Panama maid: General guide and FAQ

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Panama maid: General guide and FAQ

Panama Maid: a guide  & FAQ

So, I have a maid / nanny / housekeeper (yes all-in-one)  and I’ve been living back in Panama for a little over 20 years now.  I get lots of questions about do’s and don’ts: since most of our maids, nannies and housekeepers are not from Panama. They are from Nicaragua, Colombia, Jamaica, Dominican Republic and some even from Venezuela. Some of the things that I am going to mention will not apply to your Panama maid, although most of them will. I have tried to organize this as a guide from the start of the relationship to ending it. I hope that works for you! Throughout, I have used the term “maid” to cover nanny/ housekeeper / cleaning lady, since it’s the shortest word.

And one more thing – I’m telling you the legally compliant way. Do as I say, not as I do (well, your Panamanian neighbor does)! They mean well, but they won’t get caught.

hiring process – live-in versus travelling – referrals & agencies – contracts – social security – immigration status – labor law – trial period – remuneration – working hours – holidays – décimo – healthcare – maternity – termination – firing

Hiring process:

The process for finding a maid in Panama can be daunting, especially if you have young children and will be leaving them to be cared for. With older children, at least you know they can talk to you and tell you what is going on: but with young ones it is somewhat scary.

Your needs:

The first step is to work out “what do I need?”. Take into account what your kids’ needs are (if applicable), what you want the maid to take care of, and your working hours:

  • Do you want her to cook? Oh, and when you ask if she can cook – make sure you ask what kind of cooking she does? You may not want just rice and beans!
  • Will she clean?
  • Does she need to do the heavy cleaning, like spring cleaning? Windows?
  • Is child care involved?
  • What time does your child need to be ready for school or the bus?
  • Are you able to get home from work at the same time every day?
  • What about your social life? Do you need a baby-sitter on weeknights?
  • Working late?
  • Does she iron? If she does, what are her conditions? Some maids iron as part of the job, some charge “per shirt” or a weekly additional amount for ironing.
  • Does she understand the symbols on the clothes tags, for washing the clothes? (Yes – because if she doesn’t, you need to teach her!)
  • Will she walk the dog?
  • Do you have a cat or dog? I had a maid that was allergic to cats – she was awesome, but we had to part ways. Lesson learned: always ask about allergies!
What to look for:

My experiences have varied over the years: my cleaning lady has been with me almost 20 years. She is not awesome at cleaning, but she is reliable and trustworthy. That is priceless. When I got more staff for my home, she only stayed cleaning my office: but she has keys to the place.

I had a fabulous housekeeper for years that was more of a PA than a housekeeper, but then her husband fell ill. I lost my wife that day! I loved having a wife!  She took care of the dry-cleaning (dropping it off and picking it up), she organised painters, plumbers, air-conditioning maintenance. she watched the cooking channel and then bought groceries according to what she was going to try cooking. Irreplaceable!  Of course, I didn’t know I had a wife until I no longer had her as my housekeeper. I now know: I need a wife, not a housekeeper!

Live-in versus Travelling

A Panamanian maid will probably not want to live in, as her family is “close” and she wants to live with them. But remember the traffic and commute times when you consider live-in versus someone travelling. For them to arrive at 7.00 a.m. each morning, what time will they have to leave home? What time will they leave to get home every afternoon or evening?

It is easier to get a young foreign girl (by young I mean 22 – 29) to live in, but this also has possible setbacks. My experience with younger maids has been great at the beginning (1-2 years), but then they get a boyfriend and want to settle down. Then they no longer want to live-in. And I need a live-in at this moment of my life. When I was single, and even when I was married without a child, having a maid that arrived in the morning and then left mid-afternoon was fine (say 7 am to 3 pm).

With a child, all of that changes. I am a working mom. Sometimes I work till 7.00, or other times I get home early and I take my work home with me: I am there, but I’m not “there”. I am studying part time. I volunteer many hours at Church and some fundraisers for charities. So now I have a 40-something year old live-in maid. She doesn’t run as fast as a younger girl (and so if little miss almost-4 takes off running, I have to run!). On the other hand, she cooks well, she is happy to live in, and she is loving and sweet. Okay, I admit it! She coddles my little girl!

The Práctica: Professional Services or Employee?

Many consider that the práctica (the new-born nurse that you might get for your first month, 3 months or 6 months) is professional services, rather than an employee. As professional services, she is not entitled to receive: holiday pay, décimo, or liquidation at the end of the period that she was hired for. As an employee for a contract for a specified period of time, she is entitled to all those things. Personally, I view the práctica as an employee on a short-term contract. I know that many disagree with me on this, as it increases the cost (by about 40% if you did social security, etc.).  If she has her own Social Security and she is paying in as an “independiente” that changes the picture – and I would agree that she is professional services. But the 2-pronged rule in employment law is:

  1. is she economically dependent? Yes – she is only working for you those months
  2. is she subject to your instructions and telling her how you want the job done? I believe so – I doubt she’s looking after your newborn without you “supervising” how you want it done. It may be true that she knows more than you and is providing you with an education while she is at it, but I view the fact that she has to work X hours and be at your home and do it “your way” as meaning that you are in charge, rather than her.

The cleaning lady:

There was a time I just had someone come in twice a week for cleaning! She wasn’t considered to be an “employee”, but rather providing professional services. You will pay a little more for this, but then most of the things that I mention in the article – you can ignore! If she’s working 2 days a week, she is not an employee. The fine line is whether she works 3 days a week: if you provide at least half of her income, she is considered to be economically dependent upon you! Is she working 4 days a week for someone else? If she loses that job, then you are her primary source of income and she has “economic dependence”.

Referrals & Agencies:

My first choice is always referrals: from a friend, a family member of another maid that I know, or from other mothers.  All of my maids have come referred from a friend or their maid. But there are other sources: Facebook groups – I like Panama Mamas. Expats in Panama is another one, but it caters to more general questions. There are also placement agencies, such as Agencia domestica Panama and Maids & Nannies.

Contracting:

contract, Panama lawyers, Panama maid, hiring process, written contract, obligationsOnce you have identified your needs and the right person, it’s time to discuss contracts for your Panama maid. Even if she’s not Panamanian, still write a contract! If you don’t have a written contract: you have a verbal contract. Panama Labor Law does not leave a vacuum – there was a contract, it was not in writing. And the worst part is: the employee’s word has more weight than the employers! What was agreed? How was it agreed? Put it in writing. And yes, it should be in Spanish.  And yes, ideally, prepared or reviewed by someone (a lawyer or labor law expert) that actually knows labor contracts. I know – your neighbor has a model contract! You can probably also ask for one at the Ministerio de Trabajo.

