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Monday, December 24, 2007

Laundering Queries Focus on Corporate Secrecy Haven

Forget about Panama for dirty money. Delaware has appeared as a new haven for Eastern Europeans ...


Laundering Queries Focus on Delaware
By GLENN R. SIMPSON Staff Reporter of THE WALL STREET JOURNAL
September 30, 2004; Page A4

WILMINGTON, Del. -- Delaware's corporate-secrecy laws may be making it a haven for foreign criminal groups, prompting prosecutors in Eastern Europe and Russia to flood the Justice Department with requests for help in probes of Delaware shell companies.

In the past four years, law-enforcement agencies in Russia, Hungary and a dozen other nations have made more than 100 formal requests to the Justice Department to go before the U.S. District Court in Delaware to obtain subpoenas to learn more about the companies. In many cases, foreign prosecutors say in their requests that they believe the companies are controlled by or connected to Eastern European criminals who use them to move money into and out of the U.S.

The cases also have connections to U.S. and foreign banks, and are generating concern among top U.S. regulators and law-enforcement officials that crime groups were able to penetrate the U.S. economy despite warning signs such as a $7-billion money-laundering probe at the Bank of New York in 1999.

The Delaware cases involve a handful of banks that have catered to the region including the Bank of New York, ABN Amro Holding NV, and Bankers Trust, all of which kept correspondent accounts in New York for small Eastern European banks. Correspondent accounts allow foreign banks to conduct dollar-denominated transactions and move funds into the U.S. without setting up a U.S. branch, simply by paying fees to a host bank that has a U.S. banking license. These accounts allow banks to move money around the world without having branches everywhere.

Both the Bank of New York and ABN Amro, of the Netherlands, are the subjects of law-enforcement inquiries related to their ties to companies suspected of fraud and money-laundering in Eastern Europe.

In addition, ABN Amro is the subject of a previously undisclosed fraud suit in New York State Supreme Court over its ties to a bank in Cyprus that the Treasury Department has blacklisted for money-laundering.

That case appears to have played a role in generating a Justice Department money-laundering investigation concerning ABN Amro, documents related to the case show. In February of this year, one letter states, a lawyer with the influential Washington firm Patton Boggs met with the deputy chief of the Justice Department's money-laundering section on behalf of a group of Hong Kong investors claiming they had been defrauded by ABN Amro and provided the prosecutor with numerous documents. A Justice Department spokesman couldn't be reached last night."We are aware of a legal matter to which you refer...and we have filed a motion to dismiss the matter," an ABN Amro spokesman said.

A spokeswoman for the Bank of New York couldn't be reached.

Delaware law allows for creation of limited-liability corporations and other entities without identifying beneficial owners or directors -- one of many company-friendly laws that make the state a favored corporate-headquarters venue. These laws have led to a thriving industry that helps fuel Delaware's economy by bringing business to the state, even though the process now often is done over the Internet.

When the Soviet Union collapsed, officials say organized-crime groups that emerged gravitated to Delaware, prompting warnings from watchdogs such as the U.S. Government Accountability Office that Russian firms could use the state for money-laundering. A vast archive of correspondence from prosecutors in Eastern Europe in U.S. District Court here now indicates criminal groups, corrupt politicians and money-laundering banks in newly liberated Eastern Europe in fact may have become some of the state's best customers.

The GAO, the investigative arm of Congress and then called the General Accounting Office, warned of potential problems in Delaware in an October 2000 report, "Suspicious Banking Activities: Possible Money Laundering by U.S. Corporations Formed by Russian Entities," which found that thousands of companies had been set up in Delaware on behalf of company brokers in Russia. "It is relatively easy for foreign individuals or entities to hide their identities while forming shell corporations that can be used for the purpose of laundering money," the report warned.

