Panama off FATF grey list after four years, but EU's Bulgaria is now on

Panama is off the Financial Action Task Force (FATF)'s so-called grey list after four years as a result of its efforts to combat money laundering and terrorist financing.

The FATF announcement follows an October plenary in Paris, providing confirmation that Panama's strengthened AML (anti-money laundering) framework and counter-terrorism financing system can adhere to the globally accepted standards of the AML regime, enhancing international transparency.

The decision received support from Latin American, Asian, and European countries, and from the international organisations and the Latin American Financial Action Group (GAFILAT), of which Panama has been a member since 2010.

The FATF added Panama to its grey list of countries in June 2019 due in part to 15 unfulfilled action points required for compliance.

According to Malta's Financial Intelligence Analysis Unit (FIAU), the FATF classifies jurisdictions into different categories:

Jurisdictions with strategic deficiencies in their regime to counter money laundering, terrorist financing, and financing of proliferation that have failed to meaningfully address their AML/CFT deficiencies and are subject to a call for counter-measures (listed under ‘High-Risk Jurisdictions subject to a Call for Action’). This process is informally referred to as “black listing”.

Jurisdictions that have developed an action plan with the FATF and have made a high-level political commitment to address their AML/CFT deficiencies (listed in the ‘Jurisdictions under Increased Monitoring’). This process is informally referred to as “grey listing”.

Per its June 2023 evaluation, the FATF agreed that the required action points were mostly achieved by Panama.

These actions included essential updates to the National Risk Assessment, increasing personnel for analysis, and strengthening risk-based supervision.

Panama modified its standard for the prevention of money laundering and financing of terrorism (AML?CFT), imposing stricter penalties for non-compliance.

Since 2019, the country has introduced several AML/CFT laws and executive decrees, demonstrating its fixed commitment for improving its financial integrity and international standing.

In its 27 Ocotber announcement, the FATF said it welcomed Panama’s significant progress in improving its AML/CFT regime.

"Panama strengthened the effectiveness of its AML/CFT regime to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in June 2019 related to (1) strengthening its understanding of the national and sectoral ML/TF risk and informing findings to its national policies to mitigate the identified risks; (2) taking action to identify unlicensed money remitters, applying a risk-based approach to supervision of the DNFBP sector and applying effective, proportionate, and dissuasive sanctions against AML/CFT violations; (3) verifying updated beneficial ownership information by obliged entities, establishing mechanisms to monitor the activities of offshore entities, assessing the existing risks of misuse of legal persons and arrangements to define and implement specific measures to prevent the misuse of nominee shareholders and directors, and allowing timely access to adequate and accurate beneficial ownership information; and (4) using FIU products for ML investigations, demonstrating its ability to investigate and prosecute ML involving foreign tax crimes and providing constructive and timely international cooperation with such offence, and continuing to focus on ML investigations in relation to high-risk areas identified in the NRA and MER. Panama is therefore no longer subject to the FATF’s increased monitoring process."

The FATF said that even being off the grey list, Panama should continue to work with GAFILAT to sustain its improvements in its AML/CFT system.

Bulgaria on FATF grey list

In the same October plenary that saw FATF members move Panama off the grey list, Bulgaria was added to the list.

With Croatia already on the grey list, Bulgaria is now the second EU member state on the list. Another 21 countries from outside the EU are also on the list.

Malta was also grey listed between June 2021 and June 2022.

Bulgaria has made a high-level political commitment to work with the FATF and MONEYVAL to strengthen the effectiveness of its AML/CFT regime. Since the adoption of its MER in May 2022, Bulgaria has made progress on its MER’s recommended actions to improve its international cooperation.

In its 27 October evaluation, the FATF said Bulgaria will work to implement its action plan by: (1) implementing its national AML/CFT Strategy through adopting a comprehensive action plan; (2) addressing the remaining technical compliance deficiencies; (3) demonstrating initial implementation of risk-based supervision for postal money operators, currency exchange providers and real estate agents and establishing market entry controls for VASPs and postal money operators; (4) ensuring that the beneficial ownership information held in the Register is accurate and up-to-date; (5) completing the implementation of the automated system to ensure more automated prioritisation of STRs; (6) improving investigations and prosecutions of different types of money laundering in line with risks, including high-scale corruption and organised crime; (7) ensuring that confiscation is pursued as a policy objective; (8) ensuring the ability to conduct parallel financial investigations in all terrorism investigations; (9) addressing gaps in the TF and PF targeted financial sanctions (TFS) frameworks; and (10) identifying the subset of NPOs most vulnerable to TF abuse and demonstrating initial implementation of risk-based monitoring to prevent abuse for TF purposes.