Shelf companies, Arrears, Registered Agents & Compliance

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Shelf companies, Arrears, Registered Agents & Compliance

Cleaning up after Panama Papers

How could Panama, after the fiasco of the Panama Papers, clean up its act easily and in the stroke of a pen? One way to get rid of shelf companies, non-compliant clients, and those that are in arrears is:

From my perspective, striking off all of these companies takes care of a number of problems. Firstly, these companies were at least 3 years in arrears. Secondly, the client is not in contact with the registered agent. This means the registered agent has not got up to date due diligence from the client. Thirdly, in 2015 bearer shares were abolished. Companies were left with registered shares only, unless action was taken.  In all likelihood, this was not done.  Fourthly, the company probably doesn’t have financial records. Finally, shelf companies are virtually done away with, unless the provider has kept them up to date.  Hopefully all of these changes make Panama a better place to incorporate and run business from, legitimately.

If you think your corporation might have been struck off by mistake, and it holds assets (real estate or a bank account), you need to reactivate your company. For legal assistance with Panama Corporation, please do not hesitate to contact our office.

Arrears

The corporations that were struck off by the Tax Department owed $30 Million plus in government fees. These are unpaid annual renewals.  Not only was the government not paid, most likely the registered agent in Panama was not paid. I doubt directors were paid. Prior to the amendment of Article 318-A of the Tax Code in 2016, companies were not automatically dissolved until 10 years after they stopped paying annual renewal fees. That was 10 years that the company continued to exist without being in contact with anyone in Panama.

Unfortunately, even so, the Tax Department lacked efficiency in notifying the Public Registry of such arrears and publishing the dissolution notices. In my 20 plus years in Panama, I have only seen this 10-year notice list published once. Under the 2016 amendment, after 3 years, the Tax Department notifies the Public Registry to put these companies as “struck off”, unable to carry on any business, and two years later, if they are not reinstated, they automatically move to involuntary liquidation and dissolution. And so, in 2017, some 40,000 plus companies are struck off.  In 2019, unless reactivated, these companies are automatically “dissolved”. Hence, banks worldwide are requiring, many on a yearly basis, a Certificate of Good Standing for companies.

Registered Agents

Many registered agents will heave a sigh of relief with this list of 40,000 companies that are struck off. Those are 40,000 companies that the registered agents of Panama no longer have to be concerned about with respect to Law 2 (2011) and Law 23 (2015), as long as they had their KYC in place at the time of incorporation, or at least until 2013 or 2014. After Panama Papers, it’s time for a massive clean up! Some firms are doing this voluntarily, but the economic cost is onerous.

Law 2 (2011) provides the registered agent the option to resign from all companies where they have lost contact with the client and are not able to update due diligence. This requires preparation of public deeds (notary costs) and filing at the public registry (also cost).  All up, about $100.00 per corporation. If you have 10 companies, that’s $1,000.00; for 100 companies that $10,000.00. And that’s 40,000 companies that Registered Agents will not have to resign from.

Since February 2016, all Registered Agents in Panama were required to have the KYC documentation in place for all active corporations under their management, irrespective of the date of incorporation. Additionally, registered agents are paying the costs of physical space (warehousing or offices) for all these files, as well as being administratively responsible for the companies under Law 2 (2011) and Law 23 (2015). Automatic striking off and then dissolution will liberate this space and cost for registered agents.

Bearer Shares: December 31, 2015

On December 31, 2015, by Law 47 (2013) companies which had not expressly elected to place their shares in custody, had their Articles of Incorporation changed to prohibit the used of bearer shares. If a company, on December 31st, had bearer shares, these shares were automatically cancelled. For companies which were active and properly managed, that meant that before (or on) December 31st, they passed a corporate resolution to exchange the bearer shares for registered shares. Those companies that didn’t comply were left without shareholders. Bearer shares were cancelled, but not replaced. Striking these companies off, and dissolving them in two years time, is a good way to clean up those companies that are not compliant.

Accounting Records:

As of January 1, 2017, all companies in Panama are required to keep accounting records.  These records do not need to be filed. Tax returns are not required. But the registered agent must receive from all active companies a written confirmation of where and how such accounting records are kept. Obviously, for those companies that are not up to date, and in contact with the registered agent, this information is not on record.