Delaware officials say the problem isn't their fault and there is little they can do about it. "The reality is they are using U.S. entities for this purpose, [but] there's nothing particularly unique about Delaware as related to these small privately held shell companies," said Delaware Assistant Secretary of State Rick Geisenberger. Many other states have the same laws, he said. "They're choosing to incorporate in Delaware for the cachet of the fact that Coca-Cola and McDonalds and lots of large multinationals incorporate here. So in many ways, we are sort of victims of our own renown."

The emergence of Delaware as a nexus for money-laundering, tax evasion and financial fraud is a potentially huge embarrassment to the U.S. in the war against transnational financial crime. While launching stinging rhetorical and legal attacks on foreign jurisdictions, U.S. officials long have overlooked Delaware, which also caters to American companies that use the state to reduce state taxes.

Four of the Delaware fraud cases involve Bankers Trust, a unit of Deutsche Bank since June 1999. Last month, a federal judge in Wilmington approved a request by the Justice Department to issue subpoenas to Bankers Trust on behalf of Ukrainian prosecutors seeking to investigate a tax-fraud case. In a nine-page letter, the Ukrainian tax police in Kiev described a complex mechanism to evade value-added taxes on aluminum exports. The deal involved a firm in Rehoboth Beach, Del., called Primeway LLC, which allegedly was a client of Bankers Trust, and a Latvian institution called Parex Bank that is the target of numerous fraud probes in Eastern Europe.

A spokeswoman for Deutsche Bank declined to comment.

Delaware corporate records show Primeway was registered as a Delaware business called Consumer Corporate Agents Corp. Primeway never disclosed any of its officers and directors in state filings, and no longer is registered after failing to pay incorporation taxes for three years. Prosecutors say that shortly before it went out of business, Primeway signed millions of dollars in fictitious contracts with a firm in Ukraine, allowing that company to claim millions of dollars in tax rebates from the Ukrainian government, in a classic organized-crime operation.

ABN Amro is the subject of a lawsuit in New York state court filed June 7 claiming it abetted a $16-million fraud against a group of Hong Kong investors called International Strategies Group Ltd. The architect of the fraud was allegedly First Merchant Bank OSH, based in the rump Turkish Republic of Northern Cyprus, a lawless region that lacks diplomatic relations with the U.S. and almost the rest of the world. The suit contends ABN Amro's office in New York was warned in writing by various banks, regulatory authorities and its own head office in Amsterdam about possible money-laundering by First Merchant in 1999 but failed to cut its ties to the bank immediately.

Write to Glenn R. Simpson at glenn.simpson @wsj.com

Monday, December 17, 2007

South of the Border,The Market's Still Hot

South of the Border,The Market's Still Hot
Americans Find Second-Home Boom Endures; Wildlife in the Neighborhood
By JUNE FLETCHER
December 14, 2007; Page W12
The housing slump has sent many Americans shopping south of the border.
Existing-home prices in the U.S. dropped 4.5% in the third quarter from a year ago, according to S&P/Case-Shiller. But they are still climbing in much of Latin America and the Caribbean.
1 SOUTH OF THE BORDER

Interactive map:
2 Waterfront homes are cheaper in Latin America, but closing costs are different than the United States.

