Spanish version


Deputy minister comments on changes to financial industry

He says Panama has implemented many changes since the government took over in 2014.

Spanish version


"Panama is an interesting example. This government has a strong position against corruption. I think that much has been done at the local level and this should be acknowledged. There are some problems with the international side of the issue, where Panama has a special role, as a service provider. I know this from Switzerland, we have a similar situation. At home, we have a relatively small dimension of corruption, but we create many problems in the world."

These are the words of Swiss professor Mark Pieth, who resigned from the committee of experts convened by the Panamanian government to examine its financial system in the wake of the Mossack Fonseca scandal.

On this subject, Deputy Minister of Foreign Affairs Luis Miguel Hincapié expanded the progress made by the country.

What efforts has Panama made in fiscal transparency?

From the first months of this administration, the country has made significant progress, in fact in April of 2015 it approved a reform to the law of custody of bearer shares, significantly reducing the terms for its implementation, which should be in 2018. This is a great achievement, since in the majority of jurisdictions the process of immobilizing the bearer shares and delivering them to a custodian took several years.

In fact, this reform, among others in the field of prevention of money laundering and tax evasion, allowed Panama to pass the first round of peer review of the Global Forum on Transparency and Exchange of Tax Information.

On the other hand, Panama made necessary amendments in its legislation so that in February 2016, the International Finance Action Group (FATF) approved Panama's departure from its grey list.

These efforts also included the signing of the convention on mutual administrative assistance in fiscal matters (MAC) in October of this year. This expands the network of countries with which Panama can share financial information.

The Ministry of Foreign Affairs takes care of the diplomatic part of these efforts, i.e., negotiating with organizations and countries.

What role did the investigation led by the International Consortium of Investigative Journalists (ICIJ) have in the reforms?

The result of these publications was that Panama had to move fast in actions it already started taking since before publication in April 2016.

In this sense, the changes recommended by the Organization for Economic Cooperation and Development (OECD) were adopted. Thus, the country has pledged to exchange information automatically, according to the OECD common reporting standards from 2018.

Additionally, a law was passed forcing Panamanian corporations that have no operations in territory to maintain accounting records of their operations. In this way, the authorities have information on the transactions of the offshore companies, which will be available to the competent authorities.

In the same way, this new law envisages the suspension of rights to companies which are not up-to-date with the payment of fees to the public registry.

As a government, we chose to defend the country, to amend those things that needed to be modified, because Panama is not dependent on a law firm. Indeed, in regards to the firm, the competent authorities may inform their respective research and apply appropriate sanctions.

How was the idea of creating the independent committee of experts to evaluate the practices of the financial system born?

The initiative to create this committee composed of notable Panamanian and international professionals stems from the need to establish a strategy to reinvent the platform of services and businesses in the country.

The committee has made very important recommendations that the state has said that it will adopt, and that even they have been classified as positive by Mark Pieth.

The recommendations proposed by the committee include regulation of the activity of joint-stock companies, how would it work?

It explores the idea that this activity is given only by those who hold a license to do so, i.e., that would not suffice only to be lawyer.

This license would be granted by a regulator, as is done in other jurisdictions. This would prevent the sale of "paper" companies.

The responsible law firms invest lots of money to comply with the process of due diligence and this is a requirement that every service provider must comply.

The legal requirements of maintaining policies of "know your customer" have been in place for several years, but as the world has evolved Panama also needs to do so by strengthening its laws. Today this is not only a requirement for lawyers, but it also includes real estate agents and insurance agencies, among other professionals.

Why has Panama not considered the implementation of a regime of open registration of shareholders or beneficiaries?

There are jurisdictions that are already exploring implementing it and others have considered it unconstitutional. I think it is an issue that deserves further study and more preparation, especially when there are methods so that the competent authorities can access this information.

Today lawyers need to know the ultimate beneficiaries, and if they do not comply with these rules, then they must adhere to the consequences and they should be punished.

Panama has always had good initiatives that have been proposed, but have failed to implement them. Why is this time different?

This is an issue that we have discussed international and internally, and we know that if we do not implement all the reforms and new commitments we have acquired, all this effort will be in vain and we will return to where we started, and that is something that we cannot afford. We are being watched by the world.

During the 17 International Conference Against Corruption, Pieth said that "the government is closely linked with the law firms." Similarly, this was severely criticized publicly by international journalists. Is there a conflict of interest for a lawyer with experience in the offshore industry working on these reforms?

When we separate ourselves from our work to enter the government, we do it for the country, there are not economic motivations.

In fact, the law firms have always opposed these drastic changes, a fact that we have faced since the beginning of the government in 2014, when we started with the modifications.

Given the magnitude of the changes that we have made in recent years, I can not understand how you can think that there is conflict of interest, when we have driven laws and changes that some of our own colleagues were at odds with at the time.

It is logical that all these initiatives are proposed by lawyers who understand the subject matter. It is not responsible to delegate this responsibility to people who do not know fully what they are doing. A criminal lawyer could not negotiate on behalf of the country with international organizations. It is a dynamic business and must be updated to international changes to keep the country competitive.

What is your vision for Panama?

Panama should focus their efforts to continue to be a service industry. The Canal, ports, logistics centers, air connectivity and a robust banking, in conjunction with a healthy financial centre, are the pillars that drive the country's economic growth.



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