Panama Must Boost Financial Transparency: Government Panel

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By David Haskel

Nov. 21 — A panel appointed by Panama’s government to advise on how to cope with the Panama Papers scandal warned of an “urgent and serious need to reduce the high levels of perceived opacity.”

The group’s 23-page report, published Nov. 21, urged authorities to adopt international standards on financial transparency, increase the amount of tax information exchanged with other jurisdictions, upgrade legislation and beef up monitoring of financial activities.

“This will require decisions, investment, legislation and a high degree of commitment,” the report said. “The moment has come. The country can no longer postpone decision-making in this field.”

Meanwhile, President Juan Carlos Varela Nov. 18 warned France that Panama will retaliate if Paris keeps it on its list of tax havens beyond Dec. 31. He issued the warning as the panel presented its report to the National Assembly.

Tall Order of Recommendations

Among the report’s recommendations, which reminded the government that Panama’s key offshore banking industry accounts for 9.5 percent of its gross domestic product, were that the government:

  •  fully comply with the recently signed Multilateral Convention on Mutual Administrative Assistance in Tax Matters “and define those countries with which it will sign agreements automatically”;
  •  strengthen the role of the tax office, the Directorate General of Revenue, providing it with enough funds and improved personnel training to create “a technical team whose mission is the continuous evaluation of the international standards and the adaptation of the country to them";
  •  enact legislation specifically targeting illegal international financial activities;
  •  tighten rules so that lawyers advising the country’s financial platform users “maintain the highest ethical standards and professional performance”;
  •  seek active participation in all relevant multilateral fora, including the OECD, the Financial Action Task Force (FATF) and the International Monetary Fund;
  •  establish a permanent advisory committee, made up of independent money laundering and tax evasion experts, which should produce an annual report that the government should make public;
  •  strengthen monitoring of trust funds, savings and credit societies, insurance and reinsurance companies and cooperatives; and
  •  launch an awareness campaign so that all actors help to generate transparency in the financial sector and steer clear from participating in any illicit transactions.

 

Heavy Global Pressure

The Central American nation has come under heavy international pressure after its financial and banking image was badly tarnished by the leak in April of 11 million documents from the local law firm Mossack Fonseca & Co., which triggered the scandal of global proportions widely known as the Panama Papers.

France immediately said it would return Panama to the list of uncooperative jurisdictions and it asked the Organization for Economic Cooperation and Development to do the same. The OECD at the time called the country “the last major holdout that continues to allow funds to be hidden offshore from tax and law enforcement authorities,” and sought to persuade the nation to clean up its act.

Panama answered with a two-pronged offensive, mixing warnings of retaliation with promises of improvement. The latter included setting up the panel of experts, which initially involved international experts such as Nobel Prize laureate in Economics Joseph Stiglitz. Stiglitz later resigned, saying the government declined to guarantee that the report would be made public.

More recently, the country Oct. 27 signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, earning immediate OECD praise.

To contact the reporter on this story: David Haskel in Buenos Aires at correspondents@bna.com

To contact the editor on this story: Penny Sukhraj at psukhraj@bna.com

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