Panama: Law of Offshore
Panama introduced a new and comprehensive banking law (which covered local trust companies as well) in February, 1999, replacing one that had been in place since the 1960s. The National Banking Commission that previously issued licenses was replaced by a Superintendency which comprises a Board of 5 Directors and a Superintendent. In addition to increased investigative powers, the 1999 law tightened general controls and regulations and brought the country’s supervision more in line with the regulatory standards found in European and American banking centres.
There are three types of banking license:
- General Licences permit trading both in and outside Panama, and can be issued to Panamanian or foreign banks; minimum capital is US$10m.
- International ('Restricted') licences allow offshore banking to be conducted from an office in Panama; minimum capital is US$3m.
- Representation Licences are issued to foreign banks and permit a local office but no local trading. Activities must be be limited to contacting third parties interested in carrying out operations with the Head Office. Representative Offices are not authorized to carry out any kind of operations from or within Panama.
- Combined General and International licences are available. Licence fees are, approximately, US$5,000 and up to US$50,000 (annual) depending upon the jurisdiction and the type of licence required.
At the end of 1997 more than 100 banks were licensed in Panama, from more than 20 countries and with assets of about US$23bn; however the country responded to international pressure by tightening up on banking regulation, and a number of banks closed their offices in 2000 and 2001. By mid-2005, 80 licensed banks remained, of which 30 had international licences. By the end of 2012 total consolidated assets in the banking sector reached US$89bn.
The 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 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 confidentiality is enshrined in the new law, a prima facie case proving funds are illicit will open criminals to exposure. Banks must conform with stringent monitoring and vetting procedures; each bank has a compliance officer who is responsible for ensuring that controls are applied.
Applications for Bank Licenses from the Superintendency of Banks need to be filed with the Superintendent of Banks through a local lawyer, and must be accompanied by at least the following documentation:
- In the case of corporations to be organized under domestic law: minutes of the applicant’s articles of incorporation and By-Laws, if any.
- In the case of corporations organized under foreign law: a legalized copy of the deed containing the applicant’s articles of incorporation and by-Laws, if any.
- Minutes, extract of minutes or Secretary’s certificate of the Meeting of the Board of Directors of the applicant or of its financial promoter attesting to its financial support, its authorization to exercise the banking business, as well as the allotment or investment of capital required to exercise banking activities in Panama.
- Certification issued by the authorities of the country of origin of the applicant or its promoter noting that it is duly registered and authorized to exercise the banking business in that country, as well as its authorization to conduct the banking business in or from Panama or establish a Representative Office in Panama.
- Detailed and accurate information as to domicile, address, nationality (national identity document and/or passport) and qualifications of the applicant, its shareholders or promoter, and its Directors and Officers, as well as stock ownership by its Directors and Officers.
- Resumes of the officers, directors, executives and administrators responsible for the banking office in Panama, including banking, commercial and personal references, indicating their source, in order to confirm these or to request additional information.
- The applicant and/or promoter shall provide information about the Economic Group to which it belongs, particularly any corporation having control over the applicant and/or its promoter, its components, track record; family relation, property, control or management; directors, officers and responsible personnel they may have in common.
- Evidence that the applicant has the minimum initial capital required for a Bank to operate in Panama, to wit, Three Million Balboas (US$3m) if it is applying for an International License, and Ten Million Balboas (US$10m) if it is applying for a General License. The capital destined for the subsidiary in Panama shall be made up of additional capital funds provided by the Head Office, and separated from the capital of its Head Office.
- In the case of banks organized under foreign law: names of the persons designated as the Bank’s General Attorneys-in-Fact, all of whom shall be residents of Panama and at least one of whom shall be a Panamanian citizen.
- In the case of banks organized under Panamanian Laws: name of the person who will act as Legal Representative of the bank to be established, as designated in the respective Articles of Incorporation.
- Balance Statement of the applicant and/or its promoter dated no less than ninety (90) days prior to the application. Comparative audited Financial Statements for the two last years, accompanied by reports on portfolio classification and maturity structure of assets and liabilities, as well as the applicant’s or its promoter’s position in the market of origin, according to major financial indicators (total assets, portfolio, deposits and equity) and its most recent rating by its supervising authority.
- Certification by the Technical Board of the Ministry of Commerce & Industries of the Republic of Panama or the appropriate foreign authority noting that the CPA firm auditing the applicant’s and/or its promoter’s Financial Statements is duly authorized to exercise said profession.
- Information available on recent ratings of the applicant or promoter, or the Financial Group by Rating Agencies, according to internationally recognized rating standards.
- Most recent Yearbooks and other publications containing information about the applicant and/or its promoter, or the Financial Group to which they belong, their organization, changes in corporate name, mergers or consolidations, operation turnover, domestic and foreign banking offices (subsidiaries, branches, representative offices and agencies), relations with other financial institutions, and general information on business results, as well as profit, growth and risk indicators for assets, liabilities and equity.
- Description of the plans the applicant intends to develop (short, medium and long-term objectives) once the License is granted, indicating the Bank’s likelihood of success and its contribution to the Panamanian economy.
- Financial projections of the applicant, and projected organizational functions and anticipated income-yield capacity of the bank.
Three additional laws passed in 2003 increased Panama's defences against financial crimes, money laundering and terrorism.