Panama -- Travel Rule Implementation Regulatory Overview

Panama's implementation of the FATF Travel Rule (Recommendation 16 for virtual assets) is complex and, as of late 2023/early 2024, still largely pending comprehensive, dedicated legislation. While there have been legislative attempts, a specific law fully implementing the Travel Rule for Virtual Asset Service Providers (VASPs) has not yet been enacted.

Here's a breakdown:

Overall Status: Not Fully Adopted Through Dedicated Legislation

Panama has been under significant international pressure to strengthen its AML/CFT regime and has made efforts in general AML/CFT, but a specific and comprehensive framework for Virtual Assets (VAs) and VASPs, including full Travel Rule implementation, is still evolving.

1. Whether Adopted:

   • No specific, comprehensive law for virtual assets and VASPs fully implementing the Travel Rule has been adopted and made effective.
   • There was a significant legislative attempt: Law 69 of 2022 (Proyecto de Ley 697), which aimed to regulate the commercialization and use of crypto assets and issue specific provisions for VASPs. This law would have incorporated FATF standards, including potentially aspects of the Travel Rule.
   • Status of Law 69/2022: This law was vetoed by the President of Panama in June 2022, primarily due to concerns about its scope, regulatory framework, and potential implications for financial stability and existing AML/CFT efforts. This means it did not become law.
   • Current Situation: In the absence of specific crypto legislation, existing general AML/CFT laws (like Law 23 of 2015) and regulations may apply to activities involving virtual assets if they fall under the definition of financial services or other regulated activities, but this application is often indirect and does not fully address the Travel Rule's specific requirements for VAs.

2. Effective Date:

   • Since a dedicated law has not been adopted, there is no specific effective date for the Travel Rule for VASPs in Panama.
   • Existing AML/CFT regulations have their own effective dates, but they are not tailored for the VASP Travel Rule.

3. Threshold Amounts:

   • Without specific VASP legislation, there are no specific threshold amounts established for the Travel Rule in Panama.
   • General AML/CFT thresholds for reporting suspicious transactions or cash transactions in traditional financial services (e.g., typically above USD 10,000 for cash transactions) exist under Law 23 of 2015, but these are not directly applicable to the Travel Rule for VAs.

4. Which VASPs Are Covered:

   • This is currently ambiguous due to the lack of dedicated legislation.
   • Under the proposed (and vetoed) Law 69 of 2022, a broad range of entities involved in virtual asset activities would have been covered, including exchanges, custodians, wallet providers, and other service providers facilitating VA transfers.
   • Currently, the Superintendency of Banks of Panama (SBP) and the Financial Analysis Unit (UAF) monitor activities that may fall under their existing purviews if they are deemed to interact with the traditional financial system or pose specific AML/CFT risks. However, there isn't a clear licensing or registration regime for all types of VASPs.

5. Technical Implementation Requirements:

   • Since there's no specific law or regulation for the Travel Rule for VAs, there are no mandated technical implementation requirements.
   • In the absence of clear regulatory guidance, any VASPs operating in Panama and attempting to comply with international best practices (or internal compliance programs due to cross-border operations) would likely look to global solutions like TRISA, OpenVASP, or other Travel Rule Protocol (TRP) solutions.

6. Penalties for Non-Compliance:

   • Given the lack of specific Travel Rule legislation, there are no specific penalties defined for non-compliance with the Travel Rule for VAs.
   • However, if a VASP (or an entity performing VASP-like activities) is found to be operating in violation of existing general AML/CFT laws (e.g., for failing to report suspicious transactions, not having adequate customer due diligence, or facilitating money laundering), they would be subject to the penalties outlined in those laws.
   • Law 23 of 2015 (which sets out the AML/CFT framework for many regulated entities) includes administrative sanctions (fines) and criminal penalties (imprisonment) for individuals and legal entities involved in money laundering, terrorism financing, and related breaches of AML/CFT obligations.

Relevant Legislation & Guidance:

• Law 23 of 2015 (Ley 23 de 27 de abril de 2015): "Que adopta medidas para prevenir el blanqueo de capitales, el financiamiento del terrorismo y el financiamiento de la proliferación de armas de destrucción masiva, y dicta otras disposiciones." This is Panama's primary AML/CFT law that establishes obligations for various financial and non-financial entities.

  • URL (Spanish): https://www.asamblea.gob.pa/APPS/LEGISLATURAS/PDF_LEYES/2010/2015/2015_361_2077.pdf (Note: This is a direct PDF link, official source from the National Assembly of Panama)

• Proyecto de Ley 697 (Vetoed Law 69 of 2022): While vetoed, its existence highlights the legislative intent.

  • Information on the veto (Spanish): Various news outlets reported on the veto, e.g., La Estrella de Panamá, Prensa.com. Searching "Presidente Veta Ley Cripto Panamá" would yield results.

• GAFILAT Mutual Evaluation Reports: As a member of GAFILAT (the FATF-style regional body for Latin America), Panama undergoes regular assessments. The latest follow-up reports often highlight the country's progress (or lack thereof) in implementing FATF recommendations, including those related to virtual assets (Recommendations 15 and 16).

  • The 4th Round Mutual Evaluation Report of Panama (originally 2017) and subsequent Follow-Up Reports are the most authoritative public sources on Panama's compliance with FATF Recommendations.
  • URL for GAFILAT Reports (search for Panama): https://www.gafilat.org/index.php/es/biblioteca/documentos-de-evaluacion-mutua
    • The Follow-Up Report for Panama published in July 2023 would be the most relevant to check for recent assessments on VAs/VASPs. It notes that Panama has improved some aspects of its AML/CFT framework but often still has strategic deficiencies, particularly in newer areas like VAs. It's likely to rate compliance with R.15 (new technologies) and R.16 (wire transfers, applied to VAs) as only partially compliant or non-compliant for VAs.

• Superintendencia de Bancos de Panamá (SBP): While not directly issuing Travel Rule guidance, the SBP is the primary regulator for financial institutions and has issued some general warnings or guidance related to crypto activities.

  • SBP Official Website: https://www.superbancos.gob.pa/

• Unidad de Análisis Financiero (UAF): Panama's Financial Intelligence Unit (FIU), responsible for receiving and analyzing suspicious transaction reports.

  • UAF Official Website: http://uafpanama.gob.pa/

In summary, while Panama recognizes the need to regulate virtual assets and address FATF standards, specific legislation fully implementing the Travel Rule for VASPs is still a work in progress. VASPs operating in or with connections to Panama should closely monitor legislative developments and adhere to existing general AML/CFT requirements to the extent they are applicable.