In the years since, Panama has taken some tentative steps towards cleaning up its act, but these have been manifestly inadequate to make a meaningful difference. Moreover, the country’s continuing facilitation of financial secrecy is likely to be undermining human rights in many other jurisdictions.
Tax Justice Network’s submission to the UN Committee on the Elimination of Discrimination Against Women, explains how Panama’s financial system continues to expose other countries to a significant risk from illicit financial flows. This includes abusive cross-border tax practices, which syphon away resources needed for the fulfilment of women’s rights.
The extraterritorial impacts of both corporate tax havens and financial secrecy jurisdictions have become an issue of increasing concern to human rights monitoring bodies in recent years. International human rights law makes it clear that states have a duty to cooperate to maximise the resources available for the fulfilment of human rights, and to take action to prevent behaviours by private actors within their jurisdictions that might be harmful to human rights “regardless of whether the affected persons are in their territories”.
Tax Justice Network’s newly-launched Illicit Financial Flows Vulnerability Tracker likewise suggests the country plays a significant role in facilitating questionable resource flows to and from other countries.
Key findings
- Despite some progress in reducing overall poverty levels, women and girls have been largely excluded from Panama’s finance sector-driven growth.
- Panama’s financial system continues to expose other countries to a significant risk from illicit financial flows.
- Huge flows of outward direct investment exist from Panama to other secrecy jurisdictions and tax havens – including Malta, Luxembourg and Hong Kong
- Panama’s finance-centered development strategy seems to have brought little benefit for ordinary people living in the country, much less marginalised groups such as women and indigenous communities.
- In particular, and within the beneficial ownership legal framework, bearer shares continue to pose a risk.
Key recommendations
- To meet obligations under the Commission on the Elimination of the Discrimination Against Women the State Party should establish a normative standard of legal ownership and beneficial ownership registration in all legal vehicles
- A normative standard for acceptable registration would require that:
(a) bearer shares are not available or pose no risk; (b) accessible online registration that covers all types of legal vehicles within each category (e.g. all corporations and LLCs within “companies”); (c) registration covers all types of owners within a type of legal vehicle (e.g. both limited and general partners, within “partnerships with limited liability”), and; (d) registered information should be updated at least annually.
Additional resources
- Read our blog on this submission
- Tax Justice Network’s Illicit Financial Flows Vulnerability Tracker