The Executive Decree No. A, issued on December 5, 2023, amends Article 10 of Executive Decree No. 13, dated March 25, 2022. This decree regulates Law No. 129 of March 17, 2020, which established the Private and Unique System for the Registration of Beneficial Owners of Legal Entities in Panama. The goal of this decree is to enhance the transparency and implementation of measures that align with international standards regarding the identification and registration of Ultimate Beneficial Owners.
The Panamanian government, through this decree, continues its efforts to improve the regulatory framework for the registration of beneficial owners of legal entities. This update to Executive Decree No. 13 builds on Law No. 129 and aims to ensure that the regulations meet international standards for financial transparency and the prevention of money laundering, terrorist financing, and other illicit activities.
Key Modifications to Article 10:
The following changes were made to Article 10 of Executive Decree No. 13:
- Identification of Ultimate Beneficial Owners:
- Address: The physical address of the beneficial owner where they are domiciled must be provided.
- Date of Acquisition of Ultimate Beneficial Owner Status: The date when the person became a beneficial owner must be identified. If the exact date is not known, it will be considered the date when the resident agent was informed of the person’s status.
- Criteria for Identifying the Ultimate Beneficial Owner (for Legal Entities):
- Direct or Indirect Control: The beneficial owner is the natural person who directly or indirectly holds 10% or more of the shares, voting rights, or ownership interests in a legal entity for financial subjects, or 25% or more for non-financial subjects. Exceptions apply for publicly listed companies or entities owned by international organizations or states.
- Effective Control: The beneficial owner can also be the natural person who exercises effective final control over the legal entity through other means.
- Exceptions and Special Cases:
- If the criteria mentioned above do not identify a beneficial owner, the person holding the highest administrative position in the entity must be identified as the beneficial owner.
- For private interest foundations, the natural person who benefits financially from the foundation or who exercises effective control is considered the beneficial owner.
- In the case of trusts, the identity of the settlor, trustee, protector (if any), beneficiaries, and others exercising effective control over the trust must be identified.
- For legal entities undergoing liquidation or bankruptcy, the liquidator or curator is considered the beneficial owner.
- In the event of the death of a shareholder or partner who would otherwise be considered a beneficial owner, the personal representative (e.g., executor) or administrator of the deceased’s estate must be identified as the beneficial owner.
- If none of the previous conditions apply, the person(s) who ultimately, directly or indirectly, possess, control, or exert significant influence over the entity or relationship must be identified.
Objective of the Changes: The primary objective of these modifications is to ensure a more detailed and comprehensive identification of ultimate beneficial owners. This is particularly important for compliance with international anti-money laundering (AML) and counter-terrorism financing (CTF) standards. By strengthening the legal framework for Ultimate Beneficial Onwer registration, Panama aims to maintain its reputation as a transparent and trustworthy jurisdiction for both domestic and international business operations.
Conclusion: The modification of Article 10 under Executive Decree No. A of December 5, 2023, is a critical step in ensuring that Panama continues to meet international standards for financial transparency. The changes seek to provide clearer guidelines for identifying ultimate beneficial owners, particularly in complex legal structures, while addressing specific exceptions and special cases. These amendments aim to enhance the regulatory environment, making Panama a more robust and reliable partner in global financial and legal markets.
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