Shelf companies

A shelf corporation or aged company is a corporation that has had no activity. It was incorporated, with a board of directors (nominees) appointed, and left with no activity: put on the proverbial “shelf”.  One of the problems with these companies is that they have no shareholders or beneficial owners: they are waiting to be purchased. Then, when sold, shares are issued – “appropriately dated”. Powers of attorney may be issued “appropriately dated”. Contracts could be signed “appropriately dated”.

The issue is not one of the company being eight years old, and new board of directors being appointed, and shares being issued with current date. The problem with the shelf company is that transactions could be back-dated to reflect having taken place around the time of incorporation, even though at that time, the client didn’t even own the company.  Of course, Panama Papers focused mostly on “shell companies”, rather than shelf companies.  Shell companies are those who were not actually trading, but just shells used by the client for hiding an asset or transaction.

This doesn’t mean that all shelf companies will have been blotted out with this change: if the provider who had the shelf corporation was up to date in all the government fees, the company will still exist. But in terms of compliance, it’s hard to find any legitimate way that the company could still exist and be in compliance. Shares for a new company should be issued within 30 days of incorporation. Who is the shareholder? And if the Registered Agent is required to keep all records regarding the beneficial ownership of the company from incorporation onward, there is no leeway for issuing shares to another person from the date of incorporation.

Onsite inspections: Anti-Money Laundering Solution and Anti-Terrorism enforcement

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Onsite inspections: Anti-Money Laundering Solution and Anti-Terrorism enforcement

AML rules & enforcement

In July 2017 the Indendance for the Supervision & Regulation of Non-Financial Persons adopted resolution JD-REG-001-17. This resolution sets the procedures for onsite inspections, reviewing procedures and documentation for compliance with Law 23 (2015).

Background

As explained in a previous post, Law 23 set up the Intendance and regulated the types of businesses and professionals supervised by the Intendance. This included companies in the Free Trade Zones and Panama Pacífico. Likewise, it included real estate developers, realtors, lawyers & accountants.  In particular, Law23 adopts measures to prevent money laundering and financing of terrorism. Article 13 of the Law charges the Intendance with supervising and regulating “non financial persons”.

Artice 13 of Executive Decree 361 (2015), adopted following Law 23 (2015), establishes that as part of supervising, the Intendance will carry out onsite inspections of these non financial persons.  It also provides for off site inspections, where there is simply delivery of documentation and reports to the Intendance’s office.  The intendance requires access to relevant and pertinent information in order to measure the effectiveness of the controls put in place. This is particularly important in higher risk business models, to ensure compliance.  With this in mind, the Intendance established in JD-REG-001-17 the guidelines for requesting information or documents as part of inspections.

Onsite Inspections

In order to undertaken an inspection, whether onsite or offsite, the Intendance must notify in writing. The time frame for the inspection, the scope and the documentation or information being requested are required in the letter. It must also indicate the format to be used (if applicable).

The person or entity under inspection must deliver the information or documentation by the dates required, in the requested format. Originals, copies, electronic format or any other means of delivery must allow the intendance to get a clear and real view of the situation the transactions being supervised.  The intendance may request documents be translated to Spanish.

Late & incomplete compliance

Compliance which is provided late or not at all will be considered to have failed to comply.  If the information or documentation requrest is incomplete, illegible or in a format different to the one requested, sanctions may also apply.

Costs of inspection

At this time, we have no idea of what the actual cost of inspections will be, although it is understood that the Intendance (similar to the Banking Superintendent) charges the entities that are under supervision for doing onsite inspections. They are charged for the manpower required to be in their offices for the time spent there. Other indirect costs are space, internet & phone connections that must be provided, and the staff that need to be assigned to assist and provide the inhouse documentation that is being inspected and reviewed.

Our firm is able to assist with compliance manuals, preparation of policies and procedures and preparation for such inspections.

