PANAMA Law and Practice Contributed by: Kharla Aizpurua Olmos, Roberto Vidal, Miguel Arias and Eduardo Oteiza, Morgan & Morgan
in matters of compliance with Law 23, the Regulation of Law 23, and other corresponding agreements relat - ing to the prevention of money laundering, the financ - ing of terrorism and the financing of the proliferation of weapons of mass destruction (the “Compliance Laws”). The Compliance Laws establish a series of measures that financial obliged subjects must imple - ment to prevent the improper use of their services. It is worth noting that it is possible for an entity to be subject to the Compliance Laws but not subject to licensing requirements. For example, entities dedi - cated to payment processing services and issuers of electronic money are financially obliged subjects and must register with the SBP in order to comply with the Compliance Laws, but they are not required to obtain a licence for their activities. Thus, a fintech company may not be required to have a licence from any of the regulators, but it could be subject to registration requirements with the SBP only for the purposes of the Compliance Laws. Law 23 establishes a regime of administrative sanc - tions for those that violate its provisions. The super - visory bodies will apply sanctions considering the seriousness of the offence, its recurrence and the damage caused. Sanctions may include fines of between USD5,000 and USD5 million, which may be imposed on individuals and entities that fail to com - ply. In addition, progressive sanctions are provided for continuous violations, and corporate responsibility is established, attributing the acts of employees to the obliged entity. 2.15 Financial Action Task Force (FATF) Standards The Compliance Laws are generally aligned with the standards of the Financial Action Task Force (FATF). Since the enactment of Law 23 in 2015, Panama has been actively taking significant steps to comply with FATF recommendations. However, its progress and effectiveness have been subject to periodic scrutiny by the FATF. 2.16 Reverse Solicitation Local regulation does not explicitly permit reverse solicitation, although it does often apply to opera - tions carried out in or from Panama. Under that prem -
ise, when a Panamanian customer independently approaches a foreign provider to access a regulated product or service, the provision of said foreign prod - uct or service would not be caught by local regulation. It is very important that the foreign provider does not carry out any prior marketing, solicitation or advertise - ment directed at the Panamanian market. 3. Robo-Advisers 3.1 Requirement for Different Business Models As mentioned above, Panama does not have a spe - cial regulatory framework for companies in the fintech industry, including robo-advisers. Therefore, there are no regulations or requirements for robo-advisers besides the applicable AML legislation (Law 23) and the Data Protection Regulation. The SMV regulates “investment advisers”, defined as individuals or enti - ties that, for compensation, provide advice to others on the pricing of securities or the suitability of invest - ing in, buying or selling those securities. This includes preparing and publishing studies or reports relating to securities, as well as advising on forex. These regula - tions apply to both individuals and companies, along with their employees, that offer investment advisory services to clients. However, there is currently no clear guidance on whether these regulations also extend to robo-advisers. 3.2 Legacy Players’ Implementation of Solutions Introduced by Robo-Advisers Legacy players in Panama have not developed or are only beginning to develop robo-adviser services for their clients. However, it is only a matter of time before all legacy players will offer these services to their clients since there is a trend in Panama for lega - cy players to create and implement fintech products and services based on modernisation and the current changing dynamic of services offered to a new wave of clients that want to leverage technology for their financial services. 3.3 Issues Relating to Best Execution of Customer Trades Panama has no special regulations regarding the best execution of customer trades. However, some securi -
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