Thursday, March 12, 2015


The Panamanian Cabinet has this week approved a draft of a major bill intended to suppress money laundering, terrorist financing, and financial transactions in support of weapons of mass destruction programs; the proposed law has now gone to the National Assembly, where there will be intense pressure for prompt passage. Do you want to know why ?

Panamanian businessmen are extremely upset, due to recent actions, of the US banking system, to block all transactions in three key Panamanian industries, resulting in the inability of companies to either make, or receive, payments from American banks. As you may know, Panama does not have a central bank, and all its US Dollar transactions are cleared through the Federal Reserve.

Additionally, a number of prominent Panamanian banks have had their transactions blocked in the United States, ever since the FATF placed Panama on the "Grey List," designating it as high risk for money laundering. Some Canadian banks have reportedly followed suit, and not approved any wire transfers that exceed CA$5000. Most North American compliance officers are painfully aware that there are very few effective compliance programs in Panama's banks, many of which are known to accept dirty money, and turn a blind eye to the source of funds of the money being deposited. We have decided to decline to identify the names of the banks whose transactions have been blocked, as there is  an ongoing criminal investigation in progress, and we have no wish to obstruct justice.

When he was in office, former president Ricardo Martinelli received a blunt warning, from US regulators, that continued rampant money laundering by Panamanian banks would result in a total block upon all funds, coming from, or directed to, Panama. Martinelli's response was to visit several European financial centers, especially Lugano, in Switzerland, seeking possible alternative solutions to being frozen out of the US financial structure, but he returned without obtaining the assistance that he sought.

Of course, mere passage of tough AFT/CFT/WMD legislation, alone, will not reduce American pressure; actual enforcement, meaning the filing of criminal charges against the most visible violators in the financial industry. Will Panama ever lift itself out of its present status, as the preferred destination for narco-profits, and the proceeds of corruption ? We cannot say, but if it fails to truly reform itself, look for some very nasty US sanctions to be imposed, resulting in not only capital flight, but a major shock to the economy, when its financial services industry is forced to severely contract.

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