 

 

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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    Interesting articles:

    Panama Registered Agent – Know Your Client rules

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    beth-gray

    In recent years, the fight against money laundering has gained importance in the priorities of many countries. Moved by FATF, governments from principal financial centers have worked to identify money laundering typologies, develop recommendations on best practices to combat money laundering and encourage cooperation among national law enforcement and regulatory agencies.  In response to this, Panama has adopted laws under which lawyers (as registered agents) are required to fulfill certain basic “Know Your Client” (“KYC”) or “Due Diligence” requirements, similar to those imposed on banks and other financial institutions.   Since 2011, these rules have been in place for all new incorporations (corporations, foundations, trusts and other legal entities), and in February 2016 all Registered Agents in Panama must have the KYC documentation in place for all active corporations under their management, irrespective of the date of incorporation.

    In this post, I will present the historical and legal background of these requirements, as well as a brief synopsis of the political and economic reasons for compliance with these new rules.  I will then enter into detail regarding the requirements of Law 2 (2011) – What does it require? Who must comply? and What does compliance entail?   This post will then present how lawyer-client privilege is maintained under these laws, and how information may be legally requested (due process).  Finally, I will close looking briefly at the effects of non-compliance on the Registered Agent.

    Background laws and regulations

    Law 32 (1927), which establishes the legal framework for incorporation of corporations in Panama, establishes in Article 2, subsection 7, that all corporations must have a Registered Agent in Panama.  Until 1966, the Registered Agent could be any person or legal entity, and it did not need to be a lawyer.  However, Decree 147 (1966) changed this, indicating that since the Registered Agent may be required to exercise some responsibilities that were reserved specifically for lawyers, it was necessary that the Registered Agent be either a lawyer or a law firm.

    While Panama has been under scrutiny for many years for failing to comply with international investigations and cooperation against drugs and money laundering, the rules in Panama have actually required compliance and generally been effective.  There have been a number of international studies which have run practical exercises to test compliance, and they have generally found that Panamanian lawyers and Professional Service Providers are more compliant than their US, UK or Australian counterparts.  For examples, please see:

    In 1994, Panama enacted Executive Decree 468 which established the obligations and responsibilities of Registered Agents to “Know Your Client”. These regulations were originally limited to money laundering relating to drugs, but this was expanded in 2006, by Executive Decree 124, to include Drugs, Money Laundering and Terrorism.   The purpose of this regulation was to protect the reputation of Panamanian corporations, to ensure that they could not be used for drug-related money laundering.  This established that all lawyers or law firms who acted as registered agents for corporations were required to “know your client” and have sufficient information to be able to identify the client to the “competent authorities” when so required.  Lawyers were required to provide this information to the Prosecutor or to a Court, if such information was requested because of an investigation being underway in Panama or a request through an MLAT.  These regulations protected the lawyer, or law firm, that provided this information, stating that this was not considered to be a breach of the lawyer-client privilege and confidentiality that the lawyer was required to maintain.  It further provided that the lawyer or law firm would be considered to be in contempt of court for failure to identify the client without just cause (such as failure to follow due process).

    Pressure to comply

    For over twenty years, Panama has been under pressure to become compliant with the FATF 40 Recommendations, which include rules regarding banking, holding of records and exchange of information.  It is also under pressure for the exchange of information for tax purposes, as can be seen by the 30 treaties negotiated as of the 14th of September 2014, by Panama on Double Taxation or Exchange of Information, of which 25 are already in force (Tax Treaty page, MEF).  Furthermore, Panama is becoming FACTA compliant, having already agreed in substance to the terms of the model 1 IGA (see Count down to FATCA, FATCA archiveIGA under FATCA, IGA monitor and Panama complies with FATCA).  To this end, Panama has established in the Ministry of Economy & Finance an International office to handle all requests for information.

    The principal pressure applied to Panama is through the banking sector, where in 2014, after being placed on the FATF grey list, Panamanian banks lost 21 correspondent banking relationships.  Banks have, however, been reporting suspicious transactions to the UAF (Financial Analysis Unit of the Ministry of Economy & Finance) since its inception in 1995. Nevertheless, this is not sufficient for compliance with FATF, and following a review and being placed on the grey list, one US bank cancelled all its correspondent relationships with Panamanian banks, and at the time there were 14 banks who only had 1 correspondent banking relationship left.  This pressure lead the banking sector to push strenuously for compliance from all sectors of the economy, in order to release the pressure that they were under.  At that time, the principal issue at stake was the Immobilisation of Bearer Shares, which was not to come into effect until 2015, with some parts of the law coming into effect in 2018.  One of the results of this was that the introduction of Law 18 (2015), which sped up the implementation of Law 47 (2013).

