National Strategy for Combatting Money Laundering, the ......The National Strategy for Combatting Money Laundering, the Financing of Terrorism and financing the Proliferation of Weapons

T R A N S L A T I O N

Ref. No.: SG-TRAD-201700172 1 Prepared by: S. Lara Date: April 12, 2017

National Strategy for Combatting Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction

National Commission against Money Laundering, the Financing of Terrorism and Financing the Proliferation

of Weapons of Mass Destruction

2017



INDEX

I. Message from the National Commission against Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction.

• Introduction to the National Strategy for Combatting Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction.

II. Mission and Vision

III. Glossary

IV. Essential aspects of the domestic and international coordination system for the

prevention of Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction.

• Domestic coordination

• International coordination

V. Legal and regulatory framework for the prevention of Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction.

VI. Conclusions of Panama’s National Risk Assessment on Money Laundering and the

Financing of Terrorism.

• Money laundering threats and vulnerabilities in Panama

• Vulnerable sectors: Nonfinancial and Financial sectors

• Legal entities

• The financing of terrorism and proliferation

VII. Pillars of the National Strategy for Combatting Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction.

• Methodology

• Description of strategic [priorities]

VIII. Appendixes

• Action plan for the execution of the National Strategy



• Acknowledgment

• Participating institutions

• Regulations



Message from the National Commission against Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass

Destruction

Law 23 dated 27 April 2015, “Adopting measures for the prevention of money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction and other provisions,” introduces an updated framework in accordance with the highest international standards on anti-money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction, which indicates the Government of the Republic of Panama’s high degree of commitment to combating this international scourge. A series of regulations, including laws, executive decrees, rules and resolutions reinforcing the regulatory prevention framework were enacted, demonstrating that Panama has fully accepted the responsibility in accordance with international standards on the matter. In addition to strengthening the legal prevention framework, the Panamanian Government recently

approved the National Risk Assessment the cornerstone for identifying the most vulnerable and highest-risk sectors for money laundering and the financing of terrorism. This will permit focusing the use of human and technology resources for combatting money laundering, in addition to strengthening the institutional structure to mitigate risks and vulnerabilities against money laundering. The National Strategy for Combatting Money Laundering, the Financing of Terrorism and financing the Proliferation of Weapons of Mass Destruction is a clear measure for meeting the tasks identified for preventing, detecting and repressing detected vulnerabilities within our system. The strategy is based on the National Risk Assessment (NRA) on Money Laundering and Financing of Terrorism in Panama. In 2016, the National Commission against Money Laundering (CNBC, for its acronym in Spanish) completed and approved the NRA, which took into account our realities, the risks identified and the work to be undertaken and concluded to improve the task of combatting money laundering and the financing of terrorism. The Panamanian economy is characterized by its stable macroeconomic fundamentals, among which the banking monetary system, the lack of foreign exchange risk, interest rates close to international rates, low inflation and sustained economic growth are highlighted. This has permitted attracting foreign direct investment to our economy, favoring the conditions conducive to a positive business environment open to foreign investment. For the last two decades, Panama has been one of the fastest growing economies in the region, with a positive impact on employment generation and the reduction of income distribution imbalances. It currently has a BBB international investment grade rating with a stable outlook, granted by the main rating agencies, including Standard & Poor’s, Moody’s and Fitch. The completion of the Panama Canal expansion is tangible evidence of the positive outlook and viability of our economy in the short, medium and long term.



Aware of the vulnerabilities faced by a service economy and the geographic reality of its location between regional blocks of supply and demand for prohibited substances and criminal organizations originating and operating in other countries, the Panamanian economy may be used to launder or finance criminal activities. In connection with the above, Panama has identified the sectors with the highest risk for money laundering and the financing of terrorism, and has created a Strategy to maximize available resources to combat and mitigate this scourge, as well as the tasks for reinforcing its institutional capacity and strengthening international cooperation against the flow of illicit money. This analysis is based on the risk methodology used by the Financial Action Task Force of Latin

America (GAFILAT, for its acronym in Spanish) the regional affiliate of the Financial Action Task Force (FATF). After completing the National Risk Assessment, a strategy was prepared by an inter-institutional group with the support of the International Monetary Fund to mitigate or eliminate and/or control the risks identified and defined by the NRA. The strategy adopted by the Republic of Panama is described below. The international approach focuses on three broad categories of activities that seek to be eliminated. The first is money laundering, which today has a multiplicity of facets ranging from drug trafficking to smuggling and corruption, among many others; the second is the financing of terrorism, since it has been noted that terrorism grows internationally only if it has the economic resources to sustain itself; and the third is the financing of weapons of mass destruction, whose use by any country or actor is condemned internationally for its inhuman impact, if used. In Panama, as in other countries, these activities can originate domestically or abroad. Out of these three activities, all condemned by the international community, FATF recommendations support numerous actions to prevent money laundering, the financing of terrorism and weapons of mass destruction.

CNBC Technical Secretariat



INTRODUCTION:

Due to its geostrategic position, the Republic of Panama has conditions benefiting the economic growth attracting foreign direct investment. In connection with this, new regulations have been developed and existing regulations updated, aimed at preventing organized crime from using our financial, economic and professional platform to engage in illegal activities such as money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction. For the first time, Panama has a “National Risk Assessment on Money Laundering and The Financing of Terrorism,” which identifies domestic and cross-border threats challenging the Panamanian Government. As a consequence, the National Commission against Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction approved the National Strategy for Combatting Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction. This document is the result of the inter-institutional work that unites all of the domestic efforts on prevention, intelligence and detection, investigation and criminal justice that are included in the strategic and technical action plan with the necessary tools aimed at protecting the country from damages to the social, financial and reputational stability caused by these crimes.



Mission

Strengthening those measures for preventing, detecting and repressing money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction aimed at reinforcing the domestic coordination system by applying the strategies developed in the Action Plan.

Vision

Presenting Panama as a financial, commercial and logistics hub by cooperating in and ensuring the application of international and legal standards while developing a domestic culture for the prevention of money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction.



Glossary

ANA National Customs Authority

BD Resolution Board of Directors’ Resolution

CICAD Inter-American Drug Abuse Control Commission

CICTE Inter-American Committee against Terrorism

CNBC National Commission against Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction

CNS National Security Council

CPTF Committee on the Prevention of Terrorism and its Financing

DIJ Judicial Investigation Division

DNFBP Designated non-financial business and profession

FATF Financial Action Task Force

FIU Financial Intelligence Unit

GAFILAT Financial Action Task Force of Latin America

GAFISUD Financial Action Task Force of South America

GELAVEX Group of Experts for the Control of Money Laundering

IOSCO International Organization of Securities Commissions

IPACOOP Panamanian Institute of Autonomous Cooperatives

JB Judicial Branch

MEF Ministry of Economy and Finance

MICI Ministry of Commerce and Industry

MINGOB Ministry of Government

ML Money laundering

MOU Memorandum of Understanding

MP Public Ministry

NPO Nonprofit organization



OAS Organization of American States

PGN Attorney General’s Office

PWMD Proliferation of weapons of mass destruction

RBA Risk-based approach

SBP Superintendency of Banks of Panama

SENAFRONT National Border Protection Service

SMV Superintendency of the Securities Market of Panama

SSRP Superintendency of Insurance and Reinsurance of Panama

STR Suspicious transaction report

TF The Financing of Terrorism

UAF Financial Analysis Unit for the Prevention of Money Laundering and the Financing of Terrorism

UN United Nations

UNSCR United Nations Security Council Resolution



Essential aspects of the domestic and international coordination system for the prevention of Money Laundering, the Financing of Terrorism and

Financing the Proliferation of Weapons of Mass Destruction Coordination System, in the framework of International Standards

Domestic coordination: The Domestic Coordination System for the prevention of Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction was created following the enactment of Law 23 dated 27 April 2015, establishing legal and institutional changes based on international standards, including the United Nations Security Council Resolutions. The members of the Domestic Coordination System are: the National Commission against Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction, the Financial Analysis Unit for the Prevention of Money Laundering and the Financing of Terrorism and the Supervisory Bodies.

CNBC ✓ Minister of Economy and Finance,

✓ Minister of Foreign Affairs,

✓ Minister of the Presidency,

✓ Superintendent of Banks of Panama,

✓ Attorney General of the Republic in representation of the Public

Ministry,

✓ Chairman of the Committee on Economy and Finance of the National

Assembly.

DUTIES

1. Approve the National Strategy

2. Overseeing the National Risk Assessment Plan

3. Establishing the policies for the prevention of the crimes of money

laundering, the financing of terrorism and financing the proliferation of

weapons of mass destruction.

