Interview: Eduardo Morgan
To what extent can regulations be improved to further encourage private sector activity?
EDUARDO MORGAN: Panama is a very open country and the private sector plays a key role in the nation’s development. The government, regardless of the administration, has always been very aware of this, and this cooperation is reflected in our laws. So any regulatory modifications should be made with respect to improving efficiency related to private participation. There shouldn’t be as many steps as are currently required for these processes to be completed.
How necessary are the new bills to strengthen efforts in the fight against money laundering, terrorism financing and proliferation of weapons of mass destruction, and to freeze bearer shares?
MORGAN: Panama’s negative image is not deserved. Panama has infrastructure that can effectively identify those that may try to use the country’s banks and legal entities to launder money. The Panamanian anti-laundering system is unique; some claim that it is the best in the world. It comprises a public registry that includes the name of the entity, its board of management and its resident agent. By law, the resident agent must be a lawyer. A 1995 decree and the “Know Your Client” law of 2011 both establish the resident agent’s obligation to personally meet the client and to document information about the person establishing an entity in Panama.
It is also important to stress that the US Embassy in Panama was requested by the Panamanian government to provide a list of Panamanian companies involved in any criminal activity, whose representatives have not been identified. The embassy was not able to provide such a list because there is not a single company in Panama whose representatives have not been identified. This is also the case for the country’s banks. Those involved in corruption scandals in recent years who opened accounts in local banks are all being identified, as well as those behind entities that were created to launder money. Therefore, the new laws are not necessary.
What is really needed is to strengthen the control of institutions that were purposely weakened by the previous administration, in an attempt to carry out their corrupt activities without being held accountable. Fortunately, they failed at doing so.
Nevertheless, their efforts hurt the country’s image and have lead us to a situation in which we are forced to approve two laws that will not bring anything new to the table. They are aimed at protecting other OECD markets that see Panama as a menace; these laws will make the Colón Free Trade Zone, the real estate sector and other key areas of the economy less competitive. This is because costs will rise as a result of all the procedures that companies and institutions in those sectors will have to follow after the laws are passed.
Can Panama remain a regional financial centre in light of the more stringent regulations?
MORGAN: The financial regulations will have an initial impact on the country’s competitiveness, but it will eventually adapt to these changes. The advantage of the financial regulations imposed by the IMF’s Financial Action Task Force is that risks to Panama’s financial system are measured and the actions implemented are tailored to counteract those risks.
Since 2007, 112 multinationals have entered the country thanks to Law 41. What regulatory hurdles do these companies find on entering?
MORGAN: Public officials, as they change from time to time, are not always as familiar as they should be with Law 41. Hence, any hurdles that multinationals may face come as a result of poor implementation of the law, not because of poor regulation. Regarding modifications, the law has already undergone two amendments since it was passed to make it what it is now, so no further changes are needed.
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