Panama Bank Secrecy: Legal Theory and Practice

Panama is one of the most popular places for offshore incorporation. Panama has what are known as bearer share corporations and those corporations own a bank account.
What do we mean by bearer shares? The person in actual possession of the shares is considered the actual owner of the corporation and the bank account, creating an excellent level of privacy for the parties involved.
Of course there has to be someone as a signatory on the company bank accounts… but within every corporation there can be more than one person with signing authority. Being a signatory on an account is not proof that the corporation funds are your funds.
Technically, the owner of the bank account is the corporation and not the people with signatory privileges. Panama’s banking secrecy laws are what make it an appealing place for offshore companies to be formed.
Lets Take a look at some of those laws:
Article 74 of Decree 238 makes it so the banking commission of Panama can’t conduct an investigation on personal banking clients. Additionally, if it uncovers any information during normal operations they aren’t allowed to reveal that information to any person or authority. They may only do so if they are subpoenaed by a Panama court. Violators of this law are subject to another law which imposes fines or jail time on the guilty party.
Article 65 of Cabinet Decree 238 regulates the manner in which the National Banking Commission can gain access to banking information and documents. The law states that they may only inspect the banks general books and that they may not single out individual bank accounts. That law covers both deposits and securities at the bank, and this to can only be broken by a court order.
Article 170 states that any person with access to confidential banking information through either occupation or activity, that uses this information without the consent of the involved parties, in a way that causes someone damages, they can be punished and possibly imprisoned. That sentence can be anywhere from ten months to two years, it may include monetary fines and they will also be barred from practicing their profession for a two year period.
Regardless of where you bank today there are three reasons that can lead to your banking secrecy being violated. Those three reasons are severe criminal activity such as terrorist funding, money laundering and drug smuggling.
In Panama tax evasion is not considered a serious crime. There is no court in Panama that will allow your banking secrecy to be violated for tax related violations unless a case is brought that can show this money was also involved in a serious crime.
Panama is a member of the mutual legal assistance treaty. After 9/11 it is required that all jurisdictions who move funds to and from North America and Europe be a part of this treaty. When you analyze this treaty it does not threaten any of the strict secrecy laws set fourth in Panama.
The following are the basics of the treaty. The activity in which an investigation is being conducted must be a crime in both countries. If a country wants information they have to prove they have no other alternative method of obtaining it and they must also show they can not go fourth with legal action without the information. When information is requested it has to be specific. They can’t just be fishing for information.
They must also first file a criminal case in its court system on a national level, which ensures that smaller cases are not covered under the treaty. If another country meets all of the conditions, the request is pushed through diplomatic channels and then Panama must consider the information request.
Panama values its banking secrecy laws and they may ask for more information before they break the laws they hold with such esteem. It is not uncommon for Panama to deny an information request since they need to feel the matter is serious on their end to bring action against a person. They do have the right to refuse a request within the aforementioned guidelines.
Panama does not in any way shape or form participate in any tax treaties. They also do not acknowledge tax related investigations as criminal situations. Panama will never disclose a person’s financial information for any reason relating to a tax issue. Tax evasion is considered a civil matter in Panama. In Panama you must commit a serious crime to risk your financial privacy.
Tags: bank secrecy, panamaPosted in Banks and banking offshore Edit No Comments »
Live from Cancun - Recipes for Success 2008Saturday, May 10th, 2008
Am writing this from the airport, just leaving Cancun, Mexico where a small but select group of investors gathered for the first “Recipes for Success” event.
The event was great fun and feedback has been overwhelmingly positive and the hotel’s service could not have beeen better! We had a diverse group of couple and singles from different countries and backgrounds… but the one thing they had in common was a desire to protect their privacy, and increase their wealth and well being. Everyone here was already well versed in basic offshore and PT theory, so the presenters moved swiftly to a higher level and some very interesting discussions resulted. We are even planning some group trips in South America later this year!
Anyway, the next Recipes for Success event will be in Panama City, Panama in the first week of November. We already have some signups. Details of the event should be up on the site of Q Wealth Events (www.qwealthevents.com) within the next couple of weeks, but if you would like to put your name down ahead of time, please email info@petermacfarlane.net I’m looking forward to meeting you there!