Published legislation and draft legislation - Panama

Modernization and competitiveness of the financial system

Draft bill 629/2018

At a plenary session of the National Assembly, the Minister of Economy tabled for approval Draft Bill 629, April 9th, 2018, “to modernize the Republic of Panama’s financial system and make it internationally competitive”.

The aim of this bill is to adapt and bring up to date the country’s financial and non-financial offering in order to promote a complete structural transformation of the country’s financial system.

The main points of the bill are:

  • Definition of EFE, Specialized Financial Institutions: legal persons whose purpose includes financial services related to the administration, sale and purchase of electronic currencies, issue of instruments for electronic money operations, execution of ancillary services (coin and currency exchange operations, management of indirect taxes returnable to non-residents, among others).
  • Competent authority: a registry of the EFEs in the Republic of Panama will be kept, which will be supervised, managed and maintained by the Ministry of Trade & Industries for the first three years after the law is enacted. After this period, the responsibility will fall on the body that regulates legal persons set up with EFE licenses, Panama’s Banking Authority.
  • Separation of electronic money and funds: electronic money and funds deposited by clients in EFEs will remain in separate accounts with specific identification. This type of institution will be subject to annual audits.
  • The definition of crowdfunding institutions (known as CEFICO, from Centros de Financiamiento Colectivo) as “legal persons operating in Panama or from Panama whose corporate purpose is the selection of projects and brokering between project developers (looking for funding) and savers and/or investors (offering funding), using diverse innovative means, among them the use of online technologies or similar techniques”. The registration and supervision of these institutions will be managed by Panama’s Securities Markets Authority, as will the awarding or withdrawing of their licenses,
  • Family Asset Management Office (OFAP): the bill proposes that this legal vehicle be created in order to provide financial and non-financial services relating to family wealth; administering movable and non-movable goods, drawing up family protocols, overseeing family businesses, etc. The Ministry of Trade & Industries will create a registry of such offices.

This draft law would turn financial companies, remittance firms and companies that lease liquid assets into entities regulated by Panama’s Banking Authority (their regulatory body is currently the Ministry of Trade & Industries). This would also be the body responsible for issuing licenses to such institutions, and for managing the maintenance or removal of these licenses.

The regulation also covers the mergers of Limited Partnerships and Limited Liability Limited Partnerships; the Republic of Panama’s Public Registry will be in charge of creating, registering and regulating them. The draft law allows a Limited Partnership to become a Limited Liability Limited Partnership when its articles of incorporation provide for this.

Finally, the draft law makes reforms to a swathe of regulations. It makes modifications in insurance and reassurance (Act 12, May 19th, 2016 and its amendments), incorporates additions to the Republic of Panama’s Civil Code, reforms regulations to the securities market (Decree 1, July 8th, 1999) as well as certain tax aspects in the Republic of Panama’s Fiscal Code (Act 8, January 27th, 1956); it amends the financial leasing system (Act 7/1990), the financial companies’ framework (Act 42/2001) and the AML law (Act 23/2015); it introduces modifications to Panama central bank’s Organic Law (Decree 4/2006) and proposes changes to Panama’s Limited Companies Act in matters concerning the board of directors and dignitaries (Act 32/1927).