New Panama Law Small Stride Towards Shrugging Dirty Money Stigma

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Panama is seeking to clean up its image as a financial crimes haven by passing new regulations but the process has been tarnished by its failure to address certain policy holes and criminal proceedings against a former president.

On June 11, Panama passed Executive Decree 122, which requires the country to automatically share tax-related financial information with 33, primarily European, nations. The measure follows international reporting standards laid out by the Organization for Economic Co-operation and Development (OECD)’s Common Reporting Standards (CRS) and approved in Panama in 2016.

According to La Estrella de Panamá, the measure covers certain private and public sources, and financial institutions.

InSight Crime Analysis

Panama has long been used for tax evasion and money laundering purposes by elites from around the world, as was revealed in the explosive 2016 Panama Papers scandal. While Panama has made strides in recent years to reverse this stigma with new transparency laws, it continues to avoid some of the core issues behind financial crimes.

The positive measures taken by Panama have largely been in response to international pressure by entities such as the OECD and the Financial Action Task Force (FATF), which placed the country on its international money laundering watch list between 2014 and 2016.

Despite such initiatives, Panama is still failing to address some of the most important policy holes exploited by criminals. Its regulation of anonymous companies, a boon for money launderers and tax evaders as they allow people to set up secret shell companies without revealing their identity, remains limited. Furthermore, lax laws regarding the registration of ships under the Panamanian flag has long facilitated tax and other crimes.

Also casting a shadow over Panama’s attempts to improve its image is the ongoing espionage case against former President Ricardo Martinelli. Sources claim that current President Juan Carlos Varela — former vice president to Martinelli — was in on the scheme.

The case serves as a reminder of the high-reaching corruption that continues to undermine the rule of law in Panama, and by consequence attempts at serious policy reform.

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