SUPERVISORY BODIES ✓ Superintendency of Banks of Panama

✓ Superintendency of Insurance and Reinsurance of Panama

✓ Superintendency of the Securities Market

✓ Intendancy for the Supervision and Regulation of Nonfinancial Entities

✓ Panamanian Institute of Autonomous Cooperatives.



The National Committee for the Prevention of Drug-related Crimes is a technical and administrative body of the State responsible for studying the mechanisms for preventing illegal activities related to drugs and the rehabilitation of these behaviors. The Committee is integrated by an inter-institutional team, the White Cross and the Head of the Catholic Church, chaired by the Attorney General of the Nation. International coordination: The CNBC, representing the Republic of Panama in international forums on money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction, will ensure the coordination. The Financial Action Task Force of Latin America (GAFILAT) is a regionally-based inter-governmental organization that brings together 17 countries from South, Central and North America to combat money laundering and the financing of terrorism by means of a commitment to continuous improvement of domestic policies against both scourges and the enhancement of various mechanisms of cooperation among its member countries. Executive Decree 470 dated 20 July 2012 appointed the Director of the Financial Analysis Unit as the Permanent Representative of the Republic of Panama to the Financial Action Task Force of South America (GAFISUD, today known as GAFILAT). By means of the Minutes of the XXI Plenary Meeting of the Representatives of South America (GAFISUD) in July 2010, a resolution was passed admitting Panama as a plenary member. Currently, Panama serves as Vice Chairman for the Organization for 2017 and will serve as Chairman in 2018.

Law 23 of April 2015 establishes that the Republic of Panama as it is subject of

International Law will participate actively in regional and international AML/CFT/PWMD organizations. The Financial Analysis Unit for the Prevention of Money Laundering and the Financing of Terrorism is the representative to the EGMONT Group of Financial Intelligence Units. The EGMONT Group is the organization that brings together the Financial Intelligence Units (FIUs) of the world. As for the United Nations tools for the prevention and repression of the financing of terrorism, Law 23 dated 27 April 2015 implements United Nations Security Council Resolutions 1267 and 1373 for preventive freezing [of assets], which is developed in Decree 587 dated 4 August 2015. Since 2015, Panama is a member of two working groups of the Global Coalition to Defeat ISIS, one which seeks to block potential for and access to funding for this terrorist group and the other, on stabilization, in which Panama supports humanitarian causes.



Regionally, the Republic of Panama is the Vice Chairman of the Organization of American State’s Inter-American Committee against Terrorism (CICTE) and will serve as Chairman for the 2017-2018 Seventh Regular Session of the committee. Panama will present the “Strengthening Domestic Financial Systems for the Prevention of Terrorism and the Proliferation of Weapons of Mass Destruction through International Cooperation and the Exchange of Information” Declaration for the agreement of CICTE/OAS member countries. The Intendancy for the Supervision and Regulation of nonfinancial entities participates in the Special Committee that drafted Panama’s declaration. The UAF represents Panama in the sub-working group of the Financial Intelligence Units and the

Criminal Investigation Organism of the Group of Experts for the Control of Money Laundering (GELAVEX). The Group of Experts was created in 1990 pursuant to Article 22 of the Statute of the Inter-American Drug Abuse Control Commission (CICAD) and is therefore one of the established Advisory Bodies.



Legal and Regulatory Framework for the Prevention of Money Laundering, the Financing of Terrorism and Financing the Proliferation

of Weapons of Mass Destruction

By means of Law 23 dated 27 April 2015, the Republic of Panama created the domestic legal framework for the prevention of money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction. Pursuant to the provisions of Law 23 dated 27 April 2015, Executive Decree 363 dated 13 August 2016 issued and enacted the regulations for it. This Executive Decree is aimed at developing the regulatory framework’s general guidelines to understand and implement standards that must be applied by the different regulatory bodies and all regulated entities for the prevention of money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction, as well as the prevention of risks derived from the possibility of products and services offered by regulated entities being used as ML/TF/PWMD instruments. Traditionally, the Panamanian financial sector has had a more robust AML/CFT/PWMD supervisory and regulatory framework. Financial supervisory bodies have developed regulatory and supervisory prevention framework in accordance with the regulatory framework. As for the banking sector, the main element of the financial sector and the one with the greatest exposure to international markets, besides the supervisory and regulatory structure developed by the Superintendency of Banks, the operations of the international banking business requires correspondent and credit relationships with the main international banks and multilateral credit bodies, which also introduce practices and procedures that help to mitigate the misuse of the illegal flow of capital. In recent decades, the supervisory bodies have also developed a cooperative capacity not only domestically but also with the different regional supervisory bodies, which has favored the exchange of information for the prevention of money laundering. In the case of the banking sector, the Superintendency of Banks is a member of various international supervisory bodies such as the Central American Council of Superintendents of Banks, the Association of Supervisors of Banks of the Americas (ASBA) and the Group of International Finance Centre Supervisors (GIFCS). At the same time, the Superintendency of the Securities Market has been member of the International Organization of Securities Regulators (IOSCO) and currently has met the conditions that will permit it to again participate as an active member. These organizations promote not only cooperation for financial supervision and for the prevention of money laundering and the financing of terrorism, but also training and specialized education on these important topics. To this end, there has been a network of training and education of specialized human resources for several decades based on



continuous and permanent updating of recommended best international standards, both by the Basel Committee for Banking Supervision and relevant anti-money laundering organizations. One of the main objectives of this strategy is to identify the strategic priorities for strengthening the advances made so far in AML/CFT supervision and the measures resulting from the identification of strategic priorities. This will permit not only reinforcing the banking supervisory framework but also reducing the negative reputational effects affecting the Panamanian economy, especially the company service provider and the banking sectors. This is a competitive advantage for the development of the banking business and the provision of funds for economic growth. However, it also represents vulnerability for the money laundering risk if there are no appropriate structures and institutions to mitigate this scourge. To that end, the objective must be to improve [and] strengthen banking supervision’s expert judgment so that the reputational risks that could negatively impact the confidence of institutional investors do not affect the offer of financial services. That is, that these elements not constitute an adverse factor for the risk assessment of international economic agents that are used for decisions to invest in Panama. If one considers that Panama is one of the fastest-growing economies in the region and also has a clear, defined strategy for the next five years, this is fundamental in taking advantage of and maximizing the benefits of the Panamanian service sector, especially of those related to interoceanic zone logistics, including the operations of the Panama Canal, ports, tourism and multimodal transportation, among others. Therefore, the key objective is addressing AML supervision with a risk-based approach, as a complement to regulatory framework supervision, which has mainly relied on the supervisor’s efforts. This implies the assessment of products and services offered and to be offered to their customers, the marketing channels used, and the geographic location from where the regulated entity provides, promotes and offers its services and products. The objective is for supervision to sensitize the actions that must be controlled and how they are executed. For this, a control environment is required in accordance with the complexity of the operations, technological structures that permit an increase in the effectiveness of the prevention duties, and a predictive analysis of the risks faced by the business. One of the main pillars of the AML risk supervision process will be developing an offsite supervision plan with continuous and updated information on the regulated financial entities. The advances on this topic are already being implemented, and the technology support infrastructure for this new supervision methodology and plan is being strengthened. Another objective of the National Risk Assessment is to maintain a regulatory framework following best international standards for combating and preventing this important scourge. Having an updated regulatory framework is one of the basic tools for regulated financial entities to have an appropriate framework for engaging in their business. Additionally it provides a suitable environment for AML risk-based supervision.



