Header

 

Free Trade Zones: Panama's weakest flank for money laundering

The country of the Isthmus has 16 free zones, including the Free Zone of Colon
  • The country of the Isthmus has 16 free zones, including the Free Zone of Colon
  • File

PANAMA CITY.- A report published by the Ministry of Economy and Finance underlines an open secret: Panama's free trade zones are prone to facilitate money laundering and other crimes

The country of the Isthmus has 16 free zones, including the Free Zone of Colon (ZLC), the second largest free rade zone in the world.

The strategic geographical location of Panama, its dollarized economy its status as a financial center, trade and regional logistics and inconsistencies in the regulatory system make it an attractive target for money laundering.

The money laundered in Panama is believed