Basic contract requirements:

The very basic requirements of the contract are:

  • Parties: name, nationality, age, male/female, civil status, domicile and cédula or passport number
  • Worker’s dependents: name of those that live and depend on the worker
  • Type of service offered
  • Place where the worker is to show up for work
  • Length of the contract: definite (period of time) or indefinite
  • Working hours and the type of “shifts” – if applicable
  • Salary – how it will be paid, on what date and where it will be paid
  • Place and date of signing the contract
  • Signatures of the parties

Register your contract with the Ministry of Labor.

Other tasks:

Social Security:

As well as the contract, consider registering her at Social Security. For that, you (the employer) must register. You can do this without a lawyer, but you might want a translator or a good taxi driver for this. I had a great guy for this until about 3 years ago, when he passed away unexpectedly. I’ve never actually found someone to replace him. He was awesome – knew where all the government offices were, had a basic idea of the forms, and could take you through it without it costing you an arm and a leg! But, you could always ask your lawyer or law firm to help you with this. Which branch to go to? The one that is easiest for you to get to in rush hour when you forgot the paperwork was due “today” – there’s going to be a day that happens!

Pros:

The benefit of registering your Panama maid at CSS (Caja de Seguro Social) is that you get rid of a couple of risks:

  1. healthcare – you are no longer responsible for her healthcare – she can go to CSS;
  2. pregnant? You are not responsible for her maternity leave, check ups or if it’s a high-risk pregnancy;
  3. if she has an accident at work – CSS covers it completely (the medical and the time she’s off work after the first 18 days. You cover the first 18 days of sick leave in a year.)

And as an added benefit: she will (if it is still around when she reaches retirement age) get a pension.  Even if your maid is an illegal immigrant, and they do not have their work permit, it is still possible to register them at Social Security and put them into that system.

Cons:

On the down-side: you have to go in and register yourself and you have to register your maid. You have to calculate and pay the SS deductions each month – employer and employee contributions, which you withhold from the salary and you pay in (there is  contribution from you and one from her), and each month you have to make the payment, complete the online forms in the system, and present. You also have to pick up her “paz y salvo” each month from CSS (so pick the most convenient office to where you live and/or work).  It’s not the most user-friendly system I have encountered – and I admit I have my office book-keeper take care of it for me, because I didn’t want to invest my time working it out!

The system is called SIPE: http://www.css.gob.pa/sipe/. This is where you sign up as an employer: http://www.css.gob.pa/sipe/afiliacion.html – and, of course, it’s ALL in Spanish!  And this is where you advise that you have a new employee starting: http://www.css.gob.pa/sipe/avisodeentrada.html.  They have a whole section on “e-learning” –  not me! I gave this to my book-keeper and told her to let me know what personal details she needed from me!

Immigration Status:

immigration, work permit, Panama lawyers, application, visa, Panama maid, visa for maid, social security, work contractIf you didn’t hire a Panama maid, what is the legal status of your maid? If she already has a visa, what kind of visa does she have? The two most common visas you will find are:

  1. doméstica (the actual visa for maids)
  2. Crisol de Razas

Unfortunately, the Crisol de Razas program appears to no longer be available, unless they got in before the 31st of May 2017 with this first application. If they are already in the system, they will be allowed to continue, but the Immigration Office is not accepting any new applications for those not already registered. Some people with Crizol de Razas were able to get a 10-year visa under the program, upon renewal. That is no longer available to new applicants, but you may still find someone that has that status. Most people have a 2-year visa, but they are able to renew.

Visa de Doméstica:

If they need to apply for the doméstica visa, then YOU the employer, will need to provide some documents to the immigration department.  The maid will need to complete the form from the Panama Tramita site. The basic requirements of this visa are published in Gaceta 26104.

  • This visa requires a $500.00 bond, plus a $250.00 fee to the Immigration Department.
  • The return ticket to their home country must be presented.
  • A utility bill for your home must be included.
  • The employer must provide their paz y salvo, which is certificate of Good Standing from the DGI (Dirección General de Ingresos) – Tax Department – showing that you are in good standing.
  • Proof that you have already registered with the CSS (Social Security).
  • An employment letter from you to her, offering her the employment.

This visa is only valid for 2 years; then she must renew it. She needs a lawyer for this visa.

Working conditions

Once you have your Panama maid, then these basic “rules” apply as to what you can and cannot expect.

Labor Code:

The Labor Code applies to all maids, irrespective of their legal status (illegally in the country or not). Even if they are an illegal immigrant, they can go to the Ministry of Labor to report you. So, comply with minimum wage, holiday pay, décimo pay, and the payment of public holidays, etc. That said, a special section of the Labor Code is dedicated specifically to “domésticas”. The important section is Article 231.

Trial period:

The Code considers that the first two weeks are a trial period. This differs from normal labour contracts, which consider that there is a 3-month trial period. If you terminate after this first 2-week trial period (and it’s not a justified termination), you will give 30-days notice (or pay out the 30-day notice).

I typically spend the first week at home with her, and then the second week I show up at any time unexpectedly during the day to check on her.  And I still do that months and years later!

Remuneration:

Minimum salary for a maid in Panama City is $250.00/month.  Good luck finding anyone willing to work for that! The typical monthly salaries that I hear are above $375.00, and go as high as $700.00/month. You will probably get what you pay for (but choose well).

The Labor Code explicitly states that “unless otherwise agreed” it is presumed that the remuneration package includes (in addition to the payment of money): food and board. The food must be healthy, abundant and nutritious; the room must be comfortable and hygienic.

I know some people that offer their maids: $XXX in salary plus $20.00/week for food (the maid then buys what she wants). Others buy the food that the maid will eat, but it is not what the family eats. I have always had the custom that the maid eats what she cooks for us (because she will sit and eat with my daughter if I am not home), unless she really wants “something from home”, in which case she may cook something separate for herself. I usually ask what types of coffee, bread, beans and rice she likes, and buy those for her (because they usually are different from what I like).

Loans or Advances:

Panama’s Labor Law prohibits that you deduct any money loaned to an employee from their liquidation pay. So, if you are going to loan them money: how and when are you going to get repaid?

  • One option: don’t loan them money.
  • Second option: don’t loan them money, but give them an advance on their next month’s salary (and document that this is an advance). Or advance them their décimo.
  • Or ask them to come and work extra for you on the weekends and spring-clean your house.

Working Hours:

According to the Labor Code, the Panama maid receives a “rest period” from 9.00 p.m. to 6.00 a.m. I realise, if you have a newborn, everyone in the house may wake up with the baby and colic! But you should not require her to serve and cater a party till 2.00 a.m., and then be up at 6.00 to get breakfast on the table for the kids.

She also receives her “weekly break” and “annual holidays” which are to be paid. She is entitled to paid day-off on public holidays or national days of mourning (such as when an ex-President dies). Nevertheless, you can ask her to work this public holiday, as long as you pay a surcharge of 100% on a normal day’s pay.

