PANAMA Law and Practice Contributed by: Kharla Aizpurua Olmos, Roberto Vidal, Miguel Arias and Eduardo Oteiza, Morgan & Morgan
Fintech Companies Serving Financial Institutions These companies provide technological solutions that enhance and optimise operations of legacy players, enabling them to broaden their service offerings within an increasingly digitalised financial ecosystem. 2.2 Regulatory Regime Panama has a unified regulatory regime, meaning there is no distinction between state and federal regu - lation. Industry participants can be subject to one or more of the following three verticals that compose the regulatory regime: • Banking: The main legal source for this vertical is Executive Decree 52 of 2008 (the Single Text of the Banking Law (as amended, the “Banking Law”)), and the sector is supervised and regulated by the Superintendency of Banks (SBP). The SBP over - sees banks, trust companies and foreign exchange houses, in addition to acting as the local regulator for anti-money laundering (AML) matters related to certain fintech activities; thus, any business model that carries out activities within this scope will be subject to either registration or licensing require - ments from the SBP. • Securities: The main legal source for this vertical is Decree Law 1 of 1999 on the Securities Market in the Republic of Panama and the Superintendency of the Securities Market (the “Securities Law”). The sector is supervised and regulated by the Super - intendency of the Securities Market (SMV), which oversees brokerage houses, investment advisers, stock exchanges, fund managers, clearing houses and credit rating agencies, among others. Thus, any business model that carries out activities within this scope will be subject to licensing requirements from the SMV. Additionally, the SMV supervises issuers and the registration of public offerings of securities. • Financial companies: This vertical, which encom - passes the regulation of lending companies, pawn shops, money remittance houses and movable goods leasing companies, has various legal sources. Even though there are different laws which regulate each of these businesses, they are all supervised and regulated by the Directorate of Financial Companies attached to the Ministry of Commerce and Industry (MICI). Lending compa -
nies are entities that engage in lending activities without deposit-taking activities. As stated above, depending on the scope of the busi - ness model, a company may be subject to one or more of the regulations detailed above. 2.3 Compensation Models Companies normally charge their customers directly, having clearly communicated pricing and payment terms. However, depending on the specific business model and the regulatory vertical in which the com - pany operates, there may be additional standards or specific information that must be included in the dis - closures. For example: • whenever a brokerage house has a conflict of inter - est, a separate and independent disclosure must be made to the customer; and • lending companies must include specific informa - tion (interest, term, number of payments, etc) in their contracts. In general, local law requires companies to provide full disclosure to their clients regarding the compensation models of their business. Furthermore, whenever a specific service is devoid of a legal framework in Pan - ama, it is advisable that end customers be informed that all transactions carried out are at their own risk and are not regulated by the SMV or SBP for local purposes. 2.4 Variations Between the Regulation of Fintech and Legacy Players Currently, the regulations applicable to fintech industry participants do not differ from those applicable to leg - acy players in the finance sector. This is due to Pana - ma’s regulatory framework’s lack of formal recognition of newer business models and more innovative enter- prises. In other words, the regulatory landscape has not caught up with the emergence of fintech. Local laws and regulations have been made and implement - ed around traditional financial institutions, and these regulations do not yet include more flexible param - eters or simplified licensing requirements for fintech companies, although there are currently several draft bills in discussion that aim to address this.
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