subject: Risks of Banking in Panama [print this page] Risks of Banking in Panama Risks of Banking in Panama
Panama is an attractive country to establish an offshore entity. Though generally not included in a list of industrialized nations, Panama boasts hundreds of banks, including scores of international banks. Their banking laws are set up to maximize privacy and anonymity for corporations, which is why Panama is a destination for those seeking to incorporate offshore.
Though some Panama banks have translated websites and seek international accounts, don't expect world-class services. Email often goes unanswered for days and it is not uncommon for the recipient to not understand your request. Time is then lost re-translating and resubmitting your original request. Despite fairly good internet connectivity and reliability, the banking staff is often unprepared for fiduciary services.
The banks use a layering approach with personnel that grants little authority and even less responsibility to its service employees. A typical bank employee earns between US$ 500 to $800 per month. They feel little empathy for foreign clients whose checking/savings accounts remind them how little they are worth to their employers.
Most Panama banks issue the typical Visa/MasterCard debit and credit cards. Typically, credit cards require 125% of the desired credit limit be held in a savings account. For example, if the client requests a US$ 5,000 limit, a secured balance of US$ 6,250 is required. Additionally, most Panama banks will only permit US$ 2,000 cash (ATM) withdrawals per billing cycle.
Debit cards seem to work similar to European and American standards but again may be subject to daily limits and other restrictions such as the maximum ATM withdrawal example above. Importantly, clients have lost their cards in ATMs outside of Panama. In one such case, a Panama attorney called the bank manager to request the card(s) be cancelled due to loss. He was informed that such action would require the card holder to travel to Panama and make the request in person in the bank, which is contrary to Visa/MasterCard rules. In the above example, the attorney threatened to sue the bank for any and all loses caused by their refusal to cancel the card. The bank manager finally capitulated. In the end, the bank manager won the day by refusing to issue any replacement cards for the client.
Depositing and withdrawing funds from a Panama bank is not a routine matter for a foreign account owner. Money laundering and drug money are international problems and Panama banks are very interested in erasing the poor image and reputation they earned during the Noriega years when Panama was a transit site for all manner of illegal financial transactions.
Consequently, Panama now has laws and enforcement regulations that require bankers to know the source of deposited funds and to make a good effort to determine that the funds are clean. Do not be surprised if your Panama bank refuses to deposit a large wire transfer into your account. If you have not "pre-cleared" the sender and satisfied the bank that these funds are legitimate payment for services or products that you have provided, the funds will be held until such time as the bank and/or government auditors are satisfied that the wire transfer funds meet their requirements.
There are procedural steps that an account owner can take in advance to minimize these delays, however, you should remember that the bank clerk receiving US$ 500 per month has been told to screen wire transfer deposits for large amounts and that is exactly what she will do. The suspect deposits will then be reviewed by an unnamed committee and forwarded to senior bank management for final approval or hold. We have found this to be a bottomless pit with major delays and high levels of frustration when the bank manager tells us his hands are tied and they cannot accept payment from Fortune 500 firms without complete due diligence disclosure from all of their officers and directors.
While some of the cited problems and risks with banking in Panama can be found in other venues, it has been our experience that Panama is not a good choice for international banking. They experience all of the cited problems and there seems to be a new and different short-coming every week. Our advice is to avoid banking in Panama if at all possible and regardless of where you bank, it is be both wise and productive to thoroughly investigate how the banking system works in each venue before deciding where to keep your money.