Every week she is entitled to one day off – “rest day” or “weekly break”. The law describes this as “descanso semanal“. Usually, this would be Sunday, but you could agree with her any day of the week off. It is supposed to be the same day each week. Customarily, however, they get a day and a half off each week: leaving Saturday afternoon (1pm, 3pm, 4pm – whatever you have agreed upon), and returning Monday morning (7am). I had one maid that never seemed to make it at 7am Monday morning, and so I changed her day off, so that she left on Friday afternoon and came back Sunday morning. Problem solved! It no longer mattered if she was an hour late.

Holiday Pay:

In Panama, you should consider the public holidays. Here is an example of the 2017 public holidays: http://www.cuandoenelmundo.com/calendario/panama/2017. Those dates marked in red are actual public holidays. those in blue are days that people usually don’t work (banking holidays or employees work the hours beforehand in order to take them off). A Panama maid is going to expect to have off the days in red, or be paid overtime (extra 100%) for that day.

Additionally, your maid is entitled to one month’s holiday per year. This is one month to go home to her family (probably in the interior or possibly overseas). You may choose to break this up into two 2-week holidays: giving her time off after the first 5.5 months, and then another 2-week holiday at the end of her work year. Note: It doesn’t have to be exactly at the end of the year. It could be at 11 months, 12 months or 13 months. But she has to get it!

holiday pay, employee rights, employment law, Labor Code, Panama lawyers, labor law, labour law, public holidays, PanamaWe’re going  away on holiday:

What if you go away on holiday? Then what? You have a couple of choices:

  1. take her with you
  2. leave her at home to look after the dog
  3. send her on holiday

If you choose option #2, you still have to pay her the complete salary she is due, as if she was doing everything (unless you can reach an agreement of some sort with her that she will do some side jobs while you are away for a friend of yours, and they will pay her). But the reality is, she’s still your employee while you are away on holiday.

Décimo (décimotercer mes):

This is a particularity of Panamanian and Central American law that I struggled for a long time to understand and get my head around. Basically: you pay employees a monthly wage, which covers 12 months. But if you look at the year as weeks, and periods of 4 weeks, there are 13 months in the year. And so the crazy (sorry, I meant to say difficult to understand) system here in Panama is that throughout the year (April 15, August 15 & December 15) you pay that “missing” month in 3 quotas. Often, the April 15 payment is made earlier in the year (after Carnavales, before the start of the school year). You are not required to pay this early, but in my office we do, because of the many employees with children starting school.

Healthcare:

It is your responsibility to sign up and sign your Panama maid up for Social Security coverage. This will cover her healthcare needs. If you don’t sign her up for CSS, then you are responsible for her healthcare, and if she has an accident at work, you are responsible for the hospital bills and well as paying her throughout the recovery time!

You are not required to provide her with private health insurance, dental coverage (also provided at CSS) or private healthcare.

Her mobile phone:

Oh, this one is difficult: ask any office manager! I connected my maid’s phone to my house wifi (setting up a Guest user), so that I can control my bandwidth usage. She listens to music all morning while cleaning. I have asked her NOT to use the headset when my daughter is home, as I want her paying attention to my daughter, not on the phone. And with this maid, I have not had any problems. But I have had problems in the past with maids and their mobile phones! Sometimes, there is nothing to do, but let them go – some things just will not be corrected!

Maternity:

One protection offered by Panama’s Labor Code is the “fuero de maternidad“: Articles 105-116 of the Labor Code. This means that for the entire 9 months of the pregnancy and for 1 year after giving birth, you can only terminate the relationship through a justified firing (with cause), and it has to be approved by the Ministry of Labor. Buy her contraceptives! You can’t force her to take them, but you can make them available to her.

Termination

fired, termination, terminated, labor law, labour law, contract, agreement, Panama lawyers, employment, justified, with cause, mutuo acuerdo, mutual accordThere are a number of scenarios that can result in termination: resignation, firing (justified) or simply unjustified termination.

Resignation

If she resigns, she is still entitled to:

  • salary for days worked this fortnight
  • holiday pay outstanding
  • décimo outstanding
  • prima de antigüedad

Firing (with cause)

If you fire her, with cause (i.e. you caught her red-handed stealing or one of the causes indicated in Article 213, then you are required to give her only the 4 payments indicated above:

  • salary for days worked this fortnight
  • holiday pay outstanding
  • décimo outstanding
  • prima de antigüedad

You do not need to pay any notice or indemnification.

Termination (without cause)

If you don’t have documented (and well documented – written amonestations), then the best way to terminate the relationship is just to pay your Panama maid her dues, and let her go!

You will have to pay:

Other causes of termination:

The Labor Code also provides another ground for termination, in article 231 that is NOT available for normal workers: sickness for more than 4 weeks which makes them unable to go to work. You are only required to pay the 1 month of incapacity (sick leave), and then the indemnity mentioned in subsection 7 of Article 231.

Mutual Accord:

My favorite form of termination is “Mutuo Acuerdo” – a written agreement between the parties to terminate the employment relationship.  This gets rid of any “he said – she said” arguments or whether or not it is justified or not. Even with this agreement, you still have to pay the first 4 items listed above:

  • salary for days worked this fortnight
  • holiday pay outstanding
  • décimo outstanding
  • prima de antigüedad

But, depending on why you are letting the person go, you can then decide what you are going to offer regarding the 30-day notice and indemnification for termination.

In the case of any doubt, ask for a lawyer.

 

Relocation Questions – July 2017 – Immigration Update

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Panama City - relocation questions

Panama – Casco Antiguo

Common Relocation Questions: Panama

We often hear relocation questions from clients who are moving to Panama for the first time and getting settled in to their new homes.  I share a couple of them here to help you get an idea of what is easy and what is hard when you are relocating.

Bank account – Driver’s License – Utilities

Relocation Questions: Opening a bank account

I went to a local Panamanian Bank the other day, having just arrived in Panama. They would not allow me to open anything because I didn’t have a banking reference letter or a letter from an employer here in Panama.  Can I open a bank account without a banking reference?

Panamanian banks, even before the Panama Papers, made it difficult for foreigners to open bank accounts here. Ideally, you want to be introduced to the bank by someone (your lawyer, your employer, a business associate). If you are applying for residency, let the bank know: this will make it easier to open the account. If you already have residency, make sure you take your immigration card or cédula with you.

Know Your Client: KYC

Banks here are required to complete their “Know Your Client” procedures, and all banks have a compliance officer that reviews and approves accounts. This is not the customer service representative that you meet. You will not meet the compliance person (that would hinder the purpose of having compliance). So, you need to have all the papers that they need to tick the boxes. Those papers include:

  1. Your passport
  2. 2nd ID of some kind
  3. Utility bill – that shows you have a place in Panama
  4. Professional reference – preferrably two – from lawyers, accountants, insurance brokers, realtors. No more than 3 months old.
  5. Banking references – no more than 3 months old; a relationship longer than 2 years (ideally)

And then you need patience: sit down and complete all the bank forms. Follow up on the account opening. Patience.

