Panama moves to strengthen its ecosystem to become a competitive business hub

In July 2025, the European Parliament approved the removal of Panama from the European Union's list of high-risk third countries for money laundering and terrorist financing. This list is based on assessments aligned with the recommendations of the Financial Action Task Force (FATF). Countries on the list are considered to have strategic weaknesses in their anti-money laundering and counter-terrorist financing frameworks, which affects their access to international financial systems and imposes additional scrutiny of transactions involving these jurisdictions.

Panama had been on the list since 2020, but following a series of legal and institutional reforms, including updates to its financial supervisory systems, regulatory frameworks and transparency rules, the European Commission proposed the withdrawal earlier this year. The final decision came with the formal endorsement of the European Parliament.

The move is seen as a major step forward for Panama's global reputation, especially in the financial and legal sectors. It is expected to reduce compliance barriers for Panamanian companies interacting with European partners and financial institutions, improve investor confidence and strengthen the country's positioning as an international financial and business centre.

In short, we recognise the merit of this decision and the positive consequences it may have for Panama's global economy, but a legal event such as this merits a dissertation on the areas that are obviously affected, but also on the invisible but essential puzzle of which Panama as a nation is also a part.

What is the list and how Panama came to be part of it.

Panama was placed on two important international watch lists related to financial crime: the Financial Action Task Force's (FATF) "grey list" and the European Union's list of high-risk third countries. These lists are maintained to identify jurisdictions with strategic deficiencies in their systems to prevent money laundering and terrorist financing. Being on either list subjects a country to increased scrutiny, makes it more difficult for local businesses to access international banking systems and often discourages foreign investment due to perceived reputational and compliance risks.

The EU's list of high-risk third countries is based in part on FATF findings, but it applies within the European Union and affects the way EU financial institutions interact with entities from the listed countries. In particular, EU firms must apply enhanced due diligence measures when doing business with persons or companies from these jurisdictions.

Panama was first included on the FATF grey list in June 2019, after the FATF determined that the country had strategic weaknesses in its framework for combating money laundering and terrorist financing, particularly around beneficial ownership transparency and the effectiveness of enforcement actions. In response to this listing, the European Union added Panama to its own list of high-risk third countries in May 2020, triggering a series of stricter compliance obligations for EU financial institutions dealing with Panamanian entities.

Since then, Panama undertook significant reforms, including updates to its legal framework, increased regulation of non-financial sectors, and improvements in supervision and enforcement. After assessing progress, the FATF removed Panama from the grey list in October 2023. Following this, the European Parliament has taken the decision to remove Panama from its list.

This removal marks a turning point for Panama, signalling greater alignment with international standards and offering renewed confidence to the global business and investment community. It is necessary not to lose sight of the fact that in the international investment arena, a robust legal framework and a high standard of compliance are values that Panama ultimately wants to be associated with.

Panama's legal and institutional efforts to strengthen its ecosystem.

Panama's removal from the FATF grey list and the European Union's list of high-risk third countries was the result of a multi-year reform effort that focused on strengthening both its legal framework and its institutional capacity to combat money laundering and terrorist financing. One of the key milestones was the reform of Law 23 of 2015, the country's main anti-money laundering and countering the financing of terrorism (AML/CFT) law. Panama introduced stricter requirements around customer due diligence, identification of beneficial owners and reporting obligations. This included the adoption of Law 129 of 2020, which established a centralised and private register of beneficial owners of legal persons, one of the most important measures to increase transparency and address concerns about the misuse of anonymous corporate structures.

In parallel, the country undertook important institutional reforms. It strengthened the Financial Analysis Unit (UAF), increasing its capacity to detect and investigate suspicious transactions and improving its ability to share information with national and international authorities. Recognising the vulnerability of sectors such as real estate, legal and gambling, the government also created a new regulator: the Superintendency of Non-Financial Subjects, charged with overseeing and enforcing compliance of designated non-financial businesses and professions. These measures were intended to close key regulatory gaps that had previously limited supervision.

Another important area of reform was enforcement. The international community, in particular the FATF, not only required Panama to pass legislation, but also to demonstrate actual implementation of those laws. In response, Panama significantly increased the number of investigations, prosecutions and sanctions related to financial crimes, showing a measurable level of effectiveness. The country also strengthened coordination between regulators, law enforcement and the judiciary, including the creation of specialised units and training programmes to ensure consistent enforcement.

Through a business lens, what does this development mean.

From a business perspective, Panama's removal from the EU's high-risk list is much more than a diplomatic victory, it is a strategic shift that directly affects the way we operate, attract investment and position ourselves globally. As a lawyer who works closely with startups, investors and multinational clients, I see it as a green light for smoother international transactions, restored confidence in our financial system and reduced regulatory frictions when doing business with our European counterparts. For years, being on that list meant added layers of due diligence, delays in cross-border payments and a general sense of wariness on the part of foreign banks and partners. Now, with Panama off the list, we are regaining credibility, which should translate into concrete benefits: easier access to capital, lower compliance barriers and a better environment for fintech, corporate structures and international trading.

But it is also a wake-up call. Getting off the list shows that we are able to align with global standards, but staying off the list will require discipline, transparency and smarter compliance across all sectors. This is a crucial moment for the Panamanian private sector, especially for entrepreneurs and companies that want to grow on a global scale. We now have the opportunity, and the responsibility, to build with integrity, knowing that the world is watching, but also that it is willing to work with us for the benefit of any international business relationship.

In conclusion, what value these qualifications represent in today's global scenario.

The power conferred on international organisations to determine the legal security and degree of collaboration for the prevention of money laundering and terrorist financing is essential in the face of a reality where these two phenomena are presented as real threats to the world order.

Panama's work does not intend to end with this single event; it is necessary to recognise the potential we have for international economies, the development of new technologies and, of course, our privileged geographical position. Hand in hand with enhancing the strengths we have, we must not lower our guard in continuing to shape our legal framework and financial system to reduce the scope of money laundering and terrorist financing, but ultimately this news has been a success in the right direction.