How to Establish a Financial Institution in Panama

The first step in setting up a financial institution in Panama is understanding the legal framework associated with its incorporation. This includes choosing the type of company you wish to create, as well as preparing the necessary documents for registration with the relevant authorities.

1. Choosing the business structure

In Panama, most financial companies are established as Corporations (Sociedades Anónimas) due to their flexibility and adaptability. This type of entity allows for the issuance of shares and the attraction of investment, a significant advantage for financial institutions.

2. Minimum capital requirements

To start a financial institution, a minimum capital investment of $500,000 USD is required, as stipulated by the Superintendency of Banks of Panama (SBP). This ensures that the company has the resources needed to fulfill its obligations and operate sustainably.

Once your company is incorporated, you must proceed with the required registrations and licenses. This includes obtaining approval from various regulatory agencies to ensure compliance with Panamanian financial laws:

1. Registration with the Superintendency of Banks of Panama (SBP)

The first authority you need to approach is the SBP. This registration is crucial as the SBP oversees all financial entities in Panama. Compliance with SBP requirements, including submitting a detailed business plan and proving the legitimate source of capital, is essential.

2. Registration with the General Directorate of Revenue (DGI)

You must also register your company with the General Directorate of Revenue (DGI), Panama's tax authority. This allows you to meet your tax obligations.

3. Registration with the Ministry of Commerce and Industries (MICI)

Registering with the MICI grants you the commercial license required to legally operate in the country.

Regulatory compliance and financial policies are among the strictest areas when establishing a financial institution. Non-compliance can lead to severe penalties or even license revocation.

1. Financial compliance policies

Your financial institution must ensure compliance with Panama’s Banking Law, which establishes rigorous standards for risk management, financial exposure, and transparency in reporting.

2. Anti-money laundering prevention

You must implement robust anti-money laundering (AML) and counter-terrorism financing (CTF) measures. This includes reporting suspicious transactions to Panama’s Financial Analysis Unit (UAF) and conducting due diligence on your clients.

Beyond legal and regulatory requirements, addressing other considerations is essential for the sustainability and credibility of your financial institution:

1. Civil liability insurance

A civil liability insurance policy is mandatory to protect the company against potential legal claims or financial losses.

2. External audits

Hiring an external auditor to review your financial statements ensures transparency and builds trust among investors, regulators, and customers.

To summarize, here's a general step-by-step procedure:

• Choose the right type of company and register your company in the Public Registry of Panama.
• It constitutes the minimum share capital of 500,000 USD.
• Register your company with SBP, DGI and MICI (each entity requires a series of requirements for registration).
• Implement money laundering prevention and financial compliance policies.
• Get liability insurance.
• Contract annual financial audits to ensure transparency.

By following these steps, you'll have a solid foundation to start operations legally and efficiently.