    In 2017 Panama will be under review for compliance with the FATF 40 recommendations, and this review will place particular importance not only on the adoption of laws (which Panama has already done), but the effectiveness of these laws, the regulations and structures that the country has in place to actually be able to comply.  Therefore, in addition to having adopted the necessary laws, it is necessary for Panama to have put into place any regulations of how the law will be implemented, who will implement the law and the budget that these offices require in order to be effective.  It should be noted that Panama has rejected automatic exchange of information (i.e. that foreign government offices can directly request information from our banks or lawyers), and has implemented systems for exchange of information following due process, in order to avoid fishing (or phishing) expeditions.

    Law 2 (2011)

    In February of 2011, Panama adopted Law 2 “which regulates the measures for Know Your Client for registered agents of legal entities existing according to the laws of the Republic of Panama”.   This law applies to all registered agents (lawyers or law firms), to ensure compliance with Know Your Client rules, to prevent money laundering, terrorism financing and any other illegal activity according to the laws of the Republic of Panama, as well as to satisfy Panama’s obligations under international treaties or conventions.  This law enables Panama to require information from a Registered Agent regarding the owner of a corporation for the purposes of the Double Taxation and Information exchange treaties that it has signed.

    What does it require?

    This law requires that the Registered Agent:

    1. Identify who is really the client and verify their identity
    2. Obtain information from the client regarding the purpose of the legal entity – what is it being set up for?
    3. Provide this information to a “competent authority” in the case of a legitimate request.

    Under this law, a “competent authority” who may request information from a Registered Agent is defined as:

    • Ministerio Público (public prosecutor) or Courts, in the case of money laundering, financing of terrorist activities and any other illegal activities according to the laws of Panama
    • Administration Office for Supervision of Non-Financial Subjects (under Law 23 of 2015)
    • General Direction of Income of the Ministry of Economy & Finance, for compliance with international treaties or conventions which have been ratified by Panama.

    What does compliance entail?

    Compliance under this law means that before even establishing a relationship with the client, the law or law firm must identify who the client is and verify their identify, as well as get the information necessary to know what the purpose of the legal entity is.  Without this information, the lawyer should not proceed to undertake any work for the client.  In the event that the lawyer is unable to obtain updated information, they should abstain from any new work requested.  It is also necessary to have the processes in place to be able to update this information, should the client transfer or assign their interest in the company to another person, or where the client’s information has changed (such as a passport expiring) and needs to be updated.  It is also necessary to know who holds the bearer shares of a company.

    The minimum requirements for compliance are the following:

    Natural person Legal Entity Professional Intermediary
    • Complete name, address and mailing address
    • Phone number, mobile phone, fax number  and email address
    • Principal economic activity
    • Copy of their national ID card or passport
    • Declaration – what will they use the legal entity for?  (for each corporation requested)
    • Contact details for a banking or commercial reference (or banking and commercial reference letters)
    • Complete name, jurisdiction and incorporation details
    • Registered address and mailing address
    • Phone number and fax number
    • Name of the legal representative or manager, and their email address
    • Principal economic activity
    • Copy of national ID card or passport of each person that has more than 25% interest (unless a public registered company)
    • Copy of incorporation documents
    • Declaration – what will they use the legal entity for?  (for each corporation requested)
    • Contact details for a banking or commercial reference (or banking and commercial reference letters)
    • Complete name, jurisdiction and incorporation details
    • Registered address and mailing address
    • Phone number and fax number
    • Name of the legal representative or manager, and their email address
    • Principal economic activity
    • Copy of incorporation documents
    • Declaration from their client – what will they use the legal entity for?  (for each corporation requested)
    • Certification that:
      • they maintain a relationship with the person for whom they are requesting the registered agent services
      • their KYC practices, including the case of bearer shares
      • that they will provide, upon request, all the information to identify the client that they represent according to the requirements and procedures of their applicable legislation
    For the professional intermediary, this applies in the case of those persons  (lawyers, bankers, trust companies, insurance companies, brokerage houses and CPAs) who belong to professional associations whose best practices require that they adopt and maintain professional standards to prevent and detect money laundering.

