Panama expects to escape watchdog’s money laundering ‘grey list’ this year

Panama expects to be removed soon from a “grey list” of countries that are not doing enough to combat money laundering, following years of pressure to clean up its financial system in the wake of the Panama Papers scandal.

President Laurentino Cortizo told the Financial Times that the Central American nation was completing work on a beneficial registry of company ownership, one of the last outstanding tasks assigned by the Financial Action Task Force, an international watchdog.

“We are expecting to leave FATF [’s grey list] soon, we are expecting it this year,” the president said. “We have made an enormous effort. I have been personally following the team working on the issue”.

A senior US embassy official confirmed there was a “really good possibility” Panama would leave the FATF grey list and it could happen before the end of 2023 if enough progress was made on uploading companies to the registry of beneficial ownership. Information from the registry also needed to be passed on to law enforcement for possible prosecutions, the official added.

Panama has been under intense pressure from FATF to complete its outstanding actions, having missed a 2021 deadline. In its latest review in February, the organisation urged Panama to “swiftly complete its action plan by June 2023” or face enhanced due diligence of transactions.

The FATF was founded in 1989 to combat money laundering, terrorist financing and other similar threats to the integrity of the international financial system. Its grey list includes nations such as Syria, Albania, Nigeria and the Cayman Islands.

Panama hit the headlines in 2016 when the International Consortium of Investigative Journalists published the “Panama Papers” — a giant leak of documents from Panama-based law firm Mossack Fonseca. It exposed the activities of 214,000 offshore companies, some of which sheltered millions of dollars of hidden assets belonging to politicians and world leaders.

Cortizo, a former cattle rancher, lamented that his “welcome present as president-elect” in 2019 was Panama being put on the FATF grey list. He argued his country had been treated unfairly since, he claimed, it was only home to 0.27 per cent of the world’s offshore companies.

“You have to ask where the other 99 per cent of the offshore companies are located,” the president said, noting that some US states such as Delaware were tax havens. “It’s important that they also deal with the problem of their tax havens.”

Cortizo remains keen to shake off Panama’s image as a haven for shady money, stressing that “we are open, and I want to put this in capital letters, underlined and in bold, open to good investment”. He wants to sell Panama as “a country of opportunities which respects law and order”.

Multinationals appear to have heard the message, flocking to Panama in recent years to establish regional headquarters, drawn by a stable, business-friendly investment climate and good air and sea connections. The economy has been one of Latin America’s best performers. Last year it grew 10 per cent and this year is expected to expand another 5 per cent, according to the IMF.

Ilan Goldfajn, president of the Inter-American Development Bank, last month lauded Panama as an example of economic recovery from the Covid-19 pandemic.

Despite boasting a Miami-like skyline of gleaming office towers and one of the highest levels of gross domestic product per capita in Latin America, Panama remains a profoundly unequal society and was shaken by weeks of anti-government protests last year.

Elections are due next year and although Panama allows re-election Cortizo, 70, cannot run for a second consecutive term. Former president Ricardo Martinelli is casting a long shadow, having announced his intention to seek his party’s nomination as a candidate.

Designated by the US state department for “significant corruption” and banned from entry but nonetheless topping some early polls in Panama, Martinelli is facing two separate court cases for corruption. His sons were sentenced to three years imprisonment in the US for laundering $28mn of bribes.

“It’s a decision for the people . . . that’s the weight of democracy,” Cortizo said when asked about the prospect of Martinelli returning to power.

“I love the tours of community work which I do in rural Panama . . . 624 activities, twice the number of the last three administrations . . . I can’t stand for re-election but I hope that style of government continues.”