New Corporate Transparency Obligations in Panama

Missuly Clark, Senior Associate at ARIAS Panama and expert in financial law, presents this article on...

New Corporate Transparency Requirements in Panama

Panama continues to implement legislative measures to comply with international requirements and enhance transparency regarding the individuals who ultimately control corporate structures and the origin of the assets they manage. In doing so, it reaffirms the commitment of the Panamanian authorities, financial institutions, and the international community to uphold the highest transparency and compliance standards. At first glance, the reform appears to be a targeted technical amendment: lowering the ownership threshold used to determine who qualifies as a Controlling Person of an entity for purposes of the automatic exchange of financial account information from 25% to 10%. These changes were introduced on June 29, 2026, through Executive Decree No. 25 of 2026 ("Executive Decree 25"), which amends subsection 21 of Article 2 of Executive Decree No. 124 of May 12, 2017, implementing Law 47 of 2016 (FATCA) and Law 51 of 2016 (CRS).

What Exactly Does Executive Decree 25 Change?

Executive Decree 25 amends the definition of "Controlling Person" contained in the FATCA and CRS regulations. Previously, an individual was deemed to exercise control over an entity if he or she directly or indirectly owned 25% or more of its shareholding or equity interest. Executive Decree 25 lowers that ownership threshold to 10%.

The Decree preserves the special rules previously applicable to trusts and private interest foundations. In the case of a trust, the settlor, trustee, protector (if any), beneficiaries or classes of beneficiaries, and any other natural person exercising ultimate effective control over the trust continue to be regarded as Controlling Persons. In the case of a legal arrangement other than a trust (for example, a private interest foundation), the term refers to those individuals holding positions equivalent or similar to those of the persons exercising control over a trust, which would typically include the founder, the Foundation Council, and the beneficiaries.

It is worth noting that Executive Decree 25 introduces an important operational clarification: where the beneficiary of a trust is itself a legal entity, reporting financial institutions must also identify the natural persons who exercise control over that trustee and report them as the Controlling Persons of the trust. This amendment closes a potential gap that previously existed where ownership or control was exercised through multiple layers of legal entities.

The Decree also significantly expands the interpretative framework governing the concept of a Controlling Person. It expressly aligns the Panamanian definition with Recommendation 10 of the Financial Action Task Force ("FATF”) and its Interpretive Note, adopted in February 2012, thereby harmonizing the domestic concept with the international beneficial ownership standard.

In addition, Executive Decree 25 provides more detailed guidance on situations where no natural person exercises control through ownership interests. In such cases, control must be determined through other means, and, if no such person can be identified, the entity's senior managing official must be treated as the Controlling Person. The Decree further allows reporting financial institutions to rely on information already collected through their AML/KYC customer due diligence procedures, provided such procedures are consistent with FATF Recommendations 10 and 25.

Practical Implications for Financial Institutions and Corporate Structures

For Panamanian reporting financial institutions subject to FATCA and CRS, including banks, securities firms, trust companies, insurance companies offering cash value products, among others, the reduction of the ownership threshold carries important operational implications.

First, institutions will need to review and update their customer due diligence procedures to identify a broader group of natural persons as Controlling Persons. Whereas previously it was sufficient to identify shareholders holding 25% or more, institutions must now identify individuals with ownership interests of 10% or more.

Second, the clarification regarding trustees that are legal entities introduces an additional layer of analysis for trustees and trust administrators. Identifying the traditional parties to the trust will no longer be sufficient. Where the beneficiary is a legal entity, institutions must trace the ownership and control chain until they identify the natural persons who ultimately control that entity.

Third, corporate and fiduciary structures that previously fell outside the reporting threshold should reassess their ownership structures to determine whether shareholders or beneficiaries who were not previously reportable now qualify as Controlling Persons under the new 10% threshold.

Finally, it is important to note that Executive Decree 25 became effective immediately upon its publication on June 29, 2026. Accordingly, reporting financial institutions are expected to apply the new threshold without delay, both when onboarding new customers and when updating information relating to pre-existing accounts as part of their ongoing due diligence obligations.