Can you open an account without a banking reference? Yes, if

  • You are 18 years old or just recently became an adult
  • Your employer refers you to the bank to open your payroll account
  • A business associate or family member introduces you to the bank as a first time account holder. This one will only work in a couple of banks and in limited cases.

Relocation Questions: Driver’s License

I heard that my driver’s license is only valid for 90 days after I arrive in Panama, but my tourist visa is valid for 180 days? What can I do?

That is right: your foreign driver’s license is only valid for 90 days, but your tourist visa for 180 days. If you are living here on the tourist visa, and driving, then you either leave every 90 days or apply for residency.  Panama does not offer a driver’s license to non-residents.

I am applying for my residency and would like to get my Panamanian driver’s license, what do I need to do?

Once you have your residency approved, you may apply for your driver’s license.  You will need to have your foreign license (copy) certified by your Consulate. The Panamanian Ministry of Foreign Affairs then needs to stamp this copy, to make it valid for use here in Panama. The documents you need to take to Sertracen are:

  • Your driver’s license + photocopy
  • The copy stamped by the Consulate and Foreign Affairs
  • Immigration Card – original + copy
  • Passport – original + copy
  • Blood test – blood type – laboratory approved by ATTT (if this is already printed on your driver’s license, not required)
  • Do sight and hearing tests at Sertracen (wear your glasses and/or hearing aids, if applicable)
  • Pay $40.00 at Sertracen – includes sight and hearing test

Be in good standing with ATTT –  i.e. not have any tickets.

Utilities

Another one of the relocation questions that we get is regarding utilities:

How hard is it to get your home connected to utilities: water, electricity, phone & internet?

This depends on where you are going to live in Panama:

Water:

Most water in Panama is provided by IDAAN, the national water institute. This applies to most small towns and urban areas.  However, you need to check with people who live in the area how often the water gets cut off. You might want to buy a water tank to have a back-up system for your home. It is quite common in the rural areas, during the dry season, to only have water a couple of hours each day. Water is rationed, and you will want to have your personal tank for water storage.

In some remote areas, you will need to have your own well and filter system.

Electricity:

Most of the country of Panama is on an electrical grid and has electricity available, without having to go to solar power or diesel generators.  However, I know of a couple of areas (Bocas del Toro, for example) that do not have electricity and where hotels or hostals rely on their own generators or solor power systems for their electricity.

You definitely need UPS batteries on all electronic equipment in Panama becuase of the electricity spikes.  While theoretically the electric company is meant to replace electronics that get blown because of these spikes, the reality is that we don’t see this happening. Get prevention!

Phone & Internet:

There is phone and internet coverage in most of the country, although quality may be dodgy. I had clients in Bocas that struggled with phone coverage, because a hill blocked the cellphone tower.  I have also been in parts of Chiriqui where you need to walk to the top of “that” hill in order to be able to make a phone call. But both of these locations where quite “off the grid”. You have a choice in Panama of Cable & Wireless (MasMóvil), Claro, Movistar and Digicel.  Depending on which part of Panama (country) you are in, one provider may have better coverage than another.

For internet connection, there is limited fiber optics in some parts of Panama City. If you require high speed internet, you definitely want to check out availability. Speak with other expats regarding their experiences before deciding on a location.  But if you are only looking for internet for personal use or limited office use, coverage is reliable in most areas.  Please note: when there is a thunder storm we often have to restart our modem.

Panama City:

If you live in Panama City, and you are moving into an apartment, it should already have water connected.  If it is a rental, it may already have the electricity connected, you need to check with the realtor. In Panama City you have numerous options for internet and phone, but you should check regarding the quality in your area. As I mentioned above, in some parts of Panama City, you will have fiber optics available.

Coronado & Beaches:

In Coronado, most of the apartment buildings have emergency water tanks, but you should check before you rent or buy. The electricity in Coronado has a wide coverage, but you may want a generator if you want 24-hour air-conditioning.

Pedasi & Las Tablas

You will want to make sure you have water storage tanks, as this area of Panama is known as the “dry belt”. There is water, but it will get rationed in the dry season.  Internet: I am not sure of the quality, so you should ask expats that live in the area.

Boquete

Boquete has a great supply of water, so this never seems to be a problem. You may suffer power outages due to rain storms, so if having electricity 24-hours a day is important to you, you will want to have a backup system.  You should ask neighbours which internet provider is the best.

Please contact Joan Villanueva for more information regarding relocating to Panama.

Easements and Community Protection

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Defining Easements & “Right-of-Way”

Image result for easements

Right-of-Way over private property to “land locked” property

A “Right-of-Way” is the legal right, established by usage or grant, to pass through the property of another.  Typically, this is restricted to a specific route and area, and fenced off from the rest of the property.  A right-of-way is “servidumbre” in Spanish. The word “servidumbre” includes rights-of-wayeasements.  Easements allow access to land for things like natural resources, development and pipelines, or construction and maintenance. An example of an easement would be sewage pipes passing underground.  A right-of-way, on the other hand, allows the person to travel through the property.  Public right-of-way typically includes the street, the curb, alleys, sidewalks, planting strips, all the way up to the fence.

When someone owns land hemmed in on all sides by other private land, a court will grant that person a right-of-way through neighbouring land, if this has not already been granted by use, custom or grant.  For example, when someone buys a lot from a larger land owner who has road access, the seller must ensure that the buyer has road access through the principal property. This seller may establish a right-of-way  through a tranch of their land.

Regulation of right-of-way & easements in Panama

The Civil Code of Panama (1917) regulates rights-of-way and easements (Servidumbres) in Title X.  This Title of the Code covers definitions, general rules, how to acquire rights, rights and duties of the parties, and how to extinguish rights.  The Code goes so far as to cover grazing rights, water rights, and the such.  The Mining Code and Administrative Code also govern some easements for specific purposes.  The Environmental Authority of Panama establishes special rules regarding water rights. The Ministry of Housing and City Council establish special regulations and approvals regarding new development projects. Our office advises on Ley 6 (2006), one of the many laws regarding real estate development in Panama.

Problematic right-of-way & easements

Our firm deals with right-of-way problems, especially where these affect communities.  A recent case involves a community that wished to protect themselves from becoming a thorough-fare.  A developer built a gated community, and then “opened” a gate from her new development into the neighbouring community to provide another exit to the main roads.  In this case, the gate violated building permits issued by the City Council.  The affected community shut the right-of-way, and the developer asked the local Sheriff to enforce the right-of-way, in spite of having planning permits rejected by the City Engineers.  The Sheriff ordered the right-of-way be opened, ignoring the City Council’s rejection of the permit.

In this case, our firm appealed to the Mayor’s office, as the Mayor is the next instance for appeals.  We presented the Mayor’s office with the City Council’s order (Secretaría Técnica Judicial de Edificaciones y Construcciones), rejecting the gate and right-of-way.  They overturned the Sheriff’s decision to order the right-of-way through this community for a number of reasons.

