Thursday, December 18, 2014


Panama's beneficial ownership disclosure law, which takes effect in approximately one year, requires all Panamanian financial institutions and NBFIs to obtain the identity of the beneficial owner of corporate bank clients. The issue is, will it actually bring transparency to a Panamanian corporate culture that intentionally obscures beneficial ownership ?

Here are the problems, as I see them:

(1) Giving banks a full year to comply allows money launderers, acting for criminal clients who are bank customers, more than sufficient time to form new companies in remote, unregulated tax havens, and transfer their assets out of Panama.

(2) The one-year window also gives financial criminals time to brainstorm new strategies and tactics, to outwit the new law. for example, Panamanian foundations, which are sometimes preferred to corporations, have no shareholders, nor do foreign trusts. There will be other entities or vehicles for criminal elements to migrate to, and adequately cover their tracks, with multiple steps, in the time-frame curiously set by the outgoing Superintendent of Banking.

(3) Corporations in Panama must be formed by licensed attorneys, many of whom deliberately conceal their clients' identities, by making their staff officers and directors, and thereafter giving a front person a Power of Attorney (Poder), which allows them to open bank accounts. I frankly do not trust them to be candid, or even honest, when requested to identify their clients for the banks. How will this information be verified or validated, especially with foreign nationals as beneficial owners ? The answer is it cannot be independently confirmed.

(4) What if the beneficial owner is a foreign corporation ? Piling layers of secrecy upon the disclosures will render them ineffective.

To conclude, I think that we can expect to see a lot of smoke and mirrors, but no real disclosure of beneficial owners' identities.      

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