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.

 

 

Non Profit supervision in Panama: AML standards

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Non Profit supervision in Panama: AML standards

Non Profit supervision: fighting money laundering

The OECD insisted, in reports on Panama’s financial center, that Panama tighten the Non Profit regulations and oversight. As a result, Executive Decree 62 (2017) regulates the creation and supervision of Non Profit organisations.  We previously dealt with setting up a Non Profit, so here I will outline the provisions regarding Non Profit supervision.

Who supervises?

The Executive Decree establishes a special deparment in the Ministry of Government. At this time,  “Department of OSFL Supervision, Follow Up & Evaluation” is part of the Legal Matters and Applications Department .  We will refer to this department as the OSFL-SFE Department.

OSFL = Organizaciones Sin Fines de Lucro = Non Profit Organizations

What are their powers?

The OSFL-SFE has 2 principal powers and objectives:

  1. Permanant risk analysis of all OSFLs legally recognised by the Ministry of Government
  2. Control mechanisms to minimise risk and follow up on the OSFL, to ensure compliance with all applicable laws

What are they supposed to do?

Consequently, the OSFL-SFE:

  • Maintains risk reports regarding OSFL’s in Panama
  • Requires reports on the funding of Non Profit entities and verify the information provided to them
  • Checks on the funding received, generated or transferred by Non Profits
  • They may report any suspicious activity to the Unidad de Analisis Financiera (the Financial Analysis Unit).

The OSFL-SFE has the following powers:

  1. Require whatever documentation they consider will allow them to supervise, follow up and evaluate OSFLs
  2. Inspect the books, records and documents of the administration, financial management and financing of the Non Profits under their supervision
  3. Request that the legal representative of any Non Profit present documents as needed for these 2 purposes

Additionally, the OSFL-SFE may visit the premises or offices of a Non Profit organization.

What should your Non Profit do?

You must keep accurate accounts, books and records of all donations received, funds raised and donations made from your Non Profit to another. At the end of each year, you report to the Tax Department 2 things:

  • Expenses: this allows the tax department to verify this information against the income tax returns of service providers and cross-check the information
  • Donations received and details of the donors – this is cross-checked against those who are claiming tax deductible donations

Consequently, your Non Profit organisation must keep update records:

  • File any change of Board of Directors at the Public Registry;
  • Update your membership records each year with any changes;
  • If your bylaws are out-dated, then you need to assign a committee to review them and bring them into compliance with new regulations and laws. Once reviewed, present the proposed changes to your General Assembly to modify your Statutes or Bylaws as appropriate. These changes must then be approved by the Ministry of Government, before they can be filed at the Public Registry.

Although it is published in Spanish, the full regulation on Non Profit supervision and organisations can be found in Gazette #28249-A.

For more information and assistance in establishing or managing your Non Profit organization please contact Betsy Moran.