France, OECD put strong pressure on Panama

The French government announced that it will once again put Panama on its "black list" of uncooperative tax havens as a result of the massive data leak known as the Panama Papers.

The leak of 11.5mn secret files from Panamanian law firm Mossack Fonseca has connected 140 politicians from over 50 countries with offshore companies in tax havens. The Panama Papers – released by the International Consortium of Investigative Journalists – names 72 current or former heads of state.

France removed Panama from its list of Uncooperative States and Territories (ETNC) in 2012 after the countries signed a bilateral accord to combat tax evasion.

Panama "led us to believe that it could respect major international principles," France24 quoted finance minister Michel Sapin as saying. "That's how it managed to avoid being on the blacklist of tax havens."

STRONG OECD REACTION

The Panama papers also prompted the OECD to call on Panama to immediately fall in line with global tax transparency standards.

"The 'Panama Papers' revelations have shone the light on Panama's culture and practice of secrecy," said OECD secretary-general Angel Gurría. "Panama is the last major holdout that continues to allow funds to be hidden offshore from tax and law enforcement authorities."

Together with the G20 group of nations, OECD has been leading a global crackdown on such practices since 2009, said Gurría. Through the Global Forum on Transparency and Exchange of Information, OECD has repeatedly warned countries such as Panama of the risks of not complying with international standards of tax transparency, he said.

"Just a few weeks ago, we told G20 finance ministers that Panama was back-tracking on its commitment to automatic exchange of financial account information," Gurría said.

The result of Panama's failure to meet the highest standards on tax transparency is now there for everyone to see through the Panama Papers, he added.

FROM CELEBRATION TO EMBARRASSMENT

The Panama Papers revelation came as a shock to Panama's government, which as recently as February had celebrated its exit from a money laundering "grey list."

The Paris-based Financial Action Task Force (FATF) added Panama to the grey list in 2014, a major blow to the international reputation of the country and its important banking sector. The FATF grey list is for countries and jurisdictions that have strategic weaknesses in their measures to fight money laundering and the financing of terrorism. To avoid moving to the black list, the countries on the grey list make a high level commitment to implement changes to comply with the FATF standards.

FATF had cited "significant progress" on improving laws and regulations to fight money laundering and the financing of terrorism in February, when it removed Panama from the list.

President Juan Carlos Varela personally announced this decision to the nation as a major victory for Panama. Now Varela and his government face the daunting task of convincing almost the entire world that the country is not operating like an anything-goes tax haven.