Law 254 and its updates regarding Due Diligence obligations on obligated subjects.
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On November 11, 2021, the government of Panama enacted Law 254, which introduced adjustments in fiscal transparency and the prevention of money laundering.
This law is divided into three main points; Accounting Records, Due Diligence, and the System of Final Beneficiaries.
This article will focus on the changes regarding stricter reinforcement and requirements for due diligence that we must maintain as lawyers and resident agents of companies and foundations. More details are below.
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Definitions:
Obligated subjects: It refers to all subjects supervised by the superintendence of non-financial subjects, this includes many types of companies, among these: free zones, casinos, gambling, real estate developers, real estate construction, transport of securities, pawn shops, trading of precious metals, lawyers, notaries, accountants.
Legal entity: Refers to the company or foundation.
Resident Agent: The lawyer or the law firm that exercises the obligatory role of agent of the company or foundation, which functions as a liaison between the client and the authorities of Panama and is considered an obligated subject to maintaining the due diligence and other requirements required by law for the entities it administers.
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Adequate identification.
The obligated subjects must maintain in their operations due diligence and care conducive to reasonably preventing such operations from being carried out with funds or on funds from illicit activities. The mechanisms of identification of the client and the final beneficiary, as well as the verification of the information and documentation, will depend on the risk profile of the obliged subjects considering the types of customers, products, and services it offers, marketing channels, and geographical location of its facilities, that of its customers and final beneficiaries.
Obligated subjects shall ensure that the due diligence process’s documents, data, or information collected are kept up to date.
Risk Assessment.
Obligated subjects shall take the necessary measures to identify, evaluate and understand their risks of money laundering, terrorist financing, and financing of the proliferation of weapons of mass destruction related to customers, countries, or geographical areas and products, services, transactions, or distribution or marketing channels.
Obligated subjects must:
• Document their risk assessments and keep these risk assessments up to date.
• Consider all relevant risk factors before determining the level of risk.
• Have appropriate mechanisms to provide information on risk assessments to their respective supervisors.
Transactional Profile.
According to the identified risk, the obligated subjects must obtain information and documentation related to their client’s financial and transactional profiles. The Executive Branch and the Superintendence of Non-Financial Subjects shall regulate this matter.
Know the nature of the client’s business.
The obligated subjects must collect information from their clients to know the nature of their professional or business activity and will record the activity declared by the client at the beginning of the business relationship. The supervisory bodies will regulate this matter, considering the obligated subject’s type of activity.
Monitoring of the business relationship.
The obligated subjects must monitor the operations carried out to ensure that they coincide with the client’s professional profile or business activity, financial or transactional profile. Such monitoring should be increased when warning signs or behaviors above the average risk are observed. Obligated subjects also conduct monitoring processes periodically to ensure that the data and information obtained are up to date. It is also mentioned to pay special attention to the financial and transactional profile against the reality of cash, quasi-cash, checks, or electronic transfers.
The supervisory bodies will regulate this matter, considering the obligated subject’s type of activity.
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Sanctions
Sanctions to the Obligated Subject.
Failure to comply with the established provisions of the law (254) will have fines from USD 5,000 to 5,000,000. Depending on the severity of the fault, degree of recidivism, the magnitude of the damage, and size of the obligated subject will be imposed by the supervisory bodies or at the request of the Financial Analysis Unit for non-compliance with the late or incorrect sending of reports.
The Executive Branch shall regulate this matter. The supervisory bodies shall regulate the application of sanctions, their respective regulations in accordance with the sanctioning powers granted by their individual constituent laws or those that create them.
Sanctions to third parties involved.
The sanctions will apply not only to the obligated subjects but also to those who allow or are non-compliance with the provisions established in the law or those dictated for its application by the supervisory body.
Sanctions to the legal entity.
The Superintendence will order the Public Registry to suspend the corporate rights of the legal entity related to the breach of the Resident Agent of any of the established obligations, its regulations, or its regulations. The Superintendency of Non-Financial Subjects is empowered to order the Public Registry of Panama to liquidate the legal entity forcibly.
The competent authority will apply sanctions to the private source that does not comply with delivering, within the period granted, the documentation and information that is requested by request for information, under the provisions of this law and its regulations:
– Fine of USD 5,000 up to 100,000 when the person fails to deliver all the information and documentation required for reasons attributable to it within the period granted.
– Fine of USD 500 for each day that elapses, after the deadline granted for the delivery of the required information or documentation, when the person does not comply with the delivery of the documentation or information requested.
Likewise, the established sanctions will be applied when in the supervisory processes non-compliance with the established obligations is detected and in cases where the private source discloses or compares confidential information with an unrelated third party.
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Contact us for any questions about Law 254 of November 2021 and the due diligence requirements clients must provide in Panama. We will gladly provide you with the necessary legal guidance.