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Panama's Banking System Maintains High Standard of Confidentiality |
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Panama remains one of the most reliable offshore destinations in the scope and enforcement of its banking secrecy laws today. Recently, many of the world’s most notable offshore destinations, from Europe to the Caribbean, have been badly breached in terms of the security and confidentiality they can offer to their international banking clients: giants such as Switzerland, Liechtenstein, Monaco and the Cayman Islands are yielding private client information under pressure from various tax authorities.
Unfortunately, it would seem the measures taken to reduce criminal financial activity, such as tax fraud, money laundering, drug trafficking and the funding terrorist activities, have compromised the confidentiality of many of the legitimate activities conducted in offshore centers.
However, offshore centers like Panama are attractive jurisdictions in which to conduct legitimate business, trade stocks, and engage in above-board asset protection and tax reduction strategies. Panama believes that its legitimate offshore clients deserve the continued security and confidentiality once offered by so many banking centers around the world, and is dedicated to preventing the abuse of information requests by foreign governments under the guise of ferreting out criminal activity.
Panama’s banking secrecy laws are contained in several decrees, several of which can be found in the “Ley Bancaria” or Banking Law, also known as Executive Decree #52 of April 2008.
Article 194 of this law specifically enshrines the client’s right to privacy and confidentiality in its relationship with the bank with respect to third parties, and Article 110 makes explicit the bank’s obligation to maintain this confidentiality. This obligation extends to all bank employees, external auditors, and public servants that may also have access to this confidential information, and continues even when they cease to act in such capacity. Penalties for breaching these articles of confidentiality can reach up to $500,000, in addition to any further criminal and civil proceedings.
There are conditions under which the banks may breach this confidentiality without the client’s consent, and these are laid out in Chapter XII of the law, “Right to Confidentiality”. The most notable exceptions are in the case of preventing money laundering, the financing of terrorism and other ‘related offences’. It is noteworthy, here, that simple tax fraud is not included in this heading.
Any other request must be presented by a competent authority, according to all laws in force, and by means of criminal proceedings resulting in a court order.
The existence of these laws is not spurious; the enforcement of confidentiality laws and the penalties for breaking them are well understood in Panama. They are seen as essential in preserving the integrity of the financial sector, which represents a substantial part of the country’s economy and is critical to its economic stability.
More than 75 banks are stationed in Panama, 36 of them with international (offshore) licenses. The financial sector represents a full 8% of the GDP, and employs 17% of the labour force. In short, the financial sector is a respected and integral part of Panama’s robust economy, and one well worth protecting – which means protecting banking clients.
Panama is in the process of signing double taxation treaties with several countries, in order to remain in good standing with the OECD, and discussions within the Panama Banking Association (Asociación Bancaria de Panamá) are currently under way to ensure the language of the treaties and their enforcement do not weaken or compromise the security of the current banking secrecy standard.
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