Friday, May 15, 2015


If you are not closely following the unfolding scandal in Panama, regarding the investigation into multi-million dollar Petaquilla Mining insider trading scandal, you may not know that the fourteen Panamanian banks (10 local, and 4 foreign-chartered), who accepted illicit profits, from the most senior PEPs in the government, are not cooperating with the anti-corruption prosecutors. They have advised that they will neither release customer bank documents, nor transaction records. This arrogant act could provoke a crippling response that Panama neither wants nor needs.

Most businessmen in the Panama financial community know very well that there was absolutely no inquiry or investigation on the Source of Funds of the millions deposited by the PEPs, and the banks who are stonewalling the investigation fear loss of banking charter, possible criminal action against officers, and widespread exit of clients, should the magnitude of the banks' money laundering be exposed.

The Financial Action Task Force, more commonly know by its acronym, FATF, has previously Panama on the second-tier or risk, "Jurisdictions identified by the FATF to have AML/CFT Deficiencies," known as the "Grey List," and there is valid concern that this latest universal non-cooperation on the part of the country's banks will be seen by the FATF as a fatal flaw.

Should the international body take action, based upon what can only e described as an unthinkable action by any financial institution, FATF could place the Republic of Panama on the first-tier for risk, "Jurisdictions that are subject to the FATFs call for countermeasures, due to their AML/CFT Deficiencies." This is what is unofficially known as as the "Black List."

Inclusion on the Black List would place Panama in the same category as the worst money laundering and terrorist financing offenders in the world, among Iran and North Korea. The impact of this action upon the Panamanian economy would be devastating, as foreign capital would rapidly exit the country, fearing, correctly, the imposition of OFAC, and international, sanctions. Those construction  cranes in Panama City would quickly become idle and rusty, if foreign money flees.

There will be some who argue that blacklisting Panama is necessary, due to the high volume of drug profits that are laundered in the country's banks, and which the government has turned a blind eye to for decades, and the material support provided to sanctioned global terrorist organizations, who raise money through criminal activity, to fund their terrorist activities. Maybe some tough love is in order, to force Panama to reform, whether it wants to or not. 

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