The move comes despite the passing of a long-delayed legislative proposal by Panama’s National Assembly on January 31 to make tax evasion a criminal (rather than administrative) offence -- the latest in a series of efforts to improve Panama’s image. The Financial Action Task Force (FATF) -- the international standard-setting body for anti-money laundering and combating the financing of terrorism (AML/CFT) -- will publish an assessment of Panama this month, before deciding whether to 'greylist' it around June.
Poor AML controls leave Panama vulnerable to the entrance of funds from the expanding cocaine trade in neighbouring Colombia.
Greylisting would hit local financial institutions' access to US correspondent banks, raising international transaction and transfer costs.
Capital flight is possible by financial institutions seeking to avoid international regulatory risks associated with Panamanian operations.
