Law 51 of 28 October 2016 regulates the framework under which financial institutions must collect and report specified information to the appointed Panamanian supervising authorities.
The Law requires that all financial institutions must perform or establish due diligence protocols and procedures in accordance with Annex I of the Intergovernmental Agreement (law 47of 24 October 2016) , and with future legislation related to the CRS . In other words, these standards will apply to Foreign Account Tax Compliance Act (FATCA) as well as the Common Reporting Standard (CRS).
Panama financial institutions obliged to report in accordance to the mentioned international agreements must maintain records of their due diligence in respect of any foreign account holder who for fiscal effects maintain their fiscal residency outside of the Republic of Panama.
Financial institutions are obliged to maintain records of their due diligence for a minimum of five years. In the event the financial institutions have no accounts to report, or declare, the Law still obliges them to report such condition.
In addition, the Law allows financial institutions to rely on compliance service providers to complete or complement the performance of due diligence and reporting obligations, in which case the financial institution will remain obliged to report regardless.
All information received by the supervising authority by virtue of Law 51 or any applicable law or regulation will remain confidential within the authority. This principle will be applicable to the financial institutions and service providers. The information provided to a supervising authority in compliance with Law 51 will not constitute a breach of the confidentiality between service provider and the client.
Should a private service provider avoid the obligations established in Law 51, the supervising authority has the competence to apply sanctions to the provider. The law also establishes sanctions for the financial institutions as well as for public officers who violate disclosure of information protocols.
Law 51 may be further regulated in order to comply with the international agreements to which the Republic of Panama may become signatory.
Dr. Juan José Espino
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