Buyers are being enticed by the kind of double-digit appreciation that has all but disappeared in the States. In addition, a growing number of new developments are targeting Americans looking for good deals and a lower cost of living.
Since 2003, annual home-price appreciation has been running at 20% in the Dominican Republic, and could reach 50% in the near future, according to Boomerang Unlimited, a Napa, Calif., real-estate investment advisory firm. In San Pedro, Belize, the average price of a 2,200-square-foot home was $697,500 in September, up 18.6% from a year ago, according to a study by Coldwell Banker; the price of a similar property in San Jose, Costa Rica, was up 20.7%, to $389,900, the study said.
Prices remain low compared with those in the U.S., particularly for waterfront properties. Because Americans generally buy and sell properties throughout the region in dollars, not the local currency, home prices don't fluctuate with the various exchange rates, as is the case in Europe. What's more, the dollar generally buys much more house in these countries than it does in the U.S., because labor and land are less expensive.
LIKE FLORIDA IN THE '50s
Still, the rapid appreciation is drawing growing numbers of bargain hunters, making good deals scarcer and causing some customers to look beyond the usual vacation hot spots. In the Dominican Republic, Century 21 broker Dean Brown says that 80% of his buyers this year have been Americans, compared with half last year. Softec, a real-estate consulting firm, says in the past three years, investments in vacation homes in Mexico, primarily by buyers from the U.S. and Canada, have shot up by 60%.
Americans' appetite for investment opportunities is helping to spur a building boom in some areas. In Panama, 170 residential-building projects are under way, mostly marketed to Americans, and 100 more are in the pipeline, according to Panama Legal, a law firm based in Panama City. Among them, a 1,500-acre resort and marina by Naples, Fla.-based developer Todd Gates. The project, on Isla del Rey, one of the Pearl Islands near Panama City, is slated to open in 2009 and will have condos, villas and single-family homes ranging from $275,000 to $1.4 million. "It's like Florida was in the '50s," Mr. Gates says.
Some buyers are buying sight unseen. Shams Deitrick, a Walnut Creek, Calif., financial adviser, recently bought a furnished, two-bedroom "ocean view villa" for $375,000 in Canto del Mar, a new 35-unit development in the southern Costa Rica town of Dominica; the project has already sold out. "All I saw was the Web site, which showed a sloth 30 feet from the unit, and monkeys everywhere," Mr. Deitrick says.
He snapped up the home on the advice of a gym buddy, who said his own Costa Rican properties have quadrupled in value over the past four years. Although Mr. Deitrick isn't looking forward to the daylong flight to Dominica when he visits for the first time in February, he says he's glad he bought the property: "It just doesn't make sense to buy in the U.S. right now."
BARGAINS, WITH TRADE-OFFS
Preston Thompson, a retired Clearwater, Fla., hospital administrator, hopes to make some money in the Dominican Republic as a "serial renovator," moving into homes, fixing them up, and selling them. In July, he bought a 2,100-square-foot house for $265,000 on the beach in Cabarete, quickly added $50,000 worth of improvements, and put it back on the market for $489,000. If the property sells, he and his wife plan to repeat the process.
Getting the house ready to sell hasn't been as easy as he anticipated, however. Subcontractors were hard to find -- only one firm in Cabarete (population about 15,000) could do granite countertops, for example -- and the quality of their workmanship was "hit or miss," Mr. Thompson says. Worse, neither he nor his wife speaks Spanish, which made communicating with the workers difficult. He's also concerned that Americans may be turned off by local health-care facilities, which he says are very modest. For all of its current popularity, he says, the Dominican Republic is essentially still a developing country. "You have to put up with inconveniences," he says.
Earlier this year, Geoff Folsom, a Thousand Oaks, Calif., businessman, bought a 4,500-square-foot oceanfront penthouse, with its own private swimming pool, in Trump's Ocean Resort in Playas de Tijuana, Mexico, a 30-minute drive from San Diego, Calif. He paid $3 million for the property, about half the cost of similar resort units he looked at in the States. Property taxes and maintenance costs are lower than in the U.S., too.
There are trade-offs, he says. The mostly undeveloped area outside the development's gates has few restaurants and hotels, and Mr. Thompson is concerned about recent news reports of armed robberies on nearby roads. Still, he anticipates that, as the area develops, appreciation rates will exceed anything he could get in the U.S. "You get so much better value south of the border," he says.
There are additional downsides to buying in this part of the world. The weather can be violent and unpredictable: Last month Hurricane Noel slammed the Caribbean, causing floods and mudslides, and leaving 147 dead. And insurance to protect against natural disasters, including earthquakes, may be impossible to obtain.
In addition, many foreign real-estate brokers are unlicensed and don't necessarily adhere to the business standards that Americans expect. Some, for example, encourage sellers to raise their asking price after American buyers have made a full-priced offer, even if no other bidders are involved.
Plus, not every place is a boom town. Seasoned real-estate brokers say that to be successful, developments need at least some amenities and should be within an hour's drive of an international airport.
Cuxlin Ha, an 80-unit riverfront retirement community in Punta Gorda, Belize, near the Guatemalan border, is about 300 miles from the closest international airport, although a small "air taxi" airport is eight miles away. On the development's Web site, house hunters are warned that "this is not an area that promotes exciting night life and wild times (unless you're a jaguar or a howler monkey)." Buyers apparently have taken the hint: Although a three-bedroom, fully-furnished 1,350-square-foot home sells for only $100,000, only two buyers have stepped up since the project opened two years ago. "People want a more touristy area," says Bob Prehall, the Roseburg, Ore., broker who's selling the project.
But if a place does draw tourists, Americans are willing to travel long distances to buy there. Shaun de Jesus, a San Francisco derivatives sales manager, bought a three-bedroom condo in Punta del Este, Uruguay, three years ago for $120,000, then got a distress-sale deal on a two-bedroom condo in the same town for $90,000 six months later. On the southeast coast of Uruguay, about 90 miles east of Montevideo, the beach town -- which has its own international airport -- has a year-round population of 7,300 that swells with vacationers in the hot months of December and January.
Since he bought the properties, Mr. de Jesus received an offer of $150,000 on the first unit, and $170,000 on the second. But he's not selling. Even though he gets down to visit only two times a year, he says he is pleased with the units' low maintenance costs and the high rents they pull in when he's not around. In fact, he's now looking for another good deal. "If something comes up, I'll jump on it," he says.