    This information may be kept  in physical or electronic files, and must be held for at least five years by the registered agent.  In the event that the registered agent loses contact with the client, after three years of no contact (and failure to pay the annual license fees for the client), the lawyer should resign as registered agent of the company, and is only required to keep the records for a further two (2) years.

    In summary, compliance entails the following responsibilities:

    • identify the client
    • identify the purpose of the company or legal entity
    • cooperate with due process (a competent authority requesting the identify information of a company owner in a due case)
    • update the client information and maintain records
    • train staff with respect to KYC rules (in house)
    • apply the KYC policy across the board in their office
    • comply with any request from a competent authority for informationi
    • maintain confidentiality of the information

    Lawyer-Client Privilege and Confidentiality

    The general rule provided by Law 2 is that the information provided to the Registered Agent (or to any public servant belonging to a competent authority) is considered too be confidential and maintained in strict reserve.  Article 8 provides for fines from $1,000 to $25,000 in the case of breach of this confidentiality, without prejudice to any civil or criminal proceedings that may be brought for breach of the confidentiality.  Nevertheless, the public interest of disclosure under due process outweighs the right to non-disclosure of the name of the beneficial owner when properly and duly requested.  The Registered Agent is specifically exempted in the disclosure of the information requested under this law.

    Due Process and Requests for Information

    The law establishes, in Article 12, the process for a request for information. This request should be made in writing by the “competent authority”, upon fulfilling the due process required by Panama’s rules, requirements and procedures, to the registered agent:

    1. To provide the information that they hold regarding the client;  and
    2. To provide the documentation that backs up this information in any format (physical or digital) that they have.

    This request from the Panamanian authorities should fulfill the following requirements:

    1. It must indicate the reasons for this request for information (what is the legal basis – either a process being undertaken in Panama or a request from a Treaty party);
    2. The time period (term) in which the registered agent must provide the information (no less than 5 working days); and
    3. The office and address to which the information should be delivered.

    The response from the law firm should be presented on plain paper (or in electronic format if so advised), in which they legibly detail the information which is required by law.  The competent authority should be able to confirm that they have complied with the requirements of Article 6 (identification of the owner) simply and easily.

    It should be noted that the lawyer is not required to provide any other information or documentation apart from that specifically identified in this law, including anything covered by lawyer-client privilege.  This means that the lawyer is not required to identify any bank accounts, transactions or other documentation that they have, apart from the identity of the owner of the company.  Furthermore, the law specifically establishes that this law does not authorise the authorities to conduct any search and seizures of law offices, nor to remove from their premises any records or files (electronic or physical), and that in order to conduct any such search and seizure all due process of the Panamanian law would need to be complied with separately and apart from this law.

    Another important point is that Article 16 indicates that the registered agent is not required to provide the information where the Competent Authority fails to provide the legal basis for the request, or where due process has not be fulfilled, or whether the information leading to the investigation has been obtained by illegal means (such as illegal wire taps, illegally obtained evidence, etc.), whether by the Panamanian or international authorities.  Therefore, Panamanian authorities will need to ensure that their counter-parties are fully compliant with due process in their requests for information.

    Effects of non-compliance on the Registered Agent

    Should a registered agent (lawyer) fail to comply with these rules, they risk fines and even having their license to practice law being suspended for up to three (3) years.  Articles 18 to 31 of Law 2 (2011) deal with the process that should be followed to file a complaint against a lawyer (or law firm) who:

    1. provide incomplete information or fail to provide up-to-date information
    2. fail to deliver the information or documentation; or
    3. repeatedly fail to provide complete and up-to-date information or systematically fail to comply.

    In closing, I hope that this article has clearly outlined the steps that Panama has taken to comply with their Gatekeeper’s Initiative, to ensure that from the outset lawyers are cooperating in the battle against money laundering and the financing of terrorism.  This initiative began when the G-8 Finance Ministers in Moscow called on countries to consider means to address money laundering through the efforts of professional gatekeepers of the international financial system, in which lawyers and company formation agents form an important part.