Firstly, the Administrative Code of Panama establishes in Article 1325 that the appropriate authorities in case of dispute of rights-of-way or easements are the courts.  The Sheriff’s office must enforce the judgement by the court, but they do not have jurisdiction to hear the complaint.  Hearing the complaint violated the rights of the community to be heard in an appropriate forum. Secondly, the developer ignored the City Council’s order, violating urban development rulings.

Please contact Betsy Moran for more information regarding Community Protection.

 

2017 Executive Order 62: Non Profit organizations

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March 30, 2017 – Executive Order #62

Rules for Non profit Organizations: associations & foundations

This Order was issued by the Ministry of Government (“MinGob“), regulating Non Profit Organizations, such as associations and foundations.
Examples of such Not-for-Profits are:

  • associations
  • private not-for-profit foundations
  • churches
  • religious churches, congregations or communities
  • federations or other entities which are not tied with cooperatives, sports, agriculture or other types which have special legislation.

In simple terms, this Executive Order establishes the basic requirements for registering a Not-For-Profit with MinGob, who is in charge of granting “legal status”, which is later published and made known through the Public Registry of Panama.  Unlike companies, which receive their legal status simply through the filing at the Public Registry, in the case of Non Profit entities, it is MinGob who grants them legal standing.

It is easy to present the papers to MinGob, but you will require the services of a lawyer.  The basic requirements are:

  1. Power of attorney and Application by the lawyer
  2. Articles of Association, establishing the Board of Directors and approval of the Bylaws, signed by the President and Secretary
  3. List of the members of the Board of Directors (at least 3 members) – natural or legal persons.  If you include a legal person, this entity must approve (shareholders or stakeholders) participation in the Board of Directors.
  4. The Bylaws, which should be duly signed by the President & Secretary
  5. Two full sets of copies of the entire set of documents.

The entity must not have private beneficiaries and may in no way dish out income or donations received to members, board members or founders.  It may, however, hire staff.

Bylaws of Non Profit Organizations

The Bylaws of the Not-For-Profit Organization should contain the following:

  • Name – in Spanish or with a translation to Spanish
  • Registered Address in Panama (changes must be notified)
  • Geographic area in which it will operate
  • Detailed objectives – is it philanthropic, union or other nature
  • Initial capital or donations to the entity and money raising actions
  • Will it require quotas?  If so, who sets the quotas?
  • How to become a member, how human rights are upheld, and other basic Constitutional rights
  • Losing membership
  • Rights and duties of members
  • Governing bodies: General Assembly, Board of Directors
  • Who is the legal representative?
  • Changing the bylaws?
  • How the accounts will be registered? Manner in which you will record funds received and spent?
  • Can branches or chapters be set up?  How is this to be done?
  • What is the process for dissolving and liquidating? How will the funds be used on dissolution?

If there are mistakes or errors in the documents handed in, you have 60 days to fix them (once notified), otherwise the request will be denied.

Board Members

Members of the Board  must be residents of Panama: natural or legal persons, Panamanian or immigrants.  Embassy staff, diplomats, and other State or international entity envoys, may also be members.  Global Non Profit bodies may also help establish local Not-For-Profit bodies and appoint resident board members, such as:

  • Chambers of Commerce
  • Philanthropy
  • Culture
  • Religion
  • Education
  • Science
  • Art
  • Sport

Other matters

Order #62 regarding Non Profit Organizations also covers other matters like:

  • Review and Inquests
  • Records
  • Use of funds – prudence and purpose
  • Changes of Bylaws
  • Setting up branches of foreign bodies
  • Dissolving and liquidating
  • Supervision, follow-up and reviews

For more information regarding setting up a Non Profit Organization, please contact Betsy Moran.  She will assist with the registration process, and follow up to get all of the permits, including tax exemption status.

Footnotes:

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Immigration update June 2017: friendly nations work permits

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Immigration Update: June 2017

Of particular note, in this immigration update is that the Friendly Nations visa is available to immigrants from Europe, North America and other countries listed.  There have been no major changes in the requirements for work permits under Friendly Nations. We have been hearing a lot in the news regarding the change to 90 tourist permits for citizens of Venezuela, Colombia & Nicaragua,  but the updates at immigration  do not affect European or North American citizens.

In recent years, Panama has been  careful with immigration policies, to not be seen as favoring or discriminating against a particular nationality. Nevertheless, the current climate in the region is pushing a wave of immigrants into Panama. And there has been a “push back” against this wave.  Panama is not, obviously, the only country where refugees and illegal immigrants are being rejected. Many European nations have made it clear that they are not willing to welcome many newcomers, despite obvious crises pushing the waves of refugees and immigrants to seek safe havens.

Work Permits:

Immigration Update : Work permit in Panama

How to apply

The work permit tied to the Friendly Nations visa is very simple to apply for.  After applying for immigration status, it is necessary to apply separately to the Ministry of Labour for this permit.  The requirements to be met at the Ministry of Labour are:

  • Power of attorney (to the lawyer) and application
  • Certified copy of the immigration resolution, granting residency
  • Immigration Status certification
  • Certified copy of the immigration card – Permanent residency
  • 4 passport photos

Joan Villanueva is available for more information regarding this application process.

Back in 2016 and in early 2017, there was a lot of debate on the issue of work permits. Panamanians complained that too many work permits being granted to foreigners under the friendly nations visa program.  The complaints were based on the fact that Friendly Nations work permits appeared to bypass the rules on 10% rules (no more than 10% of employees in a company should be foreigners) or 15% for certain professions or executives.  See, for example:

However, this has not be put into effect so far.

 

 

Immigration update – implementation of an online application process

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Technology and systemization is being implemented in many parts of our lives, and Panama’s immigration department is finally trying to catch up with their new online application system.  They expect that this new system (Migración en Línea) will eliminate bottle-necks and long waits. Applicants may remember arriving at immigration at 5.00 a.m. to get a number for the queue.  It will also allow their staff to work more on reviewing the paperwork rather than receiving the documents. Over time the immigration office will be adding to the breadth of applications which can be made online.

Immigration office press release:

In a press release on April 5, 2017, they advised that as of the 15th of April, 2017, it is no longer possible to register (for the first time as a foreigner in Panama) in person at the immigration department (even with a lawyer). Applicants must now complete the application online and submit the documentation electronically.  The applicant pays at Immigration still, but it is anticipated that eventually they will move towards an electronic payment system. When rolling out the new system, the immigration office indicated that the steps to follow for registration were:

  1. complete online registration
  2. pay at the immigration office
  3. present the payment receipt at “certifications” and complete the document verification
  4. you will receive an email update of the status.

ImmigracionAs might be expected with any new system, it has not worked perfectly these first few weeks.  It has been our experience that we have to then take in the same paperwork that we submitted online, together with the reference number that the system provided us with, and have them complete the registration manually (in person) and not simply verify the documentation.  However, we expect that these glitches will eventually be worked out, and then we will, no doubt, find glitches with the new services as they are rolled out.  The immigration department is currently announcing (through Facebook & Twitter) that it will be possible to present visa and residency requests through the online system as of the 1st of June, 2017.

