Wednesday, November 13, 2013


Those American banks who have not yet ramped up their compliance to Enhanced Due Diligence levels for Panamanian transactions,  especially when receiving or transmitting larger sums, be advised that some Panamanian banks have been engaging in illegal financial commerce with the Democratic People's Republic of Korea (DPRK), more commonly known as North Korea, which is a designated state sponsor of terrorism.

The last thing a compliance officer at an international bank located in the US wants is a law enforcement investigation that uncovers major sanctions violations at his bank. Since it is not known how many Panamanian banks are directly involved with North Korea, and whether they are employing other local banks to further insulate themselves from discovery, it would be prudent to:

(1)  Closely examine all large transactions with Panamanian banks.

(2) Check to make sure that no dual-purpose goods are being purchased.

(3) Ensure that the purchaser is not a front company, or straw buyer, with no office, employees, assets or physical brick-and-mortar location. If you have the names of officers or agents, check them out as well.  Who is the purchasing company ?

(4) Affirm that the pricing is within normal parameters. I advise using
for that purpose. North Korea would be paying a premium to any cooperating bank, and also paying over market price for its purchases. Are the buyers overpaying ?

(5) Payments for shipments of goods to Venezuela deserve special attention, as its government has a close relationship with North Korea, and may have a standing agreement to transship the goods there. There are a number of non-transparent routes for funds into Venezuela, making your compliance task all the more difficult.

I am not raising the issue of facilitating transactions for goods whose end user is North Korea for academic reasons; this activity is ongoing, and you need to be aware that transactions with all Panamanian banks and NBFIs therefore have a higher degree of risk than I like.

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