    More information

    Other interesting articles on this topic (from other jurisdictions):

    Confidentiality or Complicity of the Lawyer

    by

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    CONFIDENCIALIDAD O COMPLICIDAD EN EL EJERCICIO DE LA ABOGACÍA – Blanqueo de Capitales

    Por: Judith Chiari

    judithchiari2 ¿Cuál es el límite entre la confidencialidad y la complicidad, que puede tener un profesional del derecho con su cliente? Cómo ejemplo expongo la siguiente situación: Un cliente nuestro de años, al cual le brindamos nuestros servicios en todos sus negocios, se presenta a nuestro despacho y nos confía que él necesita invertir (a manera de “disfrazar”) la procedencia de un dinero proveniente de un nuevo negocio, a su entender, este no es dinero sucio pues no procede del narcotráfico, sino de otra actividad (también ilícita, a nuestro entender como profesionales del derecho).

    Cómo reaccionaríamos o actuaremos ante esta situación, sabiendo que como regla de las 40 recomendaciones de la GAFI, la regla número veinte (20) versa lo siguiente:

    “Si una institución financiera sospecha o tiene motivos razonables para sospechar que los fondos son producto de una actividad criminal, o están relacionados al financiamiento del terrorismo, a ésta se le debe exigir, por ley, que reporte con prontitud sus sospechas a la Unidad de Inteligencia Financiera (UIF)”

      Los análisis de muchos casos demuestran, que los blanqueadores apenas controlan un área se trasladan a otra, en este caso, nos referimos a los profesionales del derecho. Es muy importante conocer las áreas de riesgo en que se da el blanqueo, ya que  se les someten a un régimen que de ser un simple portero han pasado a ser los que tienen que alertar para decir aquí hay algo, y decírselo al estado, avisar de que hay una posible operación de blanqueo, para que a través de los órganos convenientes actúen contra esto.

    Esta doble vía viene siendo por organismos internacionales, GAFI, la unión europea, INTERPOL, que avisa a que profesionales hay que seleccionar. En la década de los noventa pensaban que solo eran los bancos. Han aparecido muchos otros actores, como agentes de propiedad inmobiliaria, casas de cambios, contables, asesores financieros. Se ha visto más utilización de la profesión jurídica por parte de los blanqueadores, viendo esta profesión como un ámbito alternativo.

    Una preocupación que el GAFI, ya dijo en su informe del año 92 que los abogados eran un problema pues el blanqueo de capitales  se estaba dando mediante la actividad del abogado, y que había que tomar medidas al respecto, debido a la complicidad que puede existir entre el profesional del derecho y “su cliente”.

    Se da entonces la confrontación entre el derecho de secreto profesional e información del cliente y la obligación que se le impone a estos profesionales, de comunicar sobre operaciones sospechosas. Los profesionales del derecho se han visto involucrados en actos de blanqueo en los últimos años , ya sea interviniendo en la planeación diseño y realización de creación de núcleos de imputación jurídica, de nuevos sujetos, en la creación de sociedades, de estratificación de sociedades o actuando en nombre de otros, mediante fiduciarias. Un ejemplo, es el conocido caso como “Ballena Blanca”, donde se detectaron operaciones por lavado por más de 250 millones de euros, y descubrieron, conexiones de más de 1000 sociedades en varios países,  incluidos en torno a un buffet de abogados.

    Y un ejemplo mucho más reciente y local lo que estamos presenciando en nuestro ámbito nacional en cuanto a centenas de sociedades creadas con el fin de canalizar fondos provenientes del peculado.

    El problema no es un problema de conflicto sino de límites, los abogados, estamos enfrentando una grave situación:  pasamos de la época en que uno sabía qué recopilación utilizar, a lo de ahora, códigos actualizados de manera constante. Surge aquí la disyuntiva, de que el abogado es exigido por su cliente como un confidente que le resuelva sus problemas legales y a la vez, ese mismo abogado es exigido por las autoridades como un obligado informador de toda actividad que le parezca sospechosa de estar vinculada al lavado de activos.

    Planteada la cuestión, se convierte al abogado no en una ayuda del ciudadano, sino en un “micrófono debajo de la mesa”, en un delator. Esa es la cuestión que se plantea en definir donde están los límites.

