Saturday, March 21, 2015


In the world of financial crime, Smurfs are not those cute blue cartoon characters; they are individuals who move money, without triggering any reporting or accountability requirements. Former Panamanian President Ricardo Martinelli, who is suspected, with his associates, of stealing many millions of dollars while in office, knows how to smurf money, too.

What Martinelli did was to use Panama's national assistance agency, known by the acronym PAN, as a cash source. He and his allied embezzled millions from it, and they funded it periodically, using smurfing techniques. The fact that former PAN director Rafael Jaén, was arrested in Panama, and faces corruption charges, was found to have $18m in his personal bank accounts, confirms that the scheme was highly successful.

Here's how it worked: Inasmuch as any government funding, into PAN accounts, of $300,000 or more, required approval of the National Assembly, Martinelli and his associates would transfer exactly $299,000, thereby avoiding an role of the legislature. The boldness of this scheme is stunning, and is probably based upon the reality that Martinelli exerted absolute control over Panama's law enforcement sector, and did not fear either disclosure or the criminal consequences of the smurfing activities. The money transferred was used to pay grossly inflated prices to vendors, who then kicked back millions to the participants. Testimony already taken implicates ex-president Martinelli as the direct supervisor of the illicit scheme.

Jaén, now charged with embezzlement, and Crimes against Public Administration, is reportedly cooperating with Panamanian authorities. His predecessor, Giacomo Tamburrelli, has also been charged with corruption, and is under house arrest. Thirty-one other Panamanians have reportedly also be charged in the case, including the brother of the former president, Mario Martinelli.

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