The AML banking regulatory framework dates back to 2000 with the regulations on the Compliance Officer and the Compliance Program (Rule 8 and 10-2000) and the regulation for the prevention of the misuse of banking services (Rule 9-2000). The main characteristics of that regulation were the identification of suspicious transactions, including a suspicious transactions catalog; the notification to the Financial Analysis Unit; and the identification criteria for due diligence, including trust structures, registered share companies and bearer share companies, as long as the purpose was the identification and documentation of the real final beneficiary, even when they were indirect beneficiaries of bank deposits. That regulatory framework was updated in 2005 by approving Rules 12 and 12E of 2005, in which the measures for preventing the misuse of banking and trust services and the examples of suspicious transactions, respectively, were established. That regulation updated its main regulatory topics, including, among other items, the criteria for due diligence; the “customer” concept; the customer resources that are the object of the contractual relationship, regardless of the transaction amount, as well as the requirement to keep such information updated during the course of the relationship; the establishment of minimum criteria for customer profiling; the use of technology tools for detecting suspicious or abnormal activity patters; special attention to customers identified as Politically Exposed Persons (PEPs); cash reporting; and the requirement for banks and trust companies to have “Know your customer” policy manuals as well as “Know your employee” policies. Rule 12E-2005 provided a guide or catalog with examples of suspicious transactions on deposits and withdrawals, bank accounts, wire transfers, customer characteristics, operations linked to countries, territories or jurisdictions of concern, transactions with unusual characteristics, customers avoiding meeting the information requirements, changes in transaction patterns, transactions related to the financing of terrorism, transactions related to currency arbitrage and automated teller machines (ATMs). The Superintendency of Banks has updated its banking regulatory framework according to the concepts and principles of the new AML framework. This new framework, in addition to the supervision of regulated financial entities of banks and trust companies, provided additional AML supervisory powers over finance, leasing and factoring companies, issuers and processors of credit, debit and prepaid cards, issuers of payment instruments and electronic money and other corporate services provided by trust companies. To that end, the SBP has approved the following regulations that will be applicable to the regulated entities under its supervision: a) Rule 5-2015: Prevention on the misuse of services provided by other regulated entities

under the supervision of the Superintendency of Banks. The rule develops the concepts of customers, customer due diligence, identifying and verifying up to the last individual final beneficiary, the minimum due diligence requirements, documentation and follow-up, PEP, due diligence on high-risk customers, cash transaction reports, “Know your customer” policy manuals, “Know your employee” policies, the requirement to train employees, suspicious transactions, compliance duties, disciplinary system and notification of the Financial Analysis Unit, among other topics.



b) Rule 7-2015: Red flags catalog for the detection of suspicious transactions related to ML/FT/PWMD: examples of red flags related to customer behavior, red flags on top executive behavior, red flags on cash transactions, wire transfers and money orders, red flags on banks, trust companies and other financial entities, changes in patterns of conduct on transactions, transactions related to FT, transactions related to currency arbitrage and automated teller machines, among others.

c) Rule 9-2015: Disciplinary administrative procedures on AML.

d) Rule 10-2015: Prevention of the misuse of banking and trust services. The following topics

were developed: AML manuals, establishment of the AML committee in banking entities (corporate governance), concepts of customer, final beneficiary, interbank operations, due diligence in interbank operations, customer due diligence, minimum due diligence requirements, customer risk rating methodology, customer risk categories, minimum criteria for customer risk profile and analysis, individual customer profile, legal entity customer profile, identification of the final beneficiary in corporations, simplified due diligence, due diligence for wire transfers, bank and trust company risk assessment, monitoring tool for banks, PEP, high-risk customer due diligence, cash transactions reports, “Know your employee” manual, employee training requirement, unusual operations, suspicious transactions, notification of the UAF, furnishing information, corporate responsibility, and banking groups, among other topics.

e) Rule 6-2016: Guidelines for AML/CFT/PWMD risk management that may arise from new

products and technologies, establishing guidelines for ML/FT/PWMD risk factors related to customers, products or services, marketing channels and payment instruments, geographic zones, new product and technology risk assessment, incursion in geographic zones, new product and technology risk assessment report.

f) Rule 7-2016: Guidelines for AML/CFT/PWMD in cross-border correspondent banking

relationships provided by correspondent banks to the Panamanian market, establishing regulations on correspondent banking relationships, due diligence on represented banks, enhanced due diligence regime in correspondent banking relationships, correspondent banking relationships with shell banks.

g) Rule 1-2017: Amendments to Rule 10-2015. Updates on prevention policy manuals, AML

Committee, minimum due diligence requirements, customer risk classification methodology, individual customer risk profile, legal entity risk profile, identification of the final beneficiary of corporations, internal auditing, banking groups, branch offices and affiliates abroad, “Know your employee” policy, high-risk customer due diligence, preventive freezing of assets, monitoring tools, bank and trust company risk assessment, simplified due diligence.

h) The SBP is currently working on updating the wire transfer regulations.

The new regulatory framework has meant new institutional challenges for adapting the rest of the financial sector to AML regulatory and supervisory standards, as well as, from an



institutional point of view, new challenges on human resources, training and institutional structures for AML supervision. This was swiftly and efficiently addressed to create a new institutional structure, with more human resources for supervision and, similarly, adapting the new regulated financial entities to the dynamic, structure and control environment followed by the banking sector on prevention. This effort also required the provision of more human resources for training and professional enhancement. To this end, we were provided with technical assistance resources from Multilateral Organizations such as the Inter-American Development Bank (IDB) and the International Monetary Fund, as well as technical assistance from the United States Department of the Treasury. Other sources of technical assistance were the Toronto Centre for the AML supervision of trust companies, technical assistance and cooperation from ASBA and the United Nations Office on Drugs and Crime on AML/CFT. The strategy is to keep reinforcing human resource skills using preventive supervision. Parallel to that, we are currently conducting a consultancy to improve and strengthen risk-based supervision procedures. This initiative is conducted not only at the Superintendency of Banks of Panama but in other financial supervisory bodies, such as the Superintendency of the Securities Market, the Superintendency of Insurance and Reinsurance and the Panamanian Institute of Autonomous Cooperatives (IPACOOP). The idea is to have a standardized supervision scheme for AML/CFT for the entire financial sector and for it to be applicable to financial conglomerates with simultaneous operations in two or more markets.

The Strategic Plan of the Financial Coordination Council (CCF, for its acronym in Spanish)

an organization that brings together financial supervisors includes among its strategic pillars the establishment of a Liaison Committee for AML/CFT/FPWM supervision. That committee, already in place, coordinates the institutional efforts necessary for the development of this new methodology of risk supervision, complementary to the supervision of legal compliance. This validates the inter-institutional cooperation efforts for AML/CFT supervision and regulation. The Superintendency of the Securities Market was created by means of Law 67 dated 1 September 2012 (published on Official Gazette 26863-A dated 2 September 2011), as an autonomous body of the State, with legal status, its own equity and administrative, budgetary and financial independence. It was created from the former National Securities Commission (created by Cabinet Decree 547 dated 16 July 1970), which was under the Ministry of Commerce and Industry and whose primary function was to regulate, analyze and oversee the sale of securities to the investing public.



Later on, Decree Law 1 dated 8 July 1999 institutionalized the National Securities Commission under the direction of three commissioners. The general objective of the Superintendency is to regulate, supervise and oversee securities market activities conducted in and from the Republic of Panama, providing legal security for all market participants and guaranteeing transparency, with special protection for investors’ rights. Currently, the Superintendency has the exclusive competence for regulating and supervising issuers, investment firms, intermediaries, and other securities market participants. The Superintendency has supervised its regulated entities on the prevention of money laundering and the financing of terrorism since the enactment of Law 42 of 2000 and has ensured compliance with those international agreements our country has ratified. With the enactment of Law 23 dated 27 April 2015, the Superintendency has modified its regulations to require regulated entities in the sector to implement the high standards on AML/CFT recommended by international organizations and the practical improvements required by its international peers. During the existence of the institution, the supervision of the “Know your customer” policy has been emphasized in regulated entities, in order to prevent the introduction of illegal money into our financial system, and an AML/CFT Supervision Manual based on the risk-based approach methodology has been introduced. The Superintendency of Insurance and Reinsurance of Panama, is an institution created to regulate and oversee the insurance market in the Republic of Panama. The Superintendency was established in 1956 as a division within the Ministry of Commerce and Industry of the Republic. Subsequently, by means of Law 12 dated 3 April 2012, the Superintendency of Insurance and Reinsurance of Panama became an autonomous institution of the State, responsible for controlling, supervising, regulating and overseeing companies or entities conducting insurance operations, insurance brokers, captive insurance companies (Law 60 of 1996) and reinsurance companies and brokers (Law 63 of 1996). As required by Law 23 dated 27 April 2015, the Superintendency of Insurance and Reinsurance of Panama is updating its Anti-money laundering regulation (Rule 3-2015) to establish the criteria the regulated entities of the insurance sector must adopt to identify, assess and understand ML/FT/FPWMD risks and consequences within the industry. Similarly, the SSRP is adopting an ML/FT/FPWMD risk-based approach and an administrative disciplinary procedure ensuring the application of dissuasive sanctions to regulated entities that fail to comply with the AML regulation.