    Por eso entiendo, que muy especialmente en el caso de los abogados, el secreto profesional va más allá de ser un derecho y un deber, pues existe también un deber de callar, para preservar la privacidad del cliente, tiene un significado puramente axiológico, forma parte de las bases del sistema, es un evento fundamental en el Estado de Derecho, pasa de ser un simple derecho a ser una institución jurídica objetiva, subjetiva como el derecho de cliente y derecho/deber de abogado y objetiva base fundamental de derecho de los ciudadanos que precisan asistencia.

    El abogado debe ser confidente, pero lo que no debe ser es cómplice y es esto lo que trae el debate.

    En la nueva ley 47 del 6 de agosto de 2013, que adopta un régimen de custodia aplicable a las acciones emitidas al portador, en el Capítulo IV , que establece la información; Artículo 10 numeral 4 versa lo siguiente:

    “Proporcionar la información a que se hace referencia esta Ley cuando esta sea requerida por las autoridades competentes.  El suministro de la información no se considerará como incumplimiento de su obligación de mantener la información en estricta reserva ni como una violación al deber de confidencialidad o el derecho a la privacidad.

    Los abogados incumplen cuando asisten la confesión, asesoramiento o determinados operaciones por cuenta de su cliente o bien cuando actúan representado a su cliente en toda transacción financiera.

    Por lo tanto el abogado se convierte en sujeto obligado solo cuando deja de actuar como órgano necesario, cuando nos encontremos ante ese ámbito del derecho profesional donde el abogado es un profesional con el que hay que contar sin reservas; ese abogado confidente en el que hay que confiar, en el que hay que depositar toda la confianza y que además es imprescindible, porque sin él no puedo defenderme ante los tribunales.

    En esos casos el abogado no es sujeto obligado, por lo tanto el abogado queda despojado de especificidad, de sus particularidades, privilegios cuando no está representando los intereses de su cliente. Tiene que identificar al cliente, examinar transacciones sospechosas, conservar documentos durante un determinado tiempo, comunicación información al servicio de instituciones en contra de blanqueo de capitales, abstenerse frente a las operaciones informadas, mantener silencio frente al cliente de que esa operación ha sido comunicada y que además ha sido paralizada, en ocasiones obviamente el cliente preguntará ¿“porque no las has ejecutado”? En este momento el abogado debe guardar silencio.Para seguir la operación y no ahuyentar a la presa.

    La actitud de los abogados se debe a la importancia que para nosotros tiene la relación de confianza entre abogado-cliente y del deber de mantener el secreto profesional. Dicha relación de confianza queda enormemente deteriorada en materia de prevención de blanqueo de capitales, normativa que no sólo nos anima, sino nos obliga a mantener desde un principio una actitud beligerante y de desconfiada con respecto a las intenciones del cliente y los motivos por los que solicita nuestro asesoramiento.

    Tener que investigar a nuestro cliente, desconfiar de él, efectuar averiguaciones sobre su actividad sin que lo sepa y, mucho menos, y además de esto, la idea de denunciarlo ante las autoridades por una sospecha o indicio de que los fondos que pretende invertir son de procedencia ilícita, aún sin tener certeza de dicho extremo.

    A los abogados se nos imponen obligaciones de índole policial, sin poder disponer de los medios materiales necesarios para poder cumplir dichas obligaciones, como las que tienen otros sujetos obligados, como son las entidades financieras, por poner un ejemplo.

    La amplitud del concepto de «blanqueo de capitales», engloba todo capital procedente de «cualquier» actividad ilícita, incluso procedente de delito fiscal, dificulta la labor de detectar a un presunto blanqueador, cuyo perfil no es el de un delincuente tradicional (traficante de armas o droga, por ejemplo), sino que puede perfectamente tratarse de un profesional aparentemente honesto y buen padre de familia, que, por ejemplo, elude el pago de sus impuestos, o es acusado en su país de origen de una quiebra fraudulenta.

    El primer tipo de blanqueador es posible, entre comillas, detectarlo, el segundo, sencillamente, es difícil de ser detectado.

    Debemos entonces como profesionales, conocer nuestro cliente investigar pero no por esto hostigarlo, en caso tal de tener sospecha cierta y demostrable entonces actuar cónsonamente con la legislación para prevenir quedar envueltos en el delito de blanqueo de capitales.