In this article we’ll review Panama’s banking regulations for international or offshore banks. Those banking regulations for starting a new international bank and not a domestic bank. An international bank, in this case, is one that provides services to people and companies outside of Panama.
Panama has been in the news quite frequently, and not in a positive way. The Panama Papers destroyed a large part of the industry as many banks closed and foreign investment stopped flowing.
Because of the importance that the banking industry represents in Panama, new banking regulations were put into place to make the country the powerhouse in the industry that is was a few years back.
One big-time benefit that Panama has going for it is that its currency is the US Dollar. You get to operate your bank with US dollars without having to deal with American Banking Authorities. Yes, all accounts are held in US dollars and all paper money transactions are in USD.
● Coins are called Balboas and printed by the Panama government. Balboas are equivalent to US coins but are not provided by the US mint.
Panama has two state-owned deposit-taking institutions, the Panamanian Banking Association and the Banking Supervisory Authority. Panama’s banking system also does not have a deposit insurance scheme. So, there is no equivalent to FDIC.
Another institution, the Superintendency of Banks of Panama, regulates and supervises the banks and the banking groups that have been authorized to operate in Panama. Its main goal is to protect the integrity of the banking industry in Panama.
The regulatory activities of the Superintendency of Banks of Panama are divided into two categories, macroprudential and microprudential. The macroprudential regulation protects the banks from any financial risk that can prevent its stability and the microprudential regulation focuses on the financial activities of each bank.
At this moment there are thorough laws in Panama designed to protect corporate and individual financial privacy and activities. These same laws also apply to offshore corporations and foreign banks operating inside the island.
For example, the names of the bank shareholders must always be private and are not required under law to be publicly registered. Also, Panama has very strict banking secrecy laws that also help to protect financial institutions of any kind, such as:
– Anonymous Panama Corporations do not have to declare income generated from outside of Panama
– Laws that protect privacy, but still give you full control of your assets and your bank account
– Tax reduction that does not have to be reported
– Asset protection
These secrecy laws are not likely to change any time now, 17% of the Panamanian workforce is dedicated to the financial and banking industry and altering the secrecy law means that many banks and financial institutions will most likely search for a new place to operate from.
There is one very specific detail that everyone must know before you decide to open a bank in or do business in the country. A foreigner cannot open a bank account in the country, for that they need to obtain a residence visa.
The good news about obtaining a residence visa in Panama is that it is very easy to get one, as opposed to other foreign jurisdictions. An investment of $25,000 dollars to a government-sponsored program is enough to obtain a residence visa.
It is important to make clear that all banks who are operating in the country of Panama are subject to inspection and supervision, and that no bank can realize commercial activities without a corresponding bank license.
All banks in Panama must also maintain a minimum balance of liquid assets that is equivalent to 30%. This applies only to the banks who are doing business in Panama, not to subsidiaries or where the bank’s headquarters is located.
Just like in the United States any deposit and withdrawal that is equal or more to the amount of $10,000 in cash (paper money, not a wire transfer) have to be reported. Banks in Panama have the obligation to do a background check and research on clients more thoroughly.
KYC policy is also present in Panama which means that all clients must include a list of approved references who meet all requirements and must prove that the origin of the funds does not come from an illicit source.
Terrorism and Money Laundering are two of the most mentioned crimes regarding the banks and financial institutions in Panama, so the best way to walk past them is to avoid doing business with any client who might be suspicious or might raise some red flags that catch the attention of the Government of Panama.
Panama was affected by a breach of information losing many clients in the process, but the island is doing everything in its power to maintain its status as the best option to start a bank in the Carribean.
Panama offers two types of a banking license. A Class A licensed bank is a general license and can do business with locals and international persons/companies. A Class B licensed bank is an international license that may only do business with people and companies outside of Panama.
However, and this is a very big however, Panama will only issue a Class B license to a bank which already has a banking license from a major jurisdiction. If you have a banking license from the US or the UK, you can get an international license in Panama with about $5 million in capital.
If you don’t have a banking license from a top tier jurisdiction, and you still insist on setting up in Panama, then you can apply for a Class A license. Any very highly qualified group of persons can apply for a Class A license minimum capital is negotiable, but we expect it to be about $40 million in 2019 and 2020.