Politically Exposed Persons (PEPs) in Panama: Risk Management for Financial Institutions
Politically Exposed Persons (PEPs)—individuals holding prominent public positions or connected to them—pose high risks of money laundering and corruption for financial institutions. In Panama, Law 23 of 2015 and FATF standards mandate enhanced measures to manage these relationships safely and legally.
Definition and Scope
Domestic PEPs: Panamanian officials in significant roles (e.g., legislators, ministers, judges).
Foreign PEPs: High-ranking officials from other countries (e.g., heads of state, ambassadors).
Relatives and Close Associates: Spouses, children, business partners, or individuals with financial ties.
Key Risks
Money Laundering: Using the financial system to legitimize illicit funds.
Transnational Corruption: Moving bribes or embezzled funds through Panamanian accounts.
Reputational Damage: Associations with PEPs involved in scandals harm institutional credibility.
Enhanced Due Diligence (EDD) Measures
Initial Identification:
Use specialized databases (e.g., World-Check, LexisNexis) to flag PEPs during account openings.
Cross-reference public sources (election records, asset declarations).
Ongoing Monitoring:
Regular review of atypical transactions (e.g., transfers to tax havens, unexplained movements).
Annual PEP status updates (e.g., reassessing categorization if a client leaves public office).
Senior Management Approval:
All PEP relationships require authorization from compliance committees or executives.
Recommendations for Panamanian Institutions
Specialized Training:
Train staff on PEP red flags (e.g., use of intermediaries, opaque corporate structures).
Supportive Technology:
Deploy AI to analyze transactional patterns and map contact networks.
Interagency Collaboration:
Share alerts with the Superintendency of Banks and FIU to strengthen financial intelligence.