrated its commitment to the fight against money laundering and the financing of terrorism, but also continues to carry out timely and effective actions that allow it to maintain an equitable and competitive position in the international financial community. This achievement is the result of the joint work between the National Coordination of Panama in matters of prevention of money laundering and financing of terrorism, together with the Panamanian authorities, the private sector and the international community."