Panama banking system
For those individuals and companies considering Panama as an offshore banking venue… we have some advice: BE CAREFUL.
We are Ballinphort Corporation, a company well-versed in setting up trusts, asset protection and offshore companies. Ballinphort has nearly four years of experience working with a variety of banks in Panama. This experience has been on behalf of clients from Europe, North American and the Pacific Rim.
Panama banks operate like no other banks in the world. Firstly, no one person makes a decision: every decision is a group process with an anonymous group membership. These group decisions are based upon unknown requirements and the customer is seldom provided with any definitive reason for the decision. For example, the bank can take six months to determine if they will open a new International Business Company (IBC) checking/savings account. During this period they will require business plans, marketing plans, trade references, bank letters of introduction and all standard “due-diligence” documentation. They may require this information from all officers, directors and stock-holders. They will often require that the principals travel to Panama for a bank interview. And once all the paperwork is submitted they may tell you that your business has been refused without providing a substantive reason.
Secondly, Panama banks have at least a two-tiered fee schedule; one for Panama citizens and one for foreigners (regardless of their domicile.) Clearly, the foreigner fee schedule is much higher than the fees charged their own citizens.
Thirdly, if you plan on internet banking you will be sadly disappointed. Most of the smaller, Panama owned banks do not have websites in English, French or German. Those that do have some translated web-pages do not permit complete functionality, for example, most will not allow the user to send a wire via internet banking. Instead, the client must send overnight courier mail with an original bank wire transfer request signed by the approved signatory. Just because you have requested a wire transfer, the transaction is given no priority over other bank business. That means that if the person in the bank to whom the wire transfer request was addressed happens to be out sick or on vacation, your request will not be acted upon until that person returns to work, whether that is one day or two weeks. Normal wire transfers routinely require two weeks from the date courier mailed to be received into the receiving bank account.
Fourth, Panama banks do not require their chartered banks to maintain their required reserves in Panama. That means, if the bank keeps its reserves in England, Canada or the United States and any judge in those venues seizes the assets held in their country, the bank in Panama will be immediately closed by the Panama Superintendent of Banking. The Stanford Banking debacle is a good case in point. A U.S. Federal Judge (in Texas) ordered the Stanford Banks assets held in the United States to be frozen pending litigation. Stanford Bank Panama was immediately closed and no funds were available to depositors for over a year. Many of the banks customers are still waiting for their funds to be returned as the wire transfers are taking weeks instead of days.
Panama boasts hundreds of banks and scores of international banks. Some have translated websites and seek international accounts, but don’t expect world-class services. Email often goes unanswered for days and then the respondent did not understand your request… so additional days are 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 employ a layering approach to employees that grants little authority and even less responsibility to its service employees. A typical bank employee earns between US$ 500 to 0 per month. They feel little empathy for foreign clients whose checking/savings accounts remind them how little they are worth to their employers.
Finally, a word about Panama bank credit/debit cards; 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 customer requested a US$ 5,000 limit, a secured balance of US$ 6,250 would be 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, we have had clients lose their cards in ATMs outside of Panama. When this happened, our Panama attorney called the bank manager to request the card(s) be cancelled due to loss only to be informed that such action would require the card holder to travel to Panama and make the request in person in the bank. While this is contrary to Visa/MasterCard rules that individual bank manager may insist. In the above example, our attorney threatened to sue the bank for any and all loses caused by their refusal to cancel the card and the bank manager capitulated. However, the bank manager won the day by refusing to issue any replacement cards for our 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 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 would be both wise and productive to thoroughly investigate how the banking system works in each venue before deciding where to keep your money.