It is worth noting that the Superintendency of Insurance and Reinsurance of Panama has issued a new regulation on Corporate Governance (Rule 2-2016) for the insurance sector requiring all insurance and reinsurance companies to have a risk and compliance committee at the Board of Directors level, with oversight functions ensuring compliance with the established AML/CFT/FPWMD policies and procedures. The Panamanian Institute of Autonomous Cooperatives was created by means of Law 24 dated 21 July 1980, and Law 17 dated 1 May 1997 gave it the exclusive competence over cooperatives, authorizing or sanctioning their activities. By virtue of the enactment of Law 23 dated 27 April 2015, the IPACOOP updated and issued new regulations on suspicious transactions, risk-based supervision, due diligence, and identification of final beneficiaries, among others. Because of the new regulations, the IPACOOP issued an administrative disciplinary procedure for the cooperatives sector for the first time. Similarly, the IPACOOP has a Risk-based Supervision Manual for the Prevention of Money Laundering and the Financing of Terrorism, approved by means of Resolution DE-120-2016. It is worth noting that the IPACOOP has a Supervision Manual for Risk-based Prevention of Money Laundering and The Financing of Terrorism approved by means of Resolution DE-120-2016. However, we emphasize that in 2014, before the approval of Law 23 dated 27 April 2015, IPACOOP had changed its compliance-based AML/CFT supervision to a risk-based AML/CFT supervision methodology.

The Intendancy for the Supervision and Regulation of Nonfinancial Entities of the Ministry of Economy and Finance was created by means of Law 23 dated 27 April 2015 and is administratively responsible for supervising and regulating regulated nonfinancial entities and activities conducted by professions subject to supervision related to the prevention of money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction.

SBP

Banks Trust

companies Leasing

companies Factoring

companies Finance

companies

SMV

Securities brokerage firms

Investment advisors

Investment companies Risk rating agencies

Price providers Self-regulated

entities Pension funds

SSRP

Insurance companies

Reinsurance companies

Captive insurance

companies Other regulated

entities

IPACOOP

Savings and loans

cooperatives Multiple and

integral services

cooperatives Ancillary entities

Transportation cooperatives



By means of Executive Decree 361 dated 12 August 2015, the Intendancy for the Supervision and Regulation of Nonfinancial Entities was established. It is worth noting that one of the innovative aspects of Law 23 of 2015 is the inclusion of designated nonfinancial businesses and professions as ML/FT/FPWMD regulated entities. The Board of Directors of the Intendancy for the Supervision and Regulation of Nonfinancial Entities has issued eighteen (18) resolutions regulating the regulated nonfinancial entities and activities conducted by professions subject to supervision and its respective disciplinary procedure; and twenty-one (21) Communiqués addressed to Regulated Nonfinancial Entities and professions engaging in professional activities subject to supervision. As for domestic coordination, the Intendancy for the Supervision and Regulation of Nonfinancial Entities has signed five (5) Inter-institutional Cooperation Agreements with the Financial Analysis Unit for the Prevention of Money Laundering and the Financing of Terrorism; the General Revenue Office; the Colon Free Zone Administration; the Gaming Control Board; and the Ministry of Commerce and Industry.

By means of Executive Decree 136 dated 9 June 1995, the Financial Analysis Unit (UAF) for the Prevention of the Crime of Laundering Money from drug trafficking, under the Public Security and National Defense Council. Subsequently, that decree was revised by Executive Decree 163 of October 2000, creating the Financial Analysis Unit for the Prevention of

Real estate & Construction

Developers

Construction companies

Real estate agents

Realtors

Free Trade Zones &

Foreign Trade

Colon Free Zone

Panamá Pacífico

Baru Free Trade Zone

and Free Trade Zones

Diamond Exchange

Dealers in precious

metals and stones

Car dealers

Casinos & Gambing

Gaming houses

Casinos (A-, C-type slot

machines)

Financial nonbanking

Remittance houses

Pawnshops

Foreign exchange bureaus

Valuable goods transportation

State-owned entities

Banco Hipotecario Nacional (National

Mortgage Bank)

Sociedad de Ahorro y Préstamo

para la Vivienda

Banco de Desarrollo Agropecuario (Agricultural

Development Bank)

National Postal Service

Lotería Nacional de Beneficencia

(National Lottery)

Professional Activities

CPA

Lawyers

Notaries

Others



Money Laundering which, by means of Executive Decree 78 of 2003, became the Financial Analysis Unit for the Prevention of Money Laundering and the Financing of Terrorism. Later, by means of Executive Decree 930 dated 27 November 2009, the Financial Analysis Unit for the Prevention of Money Laundering and the Financing of Terrorism became an administrative entity with budgetary autonomy under the Ministry of the Presidency. In order to broaden the scope of compliance with international standards, Executive Decree 947 dated 5 December 2014 reorganized the Financial Analysis Unit for the Prevention of Money Laundering and the Financing of Terrorism in order to adjust its operations, designating it an administrative law enforcement agency with operating and budgetary independence under the Ministry of the Presidency. Subsequently, Executive Decree 241 dated 31 March 2015 assigned it a new name, the Financial Analysis Unit for the Prevention of Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction, and increased its duties. Law 23 of 2015 legally reinforced the UAF, establishing its operational independence. Additionally, it is regulated as a national center for the collection and analysis of financial information related to financing the crimes of money laundering, terrorism and the proliferation of weapons of mass destruction and for reporting the results of that analysis to the country’s investigative and law enforcement authorities. Its powers were broadened, especially on International Cooperation, authorizing it to exchange financial intelligence information with those peers with which it has signed memoranda of understanding or other cooperation agreements and with jurisdictions with which there is no signed agreement but that are members of the Egmont Group, and for reciprocity. Cooperation is also permitted when the information is relevant to complying with United Nations Security Council Resolution 1373. Pursuant to Executive Decree 587 dated 4 August 2015, the Preventive Freezing of assets that was developed in Title VI of Law 23 dated 27 April 2015 was regulated, establishing the procedures for the identification and application of preventive freezing measures on funds or assets in accordance with the procedures established in United Nations Security Council Resolutions 1267, 1988, 1373, 1718, 1737, 2161, 2170, 2178, 2199 and successor resolutions, by means of which all regulated entities are required to immediately withhold and prohibit the free disposal of funds and assets, including the prohibition to transfer, convert, dispose of or move assets, belonging to or controlled by designated individuals or entities under the criteria of the United Nations Security Council Resolutions. In order to comply with Decree 587, the UAF developed a manual, a format, an instructions manual and a flowchart for the preventive freezing of assets, all of these for the purpose of establishing guidelines for the regulated entities to help them to clearly and systematically comply with their obligations when the UAF sends the lists issued by the United Nations Security Council regarding the aforementioned resolutions.



At the same time, Executive Decree 324 dated 19 July 2016 created the Bureau of Counterterrorism and the Committee for the Prevention of Terrorism and its Financing in the Executive Secretariat of the National Security Council, as the entity responsible for executing the listing procedure under the criteria of United Nations Security Council Resolution 1373 and its successor resolutions. The Republic of Panama is a signatory to the United Nations Convention against Transnational Organized Crime (the Palermo Convention) and has criminalized Money Laundering in Articles 254 to 259 of the Penal Code. The latest modification to Article 254 of the Penal Code brings the range of predicate offense activities to thirty-seven (37). The Money Laundering crime contains all of the guiding verbs defined in the United Nations Convention and is also an independent offense. The penalty for money laundering is from 5 to 12 years imprisonment and involved legal entities may be subject to fines or even cancellation of their operating license or notice of operation for being used or created to commit crimes, even if they do not benefit from those crimes. Panama has a criminal regulation for prosecuting and applying criminal sanctions to individuals and legal entities financing terrorism, considering that its regulation criminalized the financing of terrorism based on the provisions of the International Convention for the Suppression of the Financing of Terrorism (Articles 293 and 294 of the Penal Code). These penalties encompass individuals who [provide funds] deliberately and by any direct or indirect means with the intention of using them illegally or knowing that they will be used, either totally or in part, to commit terrorist acts; or for a terrorist organization or terrorist, even though they are not directly connected to the terrorist act, or for any other act, such as preparing or training to commit terrorist acts. In July 2012, Panama ratified the International Convention for the Suppression of the Financing of Terrorism proposed by UN Security Council Resolution 1373 and in June 2002 adopted the Inter-American Convention against Terrorism enacted on July 2004.



Conclusions of Panama’s National Risk Assessment on Money Laundering and the Financing of Terrorism

In December 2016, the National Commission against Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction approved Panama’s National Risk Assessment on Money Laundering and the Financing of Terrorism. Money laundering is a complex crime that requires a predicate offense to generate an illegal action that must be integrated to the economy pretending to be a legal action. Three phases could be identified in money laundering in which illegal money can be laundered: the placement phase, in which money is introduced into the economy using any sector or method; the stratification phase, in which the money is divided into smaller parts which are used for several transactions, and finally, the integration phase, in which the money, once in the economy, is moved and reused to blend it and make it difficult to track.

The main conclusions of the National Assessment are presented below. They were the basis for developing the action plan of this National Strategy. Money laundering threats and vulnerabilities in Panama There is no notable presence of drug cartels or organized crime structures in Panama. Although there are some gangs, these have a domestic and non-transnational characterization as, for instance, the Maras. Panama is not a cocaine producer country, although one of its major threats is the transit of this drug through Panamanian territory.