This new system already permits the following to be done online:

  • status of naturalization applications (only while in the immigration department, not once passed to the Ministry of Government)
  • status of visa and authorized visa applications

We will continue to provide updates regarding this system, until it is fully implemented and working smoothly.

For more information, please contact Joan Villanueva.

Q&A Accounting Records in Panama

So, since posting the article regarding the need for accounting records, we have a number of questions asked by clients, so we thought we would provide a “Q&A Accounting Records”:

Q&A Accounting Records, Questions regarding accounting records in PanamaIs this true even for companies that do no business but only hold title to a property?

Yes – if the company does not actively do business but is holding assets of any nature, it should at the very least have a balance sheet. This would show the value of the asset (the property) and the value of the capital or loans made to the company which provided for the purchase of the proprety.  Additionally, there should be included in the accounting the annual property taxes which are paid on the property, or any maintenance costs that are paid by the company that owns the property.  Correspondingly, you would need to indicate where the funds come from to pay for these taxes (capital into the company, loans, or rental income).

qa2…I will also need to be advised as to just what I need to keep records of.  My  corporations are solely to hold real estate and are within my foundation.  Other than the corporations,  a bank account, the foundation has no other purpose.

For the corporations which hold the real estate, you will need to prepare an accounting such as that suggested above:  a balance sheet that shows the value of the asset (the property) and the value of the capital or loans made .

For the Foundation which owns the corporations, you should prepare a balance sheet which shows the assets (corporations – with their values – and the bank account).  Funds moving in or out of the bank account should also be accounted, and you should attach to your accounting the monthly bank statements.  As explained in our original article, there is no requirement to have a “formal accounting”, but it should at the very least have a balance sheet with assets, liabilities and capital.

Following are some basic examples of sample balance sheets:

balance sheet, Q&A accounting records

Accounting Records example balance sheet

Q&A accounting records, sample balance sheet

Sample Balance Sheet

As more questions are asked, we will attempt to update and provide answers to these questions about what is required in 2017.

Accounting Records in Panama – your 2017 update

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Accounting Records in Panama – your 2017 update

Last year Panama had many changes in the financial sector:  the Panama papers scandal lead to greater international pressure for OECD compliance and exchange of information.  Months later the Clinton list added Waked and Grupo WISA (affecting some 6000 local employees), including two newspapers.  The US alleged money laundering, although these allegations to date have been ruled unfounded by the courts.  Nevertheless, these measures have resulted in company liquidations, interventions and sell-offs.  There was also increased regulations introduced for lawyers and law firms, regarding bearer shares and due diligence, with registration of firms both with the Supreme Court of Panama and also with the Intendent that supervises Professionals (such as Realtors, Accountants, Casinos, Money Exchanges, Free zone and others). Furthermore, the pressure has increased against Panama to require all companies to provide accounting records.

As of January 1, 2017, Panamanian corporations that are open and operating, are required to have accounting records.  They will need to notify their Registered Agent in Panama where these records are being kept.

Accounting Records for Offshore Companies & Foundations

The new rules adopted by Law 52 (2016) are for those offshore companies and foundations, even though they hae no direct business transactions in Panama.

Who?

  1. Offshore corporations – irrespective of whether or not they have bank accounts, are holding property or their purpose and function.  If the company is in good standing, it is required to keep accounting records
  2. Private Interest Foundations – irrespective of what assets or holdings the foundation have
  3. Holding companies – even companies whose sole purpose is to hold share in other companies are required to have accounting records

What?

Accounting records in Law 52 are described as “that data that clearly and precisely indicates the commercial operations that the entity has, its assets, liabilities and capital contributions.”  In the Commercial Code of Panama, we find that the accounts are described as being essencial the the “Diario” and the “mayor”, and the supporting documentation.  The “mayor” is the ledger , and the “diario” would be the book where you register the day to day transactions .  The supporting documentation would be the invoices, cheque stubs, banking statements, contracts for sale or purchase, or other documentation.  All of this data should ensure that the company can provide an updated balance sheet at any time of assets, liability and capital.

Accounting records for Panamanian corporations and Foundations

Accounting records for Panamanian corporations and Foundations

How?

The law does not specify “how” these records are to be kept, but in Panama the Commercial code establishes 2 principal ways of keeping your accounting records – manually (in accounts books) or digitally.  In this second case, Panama does not recognise Excel sheets as being an acceptable digital form.  It is recognised that Excel can be easily modified and does not have a double-entry system.  Sage / PeachTree is typically used by businesses in Panama to run their accounting or tailored accounting programs for this purpose.

What is important is that the information MUST be kept up to date – i.e. no more than 60 days  after month end.

Where?

Panama does not require that these records be maintained physically in Panama or that you hire or retain a Panamanian accountant or book-keeping firm to maintain the accounts.  Nevertheless, each company must inform the registered agent which officer/director/agent (natural person, not a company) will be responsible.  The company must inform where these records will be physically located.  In the event of any changes (the person moves or changes), the registered agent must be informed in no more than 10 days of said change.

For how long?

These records must be kept for no less than five years after the period ends, even in the event that the company is closed down.

What does Gray & Co. expect from clients?

All clients have been sent an Accounting Records declaration form, in which the client is required to indicate:

  1. who is the person that will be responsible for keeping these accounting records?
  2. where will the accounting records be kept?
  3. how will the accounting records be kept – format?

The Registered Agent’s responsibilities:

The registered agent of a company is expect to:

  1. Have from each client that does not have their accounting records with the law office, a sworn declaration as mentioned above
  2. In the event of a request for accounting records from a duly authorised Panamanian official, notify the client that they have 15 days in which to comply and provide the records
  3. Should the client fail to comply in these 15 days, the registered agent is required by law to resign.

Other books & registers

After you have considered the matter of accounting records, you might also turn to look at other documentary requirements.  Panamanian corporations are also required to maintain the following books and registers:

  1. Minutes book – all minutes of meetings of the Board of Directors or Shareholders – these should be in chronological order and should include signed originals.  The Company Secretary should hold these.
  2. Shareholder Register – the register which shows who is(are) the current shareholder(s), and any previous shareholder(s).  This should include details such as:
    1. the number of shares issued
    2. the share certificate number
    3. the payment made for the shares (fully paid or partially paid)
    4. the date of issue
    5. the name and address of the shareholder

Bearer Shares

If the company still has bearer shares, these must now be held in custody (since December 31, 2015).  For more information, please see our article Bearer Share Custody.  If you had bearer shares, and failed to make the change to registered shares, then you need to contact your registered agent to get the company records into order.

For more information regarding these requirements and how Gray & Co. can serve you, please contact us.