Friday, December 7, 2007

Useful Tips on Buying Property in Panama

Your tax dollars at work: The US Embassy publishes a guide with common-sense information for those buying land in Panama. Unfortunately, many do not follow these tips and loose money when they leave common-sense at home.

Panama Information - Purchasing Property

Useful Tips on Buying Property in Panama

February 2006
INTRODUCTION AND SUMMARY. The following is general information on purchasing real estate in Panama. It is not to be construed as legal advice. The different categories of land make it imperative to engage professionals for more detailed information. Real estate laws on the mainland can be quite different than those on islands, coastal areas, and areas near national borders.

Before handing over any money, make sure you consult with a professional and do a proper due diligence investigation over the property to ensure you aren't buying a big problem! It is important to understand the rules and process your property transaction correctly.

Panama has three different types of property;

Titled Property

Titled property is not unlike "fee-simple" titles in the USA. The Panamanian Public Registry has jurisdiction over the registration of titled properties throughout the country. Titled property is verifiable through the Public Registry system and is guaranteed by the constitution of the Republic of Panama. Titled property can also be mortgaged. The bank will register a lien against the title as collateral on the loan. Titled properties are subject to annual property taxes when the registered value is over US$30,000 unless the buyer has obtained an exemption for the construction of a new dwelling. This is a pro-rated tax exoneration based on the value of the dwelling. Buying titled property normally requires the following procedure:

1. Promise to Purchase Contract: A small down payment is made at the signing of the promise to purchase contract. The down payment secures the property and establishes time for the title search and to coordinate payment arrangements for the closing. Registering this contract at the Public Registry ensures the property cannot be sold to another party during the escrow period.

2. Title Search: A proper title search includes: a) verification that the seller in fact has title to the property and it is free and clear of encumbrances, liens, or other issues that could affect the free disposition or transfer of the title; b) a review of the official survey map, and a professional surveyor to physically verify the map points on the property (to avoid future boundary conflicts); c) verification of utility debts (water and sewage d) verification of payment of property taxes and/or of the tax exemption.