Placement Stratification Integration



Considering its role as a transit and financial center and the lesser impact of organized crime, its main threat is foreign money laundering, as proceeds of the crimes committed abroad come into the country for the different laundering phases —especially integration, since the placement and stratification phases take place mainly abroad.

The main criminal phenomena that present a threat to Panama are transnational organized crime, which offers a portfolio of services using Panama for the transit or flow of several of these activities, such as drug trafficking, human trafficking, gunrunning, etc. The main domestic threats for money laundering are drug trafficking, corruption, financial crimes and copyright crimes such as trademark counterfeiting and smuggling. However, the main threat originates abroad. Crimes are committed abroad and then Panama is used as a transit for money or even to launder it. Considering the crime routes, the main crimes generating resources that could be laundered in Panama are:

1. Drug trafficking from the Andean countries to Panama and then to North America or, to a lesser extent, to Europe.

2. Other crimes related to organized crime using the same drug trafficking routes, e.g. for human trafficking using the route to North America and the gunrunning route from North America to South America.

3. Smuggling and copyright crimes where smuggled or counterfeited merchandise from China or Peru enter the country to be later re-exported or to continue its route to North America as well as South America.

Threats

Foreign- Drug smuggling

- Offenses related to organized crime

Domestic - Corruption

- Drug smuggling - Financial crimes - Copyright crimes



Most vulnerable sectors

Considering that the threat of money laundering is mainly external, the most vulnerable sectors to be used for money laundering are those with sizeable external relations channeling external money, investments and property. It is important to note that with Law 23 of 2015, all sectors currently have a quite structured regulation for the prevention of money laundering. Additionally, with the establishment of the Intendancy for the Supervision and Regulation of Nonfinancial Entities under the same Law, vulnerable nonfinancial sectors are supervised. However, within the main vulnerabilities that can be identified are the new sectors included in Law 23 of 2015, because these sectors are only beginning to implement the preventive measures included in this Law.

Nonfinancial sector:

Risk Sectors

High Colon Free Zone and Free Trade Zones, Real Estate and Construction Companies and Lawyers.

Medium High Money Remittance Companies, casinos and games of chance.

Medium Accountants, companies engaged in purchasing new and used cards, exchange bureaus and pawnshops, dealers in precious metals and stones.

Low Notaries, Banco Hipotecario Nacional (National Mortgage Bank), Banco de Desarrollo Agropecuario (Agricultural Development Bank), transportation of valuable goods, National Lottery, Panama Postal Service.

The most vulnerable sectors for money laundering in Panama would be the sectors related to foreign trade, such as the free trade zones, especially the Colon Free Zone for its leadership in the sector. Another vulnerable sector is the real estate and construction sector because it receives large foreign investments that could be vulnerable to their use for money laundering and the sector uses mostly cash for the payment of suppliers. These sectors are the most vulnerable, taking into consideration that the impact of the crime is greater because of their huge influence on the country’s economy.



Another vulnerable sector is lawyers engaging in those activities subject to supervision defined in Law 23 of 2015. This sector is vulnerable because it is only beginning to implement the preventive measures and examinations. However, the vulnerabilities of this sector are not as important to the domestic economy, meaning that its money laundering vulnerability and impact are lower than the sectors mentioned previously. In the medium high level are the money remittance companies, the casinos and games of chance. In the medium risk level are the accountants, the companies engaged in purchasing and selling cars, the currency exchange bureaus and pawnshops, and traders in precious metals and stones. Other low impact sectors include the notaries, the development banks in the housing and

agriculture sectors Banco Hipotecario Nacional and Banco de Desarrollo Agropecuario that are under the Intendancy’s supervision. The valuable goods transportation companies, the National Lottery and the Panama Postal Service are also included. These sectors do not have a great impact on the Panamanian economy. Among the Committee of Independent Experts’ recommendations included in its November 2016 report was the recommendation to provide independence to and transform the Intendancy for the Supervision and Regulation of Nonfinancial Entities into an independent regulator. Financial Sector The next vulnerable sector is the banking sector for its great exposure to risk due to its international relations, in contrast to the securities, insurance and cooperatives sectors that have less international influence. The banking sector’s vulnerability is also lower because it is the sector with the most preventive measures, including the imposition of penalties. The securities market, according to the National Risk Assessment diagnosis, is an activity that has distinguished itself by implementing measures for preventing money laundering. Additionally, the securities market sector has transparency measures based on the fact that the companies listed on the stock exchange must keep their information public. The securities market in Panama is characterized more by the sale of medium- and long-term bonds, making the sector less vulnerable to money laundering since it is not a market with a stock-market dynamism that passes issues through several hands in a single day. This makes the money easier to trace. Making the Superintendency of the Securities Market a member of the International Organization of Securities Commissions (IOSCO) is one of the recommendations made by the Committee of Independent Experts.



According to Panama’s National Risk Assessment on Money Laundering and the Financing of Terrorism, cooperatives have a lower risk of being used for money laundering due to the fact that cooperatives do not conduct international transactions. Legal entities Panama, because it is an economy integrated into the international system, has special features. Legal entities such as corporations and private interest foundations may be established in Panama but may be misused abroad for money laundering or the financing of terrorism. This can also happen to trust funds created and administered in Panama. Additionally, corporate law firms may provide services in Panama and abroad. All of them may be used to damage other economies or to generate crimes in other countries. Although Panama is used for establishing corporations, a great part of these companies do not conduct their operations in the Republic of Panama, so the Panamanian financial and commercial systems are not used for money laundering. Therefore, the vulnerability here is presented as an element that may be used to infringe other jurisdictions providing other type of services, but it does not directly indicate a vulnerability in which money is laundered or terrorism is financed within the Republic of Panama. The financing of terrorism and proliferation

As for the financing of terrorism, there is no clear terrorism threat in Panama. There are no terrorist groups, and neither potential individual terrorist radicalized towards some cause nor possible training or radicalization sites have been identified. Therefore, there is no internal threat. The threat is definitely from abroad. Although this is a low-level threat for Panama, it may be vulnerable to the financing of terrorism because the country is a financial center. However, the main Panamanian trade and financial relationships do not point to a great risk for the financing of terrorism because Panama’s relationships are mainly with Latin American countries and the United States. Consequently, the threat is low and, if any, external. As for the possible sectors that may be infringed upon for the financing of terrorism, such as money remittances, most of Panamanian remittances go to Colombia, Nicaragua, China and the Dominican Republic, which coincides with the large number of workers who have migrated from those countries to Panama because of its labor benefits and send these remittances back to their families. This means that there is a low risk for a consolidation of the financing of terrorism. The rest of the sectors that are starting to apply preventive measures have a lower risk as they do not have a close relationship with the remission of money to high-risk terrorism areas.



This reality also extends to the financial sectors, since their relationships with high-risk terrorism areas are limited. As in the case of money laundering, the sector that may have a greater exposure to the financing of terrorism, without this being a great exposure, is the banking sector, due to its international relationships. Free trade zones may have greater exposure to the FT risk, without it being high, because of their relationship with international trade. Nonprofit organizations do not have a high level of external relationships either. They are characterized more by their relationship with domestic income and beneficiaries. Even those that do have an external relationship, this is not with high-risk terrorist areas. The relations Panamanian nonprofit organizations have abroad are characterized by receiving money for conducting domestic activities, which reduces the vulnerabilities of this sector in directing resources to areas influenced by terrorism. Finally, the financing of terrorism risk is low, not only because the threat is low but because the country’s trade and financial relationships with high-risk terrorist areas are limited, which make the vulnerabilities and impact low. Considering that the threat for the financing of terrorism is low and the vulnerabilities the sectors have are low, the overall risk of this element is definitely low for Panama.



Pillars of the National Strategy for Combatting Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass

Destruction

Methodology The drafting process of this National Strategy for combatting Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction was coordinated by the CNBC and based on the National Risk Assessment on Money Laundering and the Financing of Terrorism of Panama. An inter-institutional technical working table was established comprised mainly of prevention, detection and intelligence and criminal justice authorities. Its work was focused on having regular meetings chaired by the Ministry of Economy and Finance, with International Monetary Fund advisory and technical assistance, to determine the action plan by creating the cross-sector, institutional, prevention, detection and criminal justice strategic pillars along with their respective objectives. Each institution member of the technical working table set its own actions, responsibilities and deadlines for meeting the approved strategic pillars.

