Panama signed another Tax Information Exchange Agreement (TIEA) the other week. So what does this mean? Panama has signed several of these in the past. According to lawmakers such as US Senator Carl Levin, the previous agreements were not sufficient and Panama needs to achieve further transparency.

Panama is desperately awaiting US approval of the Free Trade Agreement signed by the two countries in 2007 and will therefore agree to pretty much anything requested by the US. Year after year Panama has expected the agreement to be approved, but President Obama has yet to submit the treaty to Congress. While the Free Trade Agreement is a huge deal in Panama, it is less of a priority in the US. While US exports to Panama are not insignificant at USD 4 Billion, the US exports more to China in three weeks than it does to Panama in a year.

I have seen reports by some offshore incorporators dismissing the new TIEA as irrelevant as long as you have “compliant offshore structures”. What they typically mean is that you should engage their services to form several layers of legal structures, such as bearer share corporations owned by private interest foundations.  The reality is that nobody, and much less an American, should ever consider “hiding” untaxed money in a Panamanian bank. The bank secrecy was always a cosmetic feature in Panama. If a Panamanian bank has a slightest indication that you might be under investigation of any kind, including for tax evasion, they are likely to freeze your assets first and ask questions later, even though tax evasion is not even currently a crime in Panama.  Anyone touting Panama as a replacement for Switzerland has been watching the wrong movies.

It should also be considered that any US person who holds an account outside the US with a balance above USD 10,000.00 at any given time is required to file a Report of Foreign Bank and Financial Accounts (FBAR) with the IRS. It does not matter how many legal structures one would put between the US person and the account ownership. The bank will always require identification of the final beneficial owner. FBAR reporting applies even you would assign nominee directors, shareholders, signatories and all the rest. Any type of control or access to the funds will subject you to the FBAR reporting requirement.  Any attempt to conceal the ownership of funds may very well lead to accusations of money laundering even if the closest you ever got to money laundering was forgetting a five dollar bill in your pants before washing them.

Accounts subject to FBAR reporting include bank accounts, brokerage accounts, mutual fund holdings, trust accounts and any other type of non-US financial accounts. Failing to file FBARs can be a criminal offence subject to fines of up to $500,000 and prison terms of up to ten years. In civil FBAR cases each non-willful FBAR violation draws a $10,000 fine and each willful violation the greater of $100,000 or 50% of the amount in the account. Each year you failed to file counts as a separate violation.

The FBAR reporting requirement is of course not in any way specific to bank accounts in Panama, but reading about offshore providers dismissing the Panama-US TIEA made me think it was time to remind about this rather relevant requirement.

Michael Magnusson is a contributor on Bankers Press and author of several books including the International Bestseller “The Land Without A Banking Law – How to Start a Bank with a Thousand Dollars”. Visit www.michaelmagnusson.com for further information and book descriptions.

 

Panama Securities Law by Carl Michael Magnusson.

The Panamanian Securities Commission allows brokers, investment advisors and others to take the licensing exams in English, but the Securities Act has up until now been available in Spanish only.

This is an English Translation of the Panamanian Securities Act whereby the National Securities Commission was created and the securities market is regulated in Panama. The law regulates investment advisors, brokers, administrators, custodians, public and private investment funds and investment companies. Including the following amendments: Public Law Nº 42 of October 2, 2000 Public Law Nº 29 of July 3, 2001 Public Law Nº 11 of January 30, 2002 Public Law Nº 45 of June 4, 2003 Public Law Nº 6 of February 2, 2005

Paperback: 174 pages

By Carl Michael Magnusson

ISBN-10: 1484163230

ISBN-13: 978-1484163238

Available on Amazon here