3. Buy-Sell Contract: This contract is registered at the Public Registry and the final balance is paid to the seller, or an escrow agent. Payment is made when the title is transferred to the buyers' name. Payment can be issued by a bank, contingent on receiving from the seller proper title to the property. The buyer can open a bank account (or get a mortgage) and then formally request that the bank issue payment as soon as it is presented with the registered public deed transferring title to the buyer. Real estate agents normally get paid only when the sale closes.

4. Title Transfer: The buyer officially owns the property when the title is transferred to the buyers' name. The transfer occurs when the buy-sell contract is signed by each party and registered at the Public Registry. If the title is in the name of a corporation, there is no transfer of title, only a transfer of shares of the corporation. The buyer can keep the same officers in the corporation or appoint new members. Buyers of corporate titled properties through the purchase of the corporation itself, should ensure the annual corporation tax (Tasa Unica) is up to date. A change of corporate officers cannot be officially recorded at the Public Registry if the tasa Unica is in arrears.

Possession Rights Property

Possession Rights Property is not unlike "squatters rights" common in North America many years ago. This property is government owned but is "occupied" or "used" by a Panamanian individual (or Panamanian organization) for some time. Possession rights are generally certified by either municipal mayors, sheriffs, or other government organizations such as the Agricultural Reform Department (Reforma Agraria). Possession rights do not incur property taxes, although registered improvements on possession rights property may incur taxes at a municipal and/or national level. Most Possession Rights properties can become titled through a procedure of purchasing the land from the government, however, the law prohibits titling of possession rights properties in some areas such as certain coastal areas, national parks, or islands. In these cases, as an alternative, the "possessor" of the property can apply for an administrative concession over the land to guarantee the pacific use of it.

Acquiring possession rights over a property normally requires the following procedure:

1. Promise to Purchase Contract: A small down payment is made at the signing of the promise to purchase contract to secure the property, establish time for the title search and to coordinate payment arrangements for the closing. Contracts related to the purchase of Rights of Possession cannot be registered at the Public Registry, but can be authenticated by a public notary.

2. Due Diligence: The due diligence procedures on possession rights property is more complex since there is no central database of information on possession rights properties. Buyers of possession rights should take extra care in their purchase. The following due diligence investigation can be done on possession rights property:

a. Verification of Certification of Rights of Possession: A valid Certification of Rights of Possession is issued by a competent government authority, and contains the possessors' name, correct description of the property in terms of location, size (area), limits, boundaries and neighbors (to the north, south, east, and west).

b. Verification of Survey: A stamped, signed survey by a professional licensed surveyor or topographer, identifying the possessors' name, location and reflecting the same information in accordance with the Certification of Rights of Possession is recommended.

c. Inspection: An inspection will evaluate the physical occupation, no opposition by third persons, and good faith. A physical inspection to identify and mark the points of the property as well as confirmation of these points with the neighbors to ensure that there are no future boundary conflicts should be done by your surveyor. Also, the property should be maintained and fenced to clearly delineate the boundaries.

d. Permitting Verification: If the buyers' intentions are to build a certain type of structure or project on the possession rights property (for example, a marina, port, hotel, airstrip, etc.), it is necessary to verify any national or municipal regulations that may prohibit those activities in the area.

3. Buy-Sell Contract: The final balance is paid to the seller, or an escrow agent, once the possession rights certification is transferred or changed to the buyers’ name. Contracts relating with the purchase of Rights of Possession cannot be registered at the Public Registry, but can be authenticated by a public notary.

4. Possession Rights Certification Transfer: Possession rights for the property are officially transferred to the buyer when the Certification of Rights of Possession is transferred to the buyers' name. Transfer to the buyer’s name occurs when the buy-sell contract is signed by each party. If the possession rights are in a corporations' name, there is no transfer of certification, only a transfer of shares of the corporation. The buyer can keep the same officers in the corporation or appoint new members. Buyers of corporate possession rights properties through the purchase of the corporation itself, should ensure the annual corporation tax (Tasa Unica) is up to date. A change of corporate officers cannot be officially recorded at the Public Registry if the tasa Unica is in arrears.