INTER-INSTITUTIONAL TECHNICAL WORKING TABLE

National Customs Authority

Judicial Investigation Division / Money Laundering Unit

National Security Council

Panamanian Institute of Autonomous Cooperatives

Intendancy for the Supervision and Regulation of Nonfinancial Entities

Ministry of Commerce and Industry

Ministry of Economy and Finance

Ministry of Government and Justice

Judicial Branch

Attorney General’s Office/ Money Laundering Unit

National Border Protection Service

Superintendency of Banks

Superintendency of Insurance and Reinsurance of Panama

Superintendency of the Securities Market

Financial Analysis Unit for the Prevention of Money Laundering and the Financing of Terrorism

Colon Free Zone



Strategic Priorities A. CROSS-SECTOR STRATEGIC PRIORITIES: Are those improvement opportunities that

institutions need to strengthen their processes and actions with respect to the prevention and repression of ML/FT/PWMD.

1. To provide bodies with competencies and responsibilities for implementing the regime for the prevention and repression of money laundering and the financing of terrorism and proliferation with the necessary financial resources for:

(A) Recruitment of personnel; (B) Purchasing computer software and applications; (C) Providing training on prevention and detection programs

oriented to developing personnel capabilities and skills (regulatory, supervisory, financial intelligence, investigation and criminal justice) of all bodies with AML/CFT competencies.

2. To transform the Supervisory Process for Financial Oversight Bodies to a risk-based approach for AML/CFT/PWMD.

3. To improve the current Customs system called “Integrated Customs Management System.”

4. To control and prevent cross-border money.

5. To measure the effectiveness of efforts conducted by the Supervisory Bodies regarding AML/CFT/PWMD.

B. INSTITUTIONAL STRATEGIC PRIORITIES: Are those whose general objective is the coordination between institutions involved in the prevention, detection and repression of ML/FT/PWMD.

1. To establish and/or strengthen inter-institutional coordination (MICI-MEF, UAF-ANA and MICI-SBP) to strengthen the implementation of the National AML/CFT/PWMD Strategy.

2. To create a multidisciplinary technical team to support the National AML/CFT/PWMD Committee on decision-making, development of policies and coordination of activities related to prevention, detection and disciplinary repression of illegal activities and the effective implementation of the national AML/CFT/PWMD strategy.

3. Independence and autonomy of the Intendancy of Designated Nonfinancial Business and Professions (DNFBPs).

4. To adjust the legal framework that designates and regulates DNFBPs to international standards.

5. To enable National Customs Authority´s infrastructure.

6. To strengthen the customs regulatory framework.



7. To enter into inter-institutional cooperation agreements with the judicial authorities holding relevant information to identify illegal property under criminal investigation.

8. To strengthen inter-institutional cooperation between the National Security Council Secretariat’s Counterterrorism Department and the Committee for the Prevention of the financing of terrorism (CPTF).

9. To study and analyze the scope of inter-institutional cooperation in the current tax regulations.

C. (PRELIMINARY) STRATEGIC PRIORITIES – PREVENTION: Are those whose objectives are to strengthen controls on licenses, risk-based supervision, integrity and the use of frameworks for protecting the financial system.

1. To strengthen the infrastructure of the financial-preventive regime by creating a special

administrative procedure for granting licenses to currency exchange operators, remittance houses and electronic payment operators.

2. To strengthen the AML/CFT risk-based supervision procedure for financial operators of foreign businesses, be they banks, stock exchanges or insurance companies, by means of more robust supervision methodologies permitting the identification of foreign risks and vulnerabilities, as well as remedial actions in those foreign businesses to mitigate risks.

3. To continue with the development of special actions that favors the integrity and reputation of the country’s economy.

4. To strengthen the competent authorities’ regulatory and operational framework for AML/CFT/PWMD supervision of each sector (banking, securities, insurance, cooperatives, DNFBP) to establish a risk-based supervision regime.

5. To develop and/or strengthen formal methods for the coordination, cooperation and exchange of required information between the UAF and supervisors (baking, insurance, securities, cooperatives and DNFBP).

6. To establish and/or strengthen preventive measures to prevent and control ML/FT activities when:

(A) Used by individuals and legal entities; (B) Used by foundations and trust funds; and (C) Used by nonprofit organizations

7. To strengthen the use of electronic payment instruments in the Colon Free Zone.

D. (PRELIMINARY) STRATEGIC PRIORITIES – CRIMINAL INVESTIGATION AND JUSTICE: Are those whose objective is to strengthen the practice and use of proprietary and financial investigative techniques, as well as the use of this information in criminal investigations.

1. To review compatibility between the criminal legislation on FT and the UN Security

Council Resolutions on terrorism and proliferation.



2. To strengthen proprietary and financial criminal investigation practices.

3. To strengthen the Money Laundering Unit and the Specialized Prosecuting Attorney’s Office on Organized Crime II institutionally.

4. To strengthen the use of special investigative techniques for the criminal investigation of ML/FT/PWMD.

5. To improve the use of financial information provided by the UAF when investigating money laundering.

6. To strengthen the judicial cooperation and assistance system for the criminal investigation of ML/FT/PWMD.

E. STRATEGIC COMPONENTS – DETECTION AND INTELLIGENCE: Are those whose objective is to strengthen the detection of the movement of cash and negotiable documents, the compilation and analysis of financial information and cooperation between financial units.

1. To strengthen the financial information collection, analysis and dissemination system.

2. To strengthen current measures and procedures to improve the quality of analysis and information of STRs submitted to the UAF.

3. To strengthen the preparation of strategic analysis in the UAF.

4. To digitalize the STRs submitted in hardcopy to the UAF.

5. To strengthen international cooperation among the UAF’s peers.

6. To strengthen mechanisms for identification and detection focused on controlling the flow/movement of cash and negotiable documents.



Appendixes

IX. Action Plan X. Acknowledgment XI. Participating institutions and Technical Working Group

XII. Regulations



ACTION PLAN: Note: “when printed it will appear in another format”

(PRELIMINARY) STRATEGIC PRIORITIES DETECTION AND INTELLIGENCE

1

To strengthen UAF activities in the collection of information, analysis and financial intelligence and the quality of information disseminated.

UAF

To promote the use of the “UAF en linea” platform to collect data

January 2017

July 2018

To train platform users

To create manuals on the use of the system for regulated entities

To update the databases available and verify the quality of that information

To analyze the purchasing of new databases to obtain greater input for the analysis of information

To review the current internal procedure manuals to improve the quality of information

To create joint working tables for the UAF and the Public Ministry to evaluate the quality of information provided and the procedure for submitting that information

2

To strengthen current measures and procedures for improving the quality of analysis and information of the STRs submitted to the UAF

UAF

To conduct a survey on the quality of STRs received, including subjective and objective factors, analyzing the main deficiencies and strengths. To analyze the results by regulated sector, establishing parameters for improvement

January 2017

March 2018

To implement a continuous analysis system for STR quality

To review the manuals on STR quality

To train analysts on the new analysis techniques to provide greater input to the reports

To organize training seminars on the information included and the STR quality, to provide feedback to regulated entities

To determine the contents of the information that may be useful in preparing Strategic Analysis Reports



Acknowledgment: The Republic of Panama extends its appreciation to the Government of Canada for the financial support provided for the Technical Assistance provided by the International Monetary Fund (IMF) team of experts that encouraged the members of the country working group during the drafting process of the National Strategy for Combating Money Laundering, the Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction. The support provided by the CNBC, along with the institutions that worked for the attainment of this Strategy, as well as the support of all economic sectors and the citizenry, represent the commitment the country has to consolidate a transparent, cooperative system to prevent and repress money laundering, the financing of terrorism and the proliferation of weapons of mass destruction.



Participating institutions:

1. NATIONAL CUSTOMS AUTHORITY (ANA): The authority responsible for administering the policies, guidelines and provisions governing the customs system. It controls and supervises customs operations and the flow of goods entering, remaining in or exiting the country and those goods covered by permanent or temporary customs regimes, customs warehouses, free trade zones and duty free stores.

2. NATIONAL COMMISSION AGAINST MONEY LAUNDERING, THE FINANCING OF TERRORISM AND FINANCING THE PROLIFERATION OF WEAPONS OF MASS DESTRUCTION (CNBC): The Commission charged with approving the national ML/FT/PWMD risk strategies to take the necessary measures to mitigate national risks, manage resources and adopt decisions on execution, in addition to monitoring the action plan, establishing policies and ensuring coordination on ML/FT/PWMD, among others provided by Law.

3. NATIONAL SECURITY COUNCIL: A body of consultation and advisor to the President of the Republic on public security and national defense issues. The council should recommend, create and evaluate the policies and strategies on this issue, as well as other issues to be entrusted by the President of the Republic. It is responsible for giving instructions to prevent, avoid and confront espionage, rebellion, terrorism and its financing activities, among others.

