Thursday, January 28, 2010

Our Panamanian Bank Saga

I didn't want to jinx things by writing about it before, but now that we are feeling more confident about our status as financial citizens and property owners in the Republic of Panama (we will never be actual citizens there, and will always be citizens of the U.S.A.), we are ready to tell our story.

**WARNING** - This account is long and detailed and will probably bore some of you to tears. For perspective, be assured that it felt much longer to us while we were experiencing the richness of the journey.

Once we found a house that we wanted to buy (in late August 2009), we were ready to pay cash for it. If we had found a seller who had clear title, it could have been simple. Well, maybe that is exaggerated optimism - perhaps it might have been less difficult. But the seller of the house we wanted to buy had a mortgage on the house. It was all clean - he had legally declared the improvements to the property and there were no liens, claims or other obstacles to the sale. But he needed our money to pay off the mortgage so he could sign on the dotted line and give us title to the property. In the U.S.A., an escrow service would have been the solution to protect us while assuring that his bank/mortgage holder was paid.

In Panama, escrow is not the usual way to handle this situation. Instead, one usually goes through the process of having a Promissory Note/Letter issued. The Promissory Note is a contract that one party makes an unconditional promise, in writing and notarized, to pay a sum of money to the other under specific terms. In our case, it guaranteed that the seller's bank would receive the money held by the buyer's (our) bank, to pay off the mortgage.

But first, we needed a bank account in Panama - a local bank to handle this Promissory Note for us and to hold the funds for the seller's bank. Sounds simple - just walk into a bank, show them your driver's license or passport and other personal information, maybe a personal or bank reference or both, make a small deposit of dollars or Balboas, and you're in - right? Not so fast.

Panama is on the Gray List of the member countries of the Organization for Economic Cooperation and Development. The U.S.A. and some other members want full access to all of Panama's banking records so they can conduct wide-net searches for U.S. citizens or corporations that might be hiding money offshore. Panama rightly points out that their laws do allow access to banking and financial records, through the judicial system, when there is evidence that a law has been broken. So Panama is not likely to cave. But the banks in Panama do take extreme measures to Know Their Customers, a process which makes it exceedingly difficult for a non-citizen to open an account.

On September 24, 2009, we made a down payment and signed the Promissory Contract to buy the house. The next step was opening a bank account. Our lawyer warned us it would not be easy. She recommended trying at a smaller bank, possibly one that was not a Panamanian bank. The seller's agent in this process knew of a bank that was relatively new in Panama, one that was trying to get a solid foothold in the country. He had done business with this bank and had a few contacts there. So off we went to the small bank, where we filled out an application to open an account. After submitting the application, we had to return to the U.S.A. The bank needed still more documents, some of which we scanned and e-mailed, others of which required original signatures, which we sent via International Priority FedEx. And then we had to send another International Priority FedEx when additional documents were requested. I was also questioned by a bank officer regarding my contributions to candidates in the 2008 election. (They did not question Les, who made contributions in equal amounts to the same candidates.) Eventually, we were denied an account at this bank because we were not residents of Panama and we did not own property in Panama. If we could have opened the account, we could have owned property. But we could not buy the property, even though we had the money to do so, because we could not get a bank account.

Still in the U.S.A. but planning to return to Panama soon, Les had the idea to open a bank account here at a multi-national bank with branches in San Francisco and also in Panama. Just two days before our next flight to Panama, we opened the local S.F. account, and at the same time, filled out an application for the account in Panama.

A few days later, in Panama City, we managed to talk our way into the Premier division of this bank even though we did not have the $100,000 minimum investment required for Premier status. We had heard many negative reports about the complete absence of customer service at this bank, the horrendously outrageous fees charged for every feature and service, their generally bad attitude, and more. But we were desperate, so we went ahead with it.

We filled out more forms, they made copies of our passports and driver's licenses, we promised in writing not to ever argue with them or dispute any charges or claims they might make against us. The bank officer we dealt with (she is an international department head with a plush office on the 10th floor), her assistant, and the receptionist in the Premier division were wonderfully helpful and accommodating. She notarized documents, made scans and e-mailed them to the headquarters in NY, saving us many steps, much time, a lot of hassle and a little money. (I am still not sure why we were given such special treatment - so far the customer service at this bank with the bad reputation has been excellent.) She was also encouraging about the likelihood of our account application being approved. She liked the fact that we could provide a signed contract showing intent to buy the house, along with proof of the down payment, as well as a laminated photo-ID card for the residential development where we were buying the house. We went away from this bank with a good impression and hope of success in our quest.

We were in Panama for 2 weeks on this trip, and by the time we departed again for the U.S.A., we had not received confirmation that our account application had been either approved or denied. But the night we arrived back in San Francisco, we checked our e-mail, and to our utter delight, the helpful Panamanian bank officer had sent us the good news that we had an account - complete with an account number. The date was November 12, 2009.

Smooth sailing from this point, right? Not quite, and not quick. The long series of additional steps to home-ownership included wiring funds, having our Panama bank write the Promissory Note, giving our lawyer power of attorney to pick up this Note for us (another International Priority FedEx sent), the seller paying property taxes (which had increased since the Promissory Contract was signed), and the seller catching up on his mortgage payments so the Promissory Note could be finalized.

By the time we returned to Panama for a 6-week stay starting in mid-December, the seller's bank had concluded they did not like the wording of the Promissory Note. The seller took the Note back to our lawyer with specifics about the required wording. We picked it up and took it back to our bank and asked them rewrite it. Of course they had a problem with a couple of figures in the Note because so much time had elapsed since it was originally written in September and the outstanding mortgage amount had changed. Les held a long, exasperating conversation with them, explaining that the mortgage amount could only decrease, therefore the hold amount would undoubtedly exceed the amount needed - it was impossible for additional funds to be required. They agreed that this was indeed true, but the document had to be changed to their liking and it must go through the proper channels. And so it took another day to accomplish the rewrite.

But we got 'er done, and then the Note was back in the hands of the seller's bank. Just a few days before we returned to San Francisco in January 2010, the seller's bank released the mortgage as paid in full, and we had another signing ceremony at our lawyer's office. From there, the paperwork went back to the seller's bank for another notary stamp, and then to the Public Registry.

We have been monitoring activity in our Panama bank account, and the amount being held for the seller's bank has not been released - it is still sitting there in our account (although the funds are not accessible to us, of course) as of January 27, 2010.

But we received an e-mail from our lawyer on Monday, January 25th, that the deed for the house came out of the Public Registry and it is now in our name. That's four months and a day since we signed the original Promissory Contract.

Our lawyer told us that things have become much more difficult and complicated since last autumn when we first began our banking quest. She has a client who has what we do not have - permanent visa status in Panama. This client has been in Panama for twelve years, but has always rented and does not own property there. She recently attempted to open a bank account, but is unable to find a bank who will approve her application.

In any case, we are feeling a great sense of relief now that our name is on the deed of Casita Naranja. Without the bank account, we could not have made it happen.


  1. That's Panama City. From the tower at Panama Viejo. Captain Morgan may have had a similar view when he sacked the place.