Concession Property

Concession property is not unlike “land lease” arrangements, common in Mexico or Hawaii. Concession Property is government owned property, where the government has granted a concession to an individual or organization for a specific purpose, such as a real estate development, hotel, or marina. Concessions in Panama are generally granted for a maximum of 20 year (renewable) periods. Some concessions are granted for up to 40 years (renewable) in specially designated areas such as the Amador Causeway or where there are commercial and condominium developments currently being sold (Naos Harbor, for example).

Concession Property is often located on islands, in special coastal or other protected areas where titles are not permitted by law. Real estate developments over concession property often offer investors time share or fractional ownership arrangements. Unlike Possession Rights property, Concession property is guaranteed by the government through a specific contractual agreement.

CONTRACTS IN ENGLISH HOLD NO LEGAL WEIGHT IN PANAMA.

[Moderator says: I have my doubts about this. Yes, title is only transferred through a public deed in Spanish registered in the Public Registry. However, a contract signed by both parties in English can help a defrauded buyer get payback from a solvent seller when submitted before a court along with a translation into Spanish.]

Contracts signed are legally binding documents, and you should ensure that you have read and understood them completely before signing.

All judicial processes in Panama are conducted in Spanish. For any real estate transaction in Panama, a contract written solely in English carries no legal weight, and is generally not recognized. All contracts for property must be in Spanish on a formal public deed, and signed before a public notary, in order to be legally enforceable and where applicable, be filed at the Public Registry.

GET PROFESSIONAL HELP. Buying real estate in a foreign country should not be guesswork. As when purchasing real estate in the U.S., common sense should be the guiding factor. Again, engaging a reputable attorney and licensed real estate broker is recommended. While a good real estate agent can help you through the steps of buying, he cannot provide you with legal advice; an attorney does that. Even some Panama City-based real estate lawyers might not be fully familiar with such intricacies as land law in certain areas, e.g., Bocas del Toro.

[Moderator says: Real estate agents get their fees from the Seller, so when you are a buyer having drinks with a friendly agent, keep in mind his interest is to have the deal go through, not to protect your interest. Ask bluntly your agent and lawyer who are they representing and get their response in writing.]

Clauses in real estate contracts confirmed as abusive

http://mensual.prensa.com/mensual/contenido/2007/12/01/hoy/negocios/1191494.html

After the 8th Circuit Judge rendered an initial May 31, 2007, decision in the Duque vs Neto S.A. case in favor of the buyer of a condo (see Tough times for sellers of Panama City skycrapers?), the Third Superior Tribunal confirmed the decision on appeal.


The Tribunal only considered as non-abusive a clause which allows the developer to charge 1% of the price until the registration of the sale, which leaves as abusive clauses:
  • A 5% unilateral increase in the purchase price if the seller deems that building materials have increased in price,
  • The seller to withhold all previous downpayments if it unilaterally considers that the buyer is in default of agreement obligations,
  • The seller to unilaterally decide not to build and simply return all downpayments without interest and with the seller waiving all claims for said action,
  • All disputes to be subject to arbitration excluding the consumer protection courts.

The defendants Neto, S.A., are entitled to file a cassation action before the Supreme Court. Although precedent is not fully binding on other judges and this case does not declare void clauses in other contracts, it provides powerful arguments to those buyers suing developers with contracts that have similar clauses.

This consumer protection case serves only those buyers - foreign or locals - who have a single home in Panama. Those who are buying several properties for resale are not protected by the concept of abusive clauses. Needless to say, the expense of having a contract in Spanish translated into the buyer's language goes a long way towards avoiding running into an abusive clause.

Why do I have to give Panama banks so much information?