4. JUDICIAL INVESTIGATION DIVISION/MONEY LAUNDERING UNIT: The DIJ ML/FT duty investigates everything related to individual and legal entity financial and commercial issues involved in a Money Laundering investigation. The investigations are made in conjunction with the competent authorities, execution of search warrants and visual inspections. The Money Laundering Unit also advises the different Prosecuting Attorneys’ Offices on the development of financial investigations and the Financial Activity Reports, and attends hearings when required.

5. PANAMANIAN INSTITUTE OF AUTONOMOUS COOPERATIVES (IPACOOP): The entity responsible for ensuring that regulated entities (cooperatives) have the policies, mechanisms and internal control procedures to verify due compliance with the provisions of Law 23 dated 27 April 2015 and its regulations. To adopt a risk-based supervision approach permitting the supervisor to clearly understand the risk of ML/FT/PWMD crimes.

6. INTENDANCY FOR THE SUPERVISION AND REGULATION OF NONFINANCIAL ENTITIES: The entity responsible for supervising the prevention of ML/FT/PWMD in nonfinancial entities and activities performed by professionals under its supervision, using a risk-based approach. It is responsible for imposing sanctions on nonfinancial entities for failing to comply with Law 23 dated 27 April 2015 and other regulations.

7. MINISTRY OF COMMERCE AND INDUSTRY (MICI): The Ministry whose mission is to plan, organize,

coordinate, direct and control the activities to create, develop and expand commerce, trade, financial activities, search and exploitation of the country’s mineral resources and compliance with foreign trade policy.

8. MINISTRY OF ECONOMY AND FINANCE: The Ministry in charge of everything related to the formulation

of economic policy initiatives; the programming of public investments and social strategy; the design and execution of general guidelines and specific Government tasks on National Taxation, Revenue and



Treasury; the preparation, execution and control of the General Budget of the State, Public Credit and State modernization, as well as the preparation and execution of Programming.

9. MINISTRY OF GOVERNMENT (MINGOB): The Ministry that determines government policies and plans,

coordinates, directs and executes administrative control of the provinces and indigenous territories, respecting their cultural heritage and promoting their development.

10. JUDICIAL BRANCH (JB): The entity that includes the Supreme Court of Justice and the courts and magistrate courts the law establishes. Its duties are to protect the integrity of the Constitution and investigate and prosecute members of the National Assembly, among other duties established by the Constitution.

11. NATIONAL BORDER PROTECTION SERVICE (SENAFRONT): A specialized and permanent police force structured and organized to guard the terrestrial borders of Panama and to protect its territorial sovereignty and integrity, as well as protecting the life, honor, goods and other rights and liberties of those under State jurisdiction, maintaining public order, and preventing, repressing and investigating criminal acts and infringements committed in its jurisdiction.

12. SUPERINTENDENCY OF BANKS (SBP): Entity ensuring that Banks and other regulated entities under the Superintendency’s supervision comply with the requirement to establish policies, procedures and internal control structures to prevent their services being misused for ML/FT/PWMD.

13. SUPERINTENDENCY OF THE SECURITIES MARKET OF PANAMA (SMV): The entity responsible for regulating and supervising stock and bond issuers, investment corporations, brokers and other securities market participants under its supervision in order to comply with current ML/FT/PWMD legislation.

14. SUPERINTENDENCY OF INSURANCE AND REINSURANCE OF PANAMA (SSRP): The entity charged with the regulation, supervision, control and oversight of companies, entities and persons subject to Law 12 dated 3 April 2012 that regulates the insurance activity. Its main objective is to protect contracting parties and to promote an inclusive insurance market by performing duties and activities that ensure the solvency and liquidity of insurance companies and the performance of activities regulated in compliance with this law and its regulations. To supervise its regulated entities on ML/FT/PWMD and to sanction those that are in noncompliance.

15. FINANCIAL ANALYSIS UNIT (UAF): The entity responsible for domestically centralizing the STRs and CTRs generated or issued by regulated entities defined by law, following the standards of information confidentiality. Additionally, it has the capacity for receiving and requiring, analyzing, maintaining, furnishing, providing, exchanging, organizing, administering, preserving and preparing the documents and financial information necessary for compliance with its duties.

16. MONEY LAUNDERING AND FINANCING OF TERRORISM UNIT: The specialized entity that the Office of the Attorney General of the Republic created by means of Resolution 25 dated 4 April 2016 to support prosecuting attorneys in complex financial investigations, developing proprietary investigations and helping with money laundering criminal investigation strategy. The Unit also has a coordination mission aimed at strengthening the execution of investigations by means of inter-institutional groups with the participation of the Judicial Investigation Division, the Financial Analysis Unit and the Institute of Forensic Medicine and Forensic Sciences.



17. COLON FREE ZONE: An autonomous institution of the State subject to the inspection and oversight of the

Executive Branch and the Comptroller General of the Republic under the terms provided by law. It attracts services and centers for importing, storing, assembling, packing and re-exporting from all over the world, especially electronic devices, pharmaceutical products, liquors, tobacco, home and office furniture, textile products, footwear, jewelry and toys.



Regulations: The regulations on money laundering, the financing of terrorism and financing the proliferation of weapons of

mass destruction mainly consist of:

No. Regulations on ML/FT/PWMD and description

LAWS

1 Law 1 of 1984 regulating the trust business in Panama.

2 Law 2 dated 1 February 2011 regulating the measures on Knowing your Customer for registered agents of existing legal entities.

3 Law 3 dated 6 January 1999 creating the autonomous entity known as the Public Registry of Panama.

4 Law 4 dated 9 January 2009 regulating limited responsibility corporations.

5 Law 9 dated 26 February 1998 reforming the Banking Regime and creating the Superintendency of Banks.

6 Law 10 dated 31 March 2015 amending and adding articles to the Penal Code.

7 Law 11 dated 31 March 2015 prescribing provisions on International Legal Assistance on criminal matters.

8 Law 14 of 2007 adopting the Sole Text of the Penal Code (criminalization of ML/FT).

9 Law 18 dated 23 April 2015 modifying articles of Law 47 of 2013, which adopted a regime for the custody of bearer shares.

10 Law 22 dated 27 April 2015 amending Article 71 of the Commercial Code, requiring legal entities to keep records of their minutes and shares.

11 Law 22 dated 9 May 2002 approving the International Convention for the Repression of the financing of terrorism.

12 Law 23 dated 27 April 2015 adopting measures for preventing money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction and prescribing other provisions.

13 Law 25 dated 12 June 1995 regulating private interest foundations.

14 Law 30 dated 8 November 1984 providing measures on contraband and customs fraud.

15 Law 32 dated 26 February 1927 on Corporations

16 Law 32 dated 8 November 1984 adopting the Organic Law of the Comptroller General of the Republic of Panama.

17 Law 34 dated 8 May 2015 amending and adding articles to the Penal Code.

18 Law 35 dated 8 May 2015 approving the Convention for the Repression of Illegal Acts related to International Civil Aviation.

19 Law 36 dated 8 May 2015 approving the Complementary Protocol of the Convention for the Repression of Aircraft Hijacking.

20 Law 41 dated 2 October 2000 adding chapter VI on money laundering to title XII, and adding title XIII on final provisions, to book II of the Penal Code.

21 Law 47 dated 6 August 2013 adopting a bearer share custody regime for the Republic of Panama.

22 Law 48 dated 23 June 2003 regulating money remittance operations.

23 Law 75 dated 3 December 2003 approving the Inter-American Convention on Terrorism.

24 Law 24 dated 21 July 1980 creating the Panamanian Institute of Autonomous



Cooperatives.

EXECUTIVE DECREES

25 Decree Law 1 of 2008 creating the National Customs Authority.

26 Decree Law 1 of 1999 Securities Market Law.

27 Decree Law 2 of 2008 reforming the banking regime and creating the Superintendency of Banks.

28 Decree Law 8 of 2008 creating the National Border Service (SENAFRONT).

29 Executive Decree 263 creating the National Security Council and prescribing other provisions.

30 Executive Decree 363 dated 13 August 2015 regulating Law 23 dated 27 April 2015.

31 Executive Decree 587 dated 4 August 2015 regulating the preventive freezing developed in Title VI of the Law 23 dated 27 April 2015.

32 Executive Decree 324 dated 19 July 2016 creating the Anti-Terrorism Department and the Committee for the Prevention of Terrorism and their financing within the Executive Secretariat of the National Security Council.

33 Executive Decree 241 dated 31 March 2015 amending and adding articles to Executive Decree 947.

34 Executive decree 947 of December 2014 reorganizing the UAF.

35 Executive Decree 361 dated 12 August 2015 establishing the Intendancy for the Supervision and Regulation of Nonfinancial Entities.

