Panama Approves Money Laundering Laws In the Nick Of Time

Mike Godfrey, Tax-news.com, New York

04 October 2000

This week the Financial Action Task Force on Money Laundering (FATF) commenced a series of talks in Madrid to discuss plans to step-up its global fight against money laundering and to review the improvements that tax havens have undertaken in their attempts to be removed from a blacklist in which the FATF branded them as non-cooperative in the fight against money laundering.

One of the 15 jurisdictions under review is Panama, but this central American country has perhaps less to fear than some of its fellow miscreants. With just two days to spare before the FATF gathering, the Panama government unanimously endorsed legislation that will bring the jurisdiction into line with international anti-money laundering regulatory standards.

The new legislation will extend the maximum penalty for money laundering to 12 years imprisonment. In addition, it will enlarge upon the definition of money laundering crimes to include the proceeds of all serious crime instead of the previous limitation to drug trafficking offences. Furthermore, all financial institutions in Panama will come under the watchful eye of the bank superintendency.

In the past, Panama has been a particular hot spot for hot money. With the US dollar as its currency, with no capital controls, a vast banking sector and an uneasy proximity to the cocaine barons of Colombia, money launderers have been like bees round a honeypot.

Previously only banks were legally bound to report financial transactions over US$10,000 and other suspicious activities. However, as criminals can launder their money through other outlets, the new laws now require casinos, estate agents, insurers, the stock exchange, companies in the Colon free zone and even the national lottery to also disclose transactions of more than US $10,000.

Ruben Arosemena, chairman of Panama's Congress Justice Committee, said the new legislation was 'a clear message that Panama is among the countries that have adopted rigid legislation against this crime. At the end of the day it will also strengthen our financial centre and free zone, to avoid them being penetrated by money laundering.'

Under the news laws, the financial analysis unit (UAE), which investigates such suspicious financial activities, is awarded new powers altough a presidential decree is needed to enable it to co-operate with investigations in other countries.

With any radical legislation, there is always the the risk that many account holders may withdraw their funds. Naturally Panama is concerned about the economic ramifications, especially as the country's banking sector has assets in excess of U$30bn and accounts for approximately 11 per cent of Panama's GDP. However, UAE chief Dalys Teran said: 'we have done what we had to do and what we said we would do ... [the FATF] seem to have a system for putting countries on the list but not for getting them off.'

Now Panama can only wait for the FATF decision this week, but its immediate removal from the list is improbable. As one official put it: 'It is good that they have the laws but I think people will want to see them used before any decision is taken.'

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