Cybersecurity

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They say state-run hacking is how World War III will be waged.  In the present time, hundreds of millions of records of private data have been stolen from corporations large and small who thought they were protected.  This affects all levels of an organization, and particularly our clients and consumers.  So, what do we do?

Cybercrime legal services

© Jeniicorv8

First of all, we must understand cybercrime.  According to Wikipedia, “a hacker is someone who seeks and exploits weaknesses in a computer system or computer network”.  A hacker might be intentionally trying to access information for personal monetary gain or to damage a system because he/she doesn´t like the company.  Others do it for the thrill and pride of being able to access systems that have been set up at large expense to prevent unauthorized entry, but there is always a back door, a vulnerability that a hacker will find and exploit.  These hackers sometimes work alone, or as a syndicate, and others can be hired as another front in an already existing war or rebellion.  Because there are so many motives behind hacking, and there´s more likely an entrepreneurial aspect to it, it is very difficult to fight against it.  Without motives or sometimes even financial backing, it is hard to thwart efforts of individuals who are able to use their minds to damage large institutions and states.

One more thing, once a company is hacked, you can´t get the information back from the hacker.  It´s out there and under the control of the hacker or whoever hired him/her.  It could be an ex-employee, a political movement, a whistleblower who disagrees with company activities, or a teenager who doesn´t plan to do anything with it.  Perhaps you can find the person and get him/her behind bars, but once breached, the damage is done.

So now that we understand who does it, how do we prevent or protect a company from losses from hacking, reputational as well as financial?

On average, computer systems have been hacked 220 days after they have been hacked.  Antivirus software, firewalls (software and hardware), and other traditional forms of protection are obsolete.  At any given time, hackers can access computer systems with emails, through old versions of software and browsers, company laptops salesmen take on the road and connect to wifi at a hotel or coffee shop, and worse of all, Android phones.  The larger the corporation, the more numerous the opportunities to find a vulnerability, an unprotected terminal, but this problem is not just for large corporations.  Small companies, with perhaps less of a budget for cybersecurity, are increasingly vulnerable, and losses from hacking could cripple them.

Cybersecurity starts with education and training.  All employees, upon hiring, must be trained on the company´s values and ethics, the usual operational procedures as well as guidelines on dealing with strange email, USB memory cards, installing 3rd party software on office computers, and other user-level security measures.  They must also know how to identify phishing (fake messages from seemingly familiar persons) and whaling emails (seemingly from a high executive, but false).  For this, competent lawyers can be hired to draft a complete employee handbook that not only ensures employees know what is expected of them on their day-to-day tasks, but also how they must diligently protect the company from cyberattacks.  Also they must be aware of the consequences of not following these guidelines, or of deliberately breaching these protocols and exposing company information.

Along with procedure manuals and employee handbooks, confidentiality agreements must be drawn for all employees with access to sensitive information, where they commit and expressly agree to certain protocol and guidelines to help prevent data leaks, and affirm they will not deliberately retrieve and disclose information to third parties.

Another strategy against hacking is insurance.  Once hacking takes place, there are reputational and financial losses.  Insurance policies can be drawn up to include, depending on the type of company involved, PR campaigns, recalls, notices to change passwords, as well as crisis management to secure the network with additional systems, hardware, software and employee training.  Also forensic and legal expenses may be incurred to find and accuse an alleged hacker or group of hackers.  Cyber insurance is a new area, which makes it easier to contract a policy that best fits your company needs.

Last but certainly not least, is the main weapon that must be acquired to fight off hackers: a robust and integrated program that analyzes all live processes as well as all terminals and servers, to ensure there are no unauthorized programs run behind the scenes.  The best programs that offer this kind of analysis can generally find unauthorized programs in the first 20 minutes of analysis.  The programs they find are not in the usual antivirus updates because new ones are created every day, and these are referred to as “zero-day attacks”.  Zero day script is new and original software introduced into networks and is it impossible to keep up with considering the types of hackers who create it.  Instead, these robust, integrated programs such as Cyfir, CyberArk, and others which detect any process that is not authorized and isolates it until it can be determined it is, in fact, unauthorized.

Corporations large and small are coming to grips with this new reality, and in an ever-changing landscape of cybersecurity, much deliberation must be involved when establishing company policy, guidelines as well as the procedures to be followed in the event of a cyberattack.  The CEO, CIO and all members of the organization must work together with their legal team to implement the best strategy to defend against hackers and manage their response.

When passing a law isn’t enough

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centrofinanciero5If you read Panama’s recent headlines, you might be forgiven for thinking that all we have here are scandals and corruption, no laws in Panama and no Criminal Code.  If you’ve driven in Panama, you might also be lead to believe that we don’t have a Road Code.  That’s not true!  We have all the laws we need – we just selectively comply with them, due to selective enforcement.  One of my pet peeves in Panama is that drivers STILL don’t know how to go around a round-about!

I highlight this because in 2014 Panama was once again grey-listed by GAFILAT  (the Latin American Financial Action Group, a member of the FATF), in spite of having AML (anti-money laundering) and CFT (couter financing of terrorism) laws in place.  An IMF visit to Panama highlighted the lack of enforcement of 16 of the principal FATF recommendations.  Panama’s principal problem has been one simply of enforcement of the laws that it has. In October 2015, when FATF meets in Europe, Panama will request another evaluation of the measures taken in the past 18 months to ensure enforcement of the laws and compliance with the principal recommendations.

The reality of Laws in Panama

While Panama changed its rules regarding Bearer Shares (requiring that they go into custody or switch to registered shares) and adopted KYC (know your client) rules for lawyers and registered agents, without mentioning the regulations, procedures and reporting standards that exist for financial institutions, it has customarily ignored an important part of the process relating to implementation and supervision.

I will admit, when Panama adopted Law 23 in April of 2015 I groaned – “another law, another supervisory body”: as if there weren’t enough already! As lawyers, we are already subject to the Fourth Chamber (Sala Cuarta) of the Supreme Court, as well as being subject to the oversight of the Colegio Nacional de Abogados (Panama’s Law Society).  We already had Law 2 (2011) and Law 47 (2013).  And yet, neither of these bodies is charged with the oversight and supervision of compliance with AML/CFT rules.

Law 23 (2015), whose purpose is “to prevent money laundering, financing of terrorism and financing of the proliferation of weapons of mass destruction” established the framework for the “Administration Office for Supervision of Non-Financial Subjects”, as part of the Ministry of Economy & Finance.  The administrator, Francisco Bustamante, has already participated in meetings to establish a series of training sessions, particularly aimed at operators of the Free Trade Zone in Colon, to ensure best practices are incorporated into policies and manuals, and communicated to all employees that deal with financial transactions.  There is a long list of enterprises that will now fall under the supervision of this office, which were previously not supervised by any bodies.  To date, supervision had been limited to the Banking Superintendence (banks and trust companies), the Insurance Superintendence (insurance companies & brokers), the Securities Market Superintendence (stock exchanges, brokers & dealers, investment advisers), and the Cooperatives.