Panama banks are required by law to apply "Know-Your-Customer" (KYC) policies in order to have information in their files which would allow Panama authorities to know who the ultimate beneficiary owner (UBO) is, in case of a criminal investigation for violation of Panama laws. If your bank is not asking for this information, it is because they have no intention of sticking around for long and your money may actually be at risk of vanishing.

Regulated banks are demanding the following:

1) Personal interview with the accountholders (and/or Copy with Apostille of the passport of the accountholders)
2) ORIGINAL letters of reference from TWO (2) banks of EACH of the foreign director/ Council members and the foreign client,
3) Last statement of account from the two banks.

Banks reserve themselves the right to request further documents and even to reject the bank account application.

In addition, so that all Panama transfers are not subject to unjustified scrutiny by US banks, Panama banks must comply with Qualified Intermediary provisions enacted by the IRS.

_____________________________________________________________________
http://www.superbancos.gob.pa/aspec_prevencion/index_eng.asp

AGREEMENT 8 (2006)
The Superintendency of Banks is responsible for looking after the maintenance of the soundness and efficiency of the banking system as well download pdf

AGREEMENT 12 (2005)
Of December 14, 2005 - Prevention of the misuse of Banking and Trust Services download pdf

SPECIAL AGREEMENT 12 E (2005)
Of December 14, 2005 - Guide with examples of Suspicious Operations download pdf

AGREEMENT 5 (2003)
Of June 12, 2003 - Basic guidelines relating to the exercise of electronic banking services. download pdf

AGREEMENT 4 (2001)
Of September 5 of 2001 - DEFINITION OF CORPORATE GOVERNANCE. For the effects of this Agreement, Corporate Governance will be understood as the group of rules that govern with transparency the relationship and behavior between the Senior Management of the Bank, its Board of Directors, its shareholders, its depositors and any other stakeholder, which produces the strategic objectives of the enterprise, the means, resources and procedures to attain these objectives, as well as the system for the verification of the monitoring of responsibilities and controls corresponding to each level of the Bank�s structure.
download pdf
RESOLUTION JD No. 032-2005
Of December 21, 2005 - Whereby the scope is set for the concept of Due Diligence contained in Article 3 of Agreement 12-2005 download pdf


_____________________________________________________________________

List of Approved KYC Rules and Rules Awaiting Approval

Revenue Procedure 2000-12 states that the IRS will not enter into a qualified intermediary (QI) withholding agreement that provides for the use of documentary evidence obtained under a country's know-your-customer rules if it has not received the know-your-customer practices and procedures for opening accounts and responses to 18 specific questions listed in the revenue procedure.

This document lists those countries that have submitted know-your-customer rules. Two lists are provided -- a list of countries whose know-your-customer rules have been approved by the IRS and a list of countries whose know-your-customer rules have been submitted but not yet approved.

The qualified intermediary agreement contains an attachment that lists the specific types of know-your-customer documentary evidence for each country that is sufficient for purposes of the qualified intermediary agreement. The IRS is working together with the organizations that have submitted acceptable know-your-customer rules to develop standardized attachments. The attachments can be seen here as soon as they are available. For more information, see Rev. Proc. 2000-12 and Announcement 2000-48 .

If a country is on the approved list, entities and branches located in that country may submit their QI applications even if the IRS has not yet agreed to a specific attachment for that particular country. Once a specific attachment has been developed for a particular country, the IRS will associate the attachment with the qualified intermediary agreement it sends for signature. A qualified intermediary may suggest amendments to the attachment, but departures from the standardized attachment may delay processing of an application.

ATTACHMENT FOR PANAMA
1. QI is subject to the following laws and regulations of Panama governing the requirements of QI to obtain documentation confirming the identity of QI�s account holders.
(i) Law No. 42 of October 2, 2000.
(ii) Decree Law No. 9 of 1998.
(iii) Agreement No. 9-2000 of October 23, 2000.
(iv) Decree Law No. 1 of July 8, 1999.
(v) Interbank Agreement No. 34 of the Panama Banking Association.
(vi) Panama Banking Association�s Guide for the Prevention of the Wrongful Use of Bank Services.
2. QI represents that the laws identified above are enforced by the following enforcement bodies and QI shall provide the IRS with an English translation of any reports or other documentation issued by these enforcement bodies that are relevant to QI�s functions as a qualified intermediary.
Item 1(i): Superintendency of Banks, National Securities Commission, and Financial Analysis Unit.
Item 1(ii), (iii): Superintendency of Banks.
Item 1(iv): National Securities Commission.
Item 1(v), (vi): Board of Directors, Panama Banking Association.
3. QI represents that the following penalties apply to failure to obtain, maintain, and evaluate documentation obtained under the laws and regulations identified in item 1 above.
Fines from US$5,000 to US$1,000,000, private admonition, public admonition, removal of officers, annulment of banking license, intervention in bank�s administration with compulsory reorganization or liquidation, expulsion from Panama Banking Association.
4. QI shall use the following specific documentary evidence (and also any specific documentation added by an amendment to this item 4 as agreed to by the IRS) to comply with section 5 of this Agreement, provided that the following specific documentary evidence satisfies the requirements of the laws and regulations identified in item 1 above. In the case of a foreign person, QI may, instead, use a Form W-8 in accordance with section 5 of this Agreement. Either QI, or a banking or securities association in Panama, may request an amendment of this item 4.
(i) For natural persons:
(a) Passport,
(b) National identity card,
(c) Driving license that bears a photograph.
(ii) For legal persons:
Copy of certificate of incorporation, memorandum of association and by laws, trust deed or certified copy of extracts from the trust deed.
5. QI shall follow the procedures set forth below (and also any procedures added by an amendment to this item 5 as agreed to by the IRS) to confirm the identity of account holders that do not open accounts in person or who provide new documentation for existing accounts other than in person. In the case of a foreign person, QI may, instead, use a Form W-8 in accordance with section 5 of this Agreement. Either QI, or a banking or securities association in Panama, may request an amendment to this item
(i) QI shall not open an account by any means other than by establishing in person the identity of a customer through the account holder�s own identity documents, except as permitted in (ii), (iii) and (iv) below.
(ii) QI may obtain by mail or otherwise a copy that is an exact reproduction of the specific documentary evidence listed in item 4 above from another person that is subject to know-your-customer rules that have been approved by the IRS for purposes of qualified intermediary agreements, provided that the laws and regulations listed in item 1 permit QI to rely on the other person to identify the account holder.
(iii) QI may obtain a photocopy of the specific documentary evidence listed in item 4 by mail or otherwise remotely from the account holder or a person acting on behalf of the account holder, provided that the photocopy has been certified as a true and correct copy by a person whose authority to make such certification appears on the photocopy, and provided that the laws and regulations listed in item 1 permit QI to rely on the certified photocopy to identify the account holder.
(iv) (iv) (a) QI may obtain by mail or otherwise a copy that is an exact reproduction of the specific documentary evidence listed in Item 4 from an affiliate of QI or a correspondent bank of QI, provided that the affiliate or correspondent bank has established in person the identity of the account holder and the laws and regulations listed in Item 1 permit QI to rely on documentation provided by that affiliate or correspondent bank to identify the account holder.
(b) For accounts opened prior to January 1, 2001, if QI was not required under its know-your-customer rules to maintain originals or copies of documentation, QI may rely on its account information if it has complied with all other aspects of its know-your-customer rules regarding establishment of an account holder�s identity, it has a record that the documentation required under the know-your-customer rules was actually examined by an employee of QI, or an employee of an affiliate of QI or a correspondent bank of QI, in accordance with the know-your-customer rules, and it has no information in its possession that would require QI to treat the documentation as invalid under the rules of section 5.10(B) of this Agreement.