36 Executive Decree 52 dated 30 April 2008, Banking Law.

37 Executive Decree 16 dated 9 March 1994 regulating the Special Entrance Form for entering Panama with money and other valuables worth over 10,000.00.

38 Cabinet Decree 10 dated 9 March 1994 requiring any person entering the national territory to fill out a form declaring the money, negotiable instruments and valuables he is bringing with him.

39 Cabinet Decree 12 dated 29 March 2016 providing complementary provisions to the Single Central American Customs Code and its Regulations.

40 Executive Decree 587 dated 4 August 2015 regulating the preventive freezing developed in Title VI of Law 23 dated 27 April 2015, which adopts the measures for preventing money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction and prescribes other provisions.

41 Executive Decree 363 dated 13 August 2015 adopting measures for preventing money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction and prescribing other provisions.

REGULATORY RULES

42 Rule 2 dated 1 February 2017 modifying Articles 7, 8, 9, 17, 18, 19, 20 23, 25, and 37 of Rule 6-2015 dated 19 August 2015 on the provisions for the prevention of money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction.

43 Rule 2 dated 27 May 2015 adopting the red flags catalog for the detection of suspicious transactions related to money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction.

44 Rule 2 dated 21 June 2016 prescribing other provisions on Corporate Governance.



45 Rule 3 dated 27 July 2015 establishing minimum criteria and parameters the insurance sector regulated entities must adopt to prevent money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction.

46 Rule 4 dated 7 July 2015 providing the Guidelines for Suspicious Transactions Indicators for securities market activities conducted within or from the Republic of Panama.

47 Rule 5 dated 12 October 2016 establishing measures for preventing and controlling the risk of money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction, applicable to products and services provided by insurance sector regulated entities.

48 Rule 6 dated 19 August 2015 prescribing provisions applicable to Regulated Financial Entities supervised by the Superintendency of the Securities Market on the prevention of money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction.

49 Rule 6 dated 12 October 2016 setting the minimum criteria and parameters insurance sector regulated entities must adopt when relying on third parties for the measures of due diligence for preventing money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction.

50 Rule 7 dated 19 August 2015 providing the requirements security brokerage firms and securities clearing houses must meet to act as authorized domestic custodians of bearer share certificates.

51 Rule 7 dated 12 October 2016 setting the minimum criteria and parameters insurance sector regulated entities must adopt as internal controls for the prevention of money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction.

52 Rule 10 dated 15 December 2015 regulating the position and establishing the responsibilities of the Compliance Officer pursuant to the provisions of the Securities Market Law and Law 23 dated 27 April 2015, and rescinds Rule 9-2001 dated 6 August 2001.

RESOLUTIONS

53 Board of Directors’ Resolution 8/2015 dated 29 June 2015 “ordering all Savings and Loans Associations and Multiple Service or Integral Cooperatives that engage in savings and loan activities, as well as any other Cooperative Organization conducting financial intermediation, to implement a Guide on Suspicious Transactions and adopt the Suspicious Transactions Report (STR)”.

54 Board of Directors’ Resolution 10/2015 dated 5 October 2015 “approving a guide to the segmentation of all first- and second-tier cooperatives and ancillary cooperative entities within the Republic of Panama to develop and improve the Government’s policies on cooperative planning, oversight, inspection and supervision by the Panamanian Institute of Autonomous Cooperative.”

55 Board of Directors’ Resolution 11/2015 “approving the Special Rule for

complying with Law 23 dated 27 April 2015 for the prevention of money

laundering, the financing of terrorism and financing the proliferation of weapons

of mass destruction and ordering the Savings and Credit Associations, Multiple

Services and Integral Cooperatives conducting savings and loan activities, as

well as any other Cooperative Organization conducting financial intermediation,

to adopt this Special Rule.”



56 Board of Directors Resolution 1/2016 dated 6 January 2016 “Approving the Disciplinary Administrative Procedure applicable to Savings and Loans Associations, Multiple Services and Integral Cooperatives conducting savings and loans activities as well as any other Cooperative Organization conducting financial intermediation, for breaching the provisions for the prevention of money laundering, the financing of terrorism and financing the proliferation of weapons of mass destruction.”

57 Board of Directors’ Resolution 5/2016 dated 22 September 2016 “rescinding Board of Directors’ Resolution 4/2015 dated 23 January 2015 and ordering all of the necessary aspects for the identification of the final beneficiary to be included in the Special Rules for the Cooperative Sector in Law 23 dated 27 April 2015.”

58 Board of Directors’ Resolution 6/2016 dated 22 September 2016 “approving the amendment of articles of the Special Rules issued by means of Board of Directors’ Resolution 11/2015 date 12 October 2015 to comply with Law 23 dated 27 April 2015.”

59 Resolution 11-016 dated 3 August 2016. Resolution on the access to information pursuant to the provisions of Law 6 dated 22 January 2007.

60 Resolution 7-015 dated 14 August 2015. Pawnshops.

61 Resolution 016-016 dated 6 December 2016. Resolution amending Board of Directors’ Resolution 007-015 dated 14 August 2015. Pawnshops.

62 Resolution 014-016 dated 6 December 2016. Resolution regulating the registration and authorization process for compliance companies pursuant to Law 23 of 2015.

63 1 Resolution 006-015 dated 14 August 2015. Money remittance companies and currency exchange bureaus whether or not it is their main activity.

64 2 Resolution 015-015 dated 14 August 2015. Amending the resolution on remittances.

65 Resolution 015-016 dated 6 December 2016. Resolution amending Board of Directors’ Resolution 006-015 dated 14 August 2015, amended by resolution JD-015-015 dated 30 September 2015. Remittances.

66 Resolution 001-015 dated 14 August 2015. Real estate developers, real estate agents, real estate brokers, construction companies.

67 5 Resolution 002-015 dated 14 August 2015. Colon Free Zone companies, companies established in Panama Pacifico, Free Trade Zones of Baru and Free Trade Zones.

68 Resolution 003-015 dated 14 August 2015. Traders in precious metals and precious stones and the Diamond Exchange.

69 Resolution 004-015 dated 14 August 2015. Companies engaged in buying and selling new and used cars.

70 Resolution 005-015 dated 14 August 2015. Casinos, games of chance, betting system organizations and other physical or telematics establishments engaged in these businesses through the Internet.

71 Resolution 006-015 dated 14 August 2015. Money remittance companies and currency exchange bureaus whether or not it is their main activity.

72 Resolution 017-016 dated 6 December 2016. Currency Exchange Bureaus whether or not it is their main activity.

73 Resolution 008-015 dated 14 August 2015. Valuable goods transportation companies.

74 Resolution 009-015 dated 14 August 2015. Banco Hipotecario Nacional (National Mortgage Bank).

75 Resolution 010-015 dated 14 August 2015. Housing savings and loan associations.



76 Resolution 011-015 dated 14 August 2015. Banco de Desarrollo Agropecuario (Agricultural Development Bank).

77 Resolution 012-015 dated 14 August 2015. Panama Postal Service.

78 Resolution 013-015 dated 14 August 2015. Lotería Nacional de Beneficencia (National Lottery).

79 Resolution 014-015 dated 14 August 2015. Lawyers, public accountants, notaries.

80 Resolution 016-015 dated 29 December 2015. Disciplinary Procedure.

81 Resolution 005-015 dated 14 August 2015. Application of the UAF STRs and CTRs, report quality guide.

82 Resolution 002-016 dated 6 January 2016. Affidavit for transactions reports.

83 Resolution 003-016 dated 8 November 2016. Data update form for regulated entities.

INTENDANCY RESOLUTIONS

84 Resolution 001-016 dated 6 January 2016 requiring nonfinancial regulated

entities and professionals conducting activities subject to supervision to apply the

red flags guidelines issued by the Financial Analysis Unit for the Prevention of

Money Laundering and the Financing of Terrorism.

85 Resolution 002-016 dated 6 January 2016 requiring nonfinancial regulated

entities and professionals conducting activities subject to supervision to adopt the

Forms issued by the Financial Analysis Unit for the Prevention of Money

Laundering and the Financing of Terrorism for their cash and quasi-cash

transaction affidavits. 86 Resolution 003-016 dated 8 November 2016 ordering the nonfinancial regulated

entities and professionals conducting activities subject to supervision to fill out

the Regulated Entities Update Report (ADSO) and submit it to the Financial

Analysis Unit for the Prevention of Money Laundering and the Financing of

Terrorism and the Intendancy for the Supervision and Regulation of Nonfinancial

Entities.

Documents

National Strategy for Combatting Money Laundering, the ......The National Strategy for Combatting Money Laundering, the Financing of Terrorism and financing the Proliferation of Weapons