This new office, which we will refer to as the AOSNFS (Administration Office for Supervision of Non-Financial Subjects), has the oversight of 16 sectors of the economy, which previously were reported to FAU (Financial Analysis Unit of the Ministry of Economy & Finance) in the case of suspicious financial transactions, but which were not directly subject to any supervision.   There are now 20 new “subjects” that will need to report suspicious transactions over the $10,000.00 limit.  These sectors are the following:

  • Free Trade Zone companies, including Colon FTZ, Barú FTZ, Panamá-Pacifico & Bolsa de Diamante
  • Remittance services (for sending money)
  • Casinos, betting agencies and other forms of gambling 
  • Developers and real estate agents – when they are involved in the transaction for their client
  • Construction companies, including contractors and sub-contractors
  • Savings & Loans companies
  • BDA – Agricultural Development Bank
  • BHN – National Mortgage Bank
  • Currency exchanges
  • National Lottery
  • Pawn shops
  • Security transport services
  • Mail service
  • Jewelry shops & intermediaries of precious metals and precious stones
  • New & used car sales
  • Other activities by professionals:
    • Lawyers
    • Accountants
    • Notaries public
  • It is expected that over time the AOSNFS will issues procedures and policies to be followed by companies within each of these sectors for compliance with AML/CFT measures.   With the implementation of this law, adopting Executive Decree 361 (August 2015), which gives an organic structure to the AOSNFS, including offices and sub-directors, it is expected that Panama is 90% compliant with the 6 basic action plans that were agreed upon to get Panama off the grey list. Additionally to Law 23 (2015), Panama has also made modifications to the Criminal Code (tighter money laundering rules, among other things) and also a law to enhance and enable international cooperation with other agencies.  As of July 2015, a round of seminars for FTZ companies and currency exchange companies already began.  But, there is still a ways to go; the AOSNFS still has to finish appointing its staff, decide which systems and software to use, and then start the laborious task of working with each segment of industry to adopt appropriate Risk Based Approaches for AML/CFT.

    As usual, the newspaper headlines in Panama focused on the fact that lawyers, accountants and auditors were to come under supervision by the AOSNFS; and yet, when you read the actual article, the main changes are with the Free Trade Zones, currency exchanges, pawn shops and remittance services.  But it’s much more interesting to focus on the lawyers and accountants!  Or as another news headline read “Even your lottery winnings will be scrutinised”, since one of the resolutions adopted by the AOSNFS indicated that winnings over $500.00 should be reported, as well as pawning more than $1,500.00 or sending more than $2,000.00 through remittance services.  As of today, the AOSNFS has adopted and published 14 resolutions, regulating the type of reporting to be undertaken by different sectors.

    If in New Zealand and Australia they have come to realise that dirty money has driven up property prices, would it be true to say the dirty money is responsible for holding Panama’s property prices at an unrealistic high?  Overseas research points out that money laundering is much easier in major cities and it has a large impact on property prices, especially as prices in London have soared.  In Mexico, after adopting new AML regulations for realtors, pawn shops and used car dealers, companies complained that business had dropped some 30% (Latin America: Money Laundering Grows). Panama’s requirements for developers, realtors and construction companies, in the past, were not stringent enough to deal with these issues, so some have speculated that our real estate bubble need never burst.

    The new regulations (Resolution JD-001-015 of the 14 of August 2015), however, provide very practical requirements for ensuring that AML/CFT measures are adopted:

    • Developers must obtain proper due diligence from any investors who participate in the project
    • Builders and sub-contractors must verify the identity and details of the developer of a project
    • Developers must obtain proper due diligence on realtors and agents that sell the project
    • Real Estate companies must have proper documentation identifying each of their agents and any independent agents they work with
    • Realtors and real estate companies must identify who is the person buying the property, and if a corporation is used, the person controlling the corporation
    • In the event of any cash or cash-like transactions, identify any suspicious transactions.

    Listed among the measures to be adopted, are requirements such as knowing what the purchase of property is to be used for, knowing the client in person, as well as other ways to verify the documentation that has been received.  In the case of any cash or cash-like transaction, the client should provide:

    • Full name
    • Birth date
    • Country of birth and nationality
    • Gender
  • Civil status
  • Passport or ID number
  • Country of residence
  • Address
  • Postal address, if different
  • Home phone number
  • Work address
  • Work phone number
  • Mobile phone
  • Email address
  • Profession or occupation
  • Source of funds
  • In the case of a corporation, foundation or other legal entity being used in a purchase, it is additionally required to get full documentation on the corporation, the officers, directors and shareholders, and identify the ultimate beneficial owner.  Additionally, banking and commercial references should be obtained.  PEP rules have also been introduced with these regulations, which is especially important given Panama’s recent scandals involving members of the past government and their property purchases.

    Along similar lines, lawyers, notaries and accountants are required to obtain similar information regarding their clients, for real estate transactions (when they are acting on the client’s behalf). In all of the following cases, this information is required to be obtained:

    • Purchase of real estate
    • Administering funds, securities or other assets on the client’s behalf
    • Administering bank or securities accounts
    • Organising capitalisation of a company or its administration
    • Creation of corporations, foundations, trusts etc., or their administration

     

  • Purchase of a corporation or other entity
  • Providing a director for a corporation or legal entity
  • Providing a registered or physical office address for a corporation or legal entity
  • Providing a nominee shareholder for a corporation
  • Providing a nominee settlor for a trust or similar
  • Acting as registered agent of a corporation or legal entity
  • In the event that the client uses cash or cash-like transactions to pay, over USD$10,000.00, the professional should take extra care to ensure that full compliance with the AML/CFT measures is met.  These measures are the following:

    • Full name
    • Address
    • Postal address, if different
    • Phone number
    • Mobile phone
    • Fax number, if applicable
    • Email address, if applicable
  • Principal economic activity
  • Commercial and banking references, and in the case of acting on another person’s behalf, this person’s contact details
  • Written evidence of the references or a power of attorney with corresponding documentation is also acceptable
  • Source of funds
  • As with the case of realtors, in the case of acting on behalf of a legal entity, full due diligence on the parties involved should be obtained, such that the ultimate beneficial owner and other controlling parties are all identified.

    In the case of any suspicious transactions, all “non-financial subjects” are required to report the transaction directly to the UAF, in which case they are prohibited from informing the client of the report filed.  Law 23 protects the informant from any civil or criminal action being taken against them by the client for having reported the transaction, as it is not considered to be a breach of confidentiality or privilege to report a suspicious transaction under this law.

    The issue of AML/CFT will not simply be taken care of by laws in Panama and regulations – without actual supervision and implementation, it will be difficult to ensure that Panama is truly compliant.  Unless it assigns enough resources to make enforcement effective, money laundering (whether from corruption, drugs or other crimes) will continue to be a blot on Panama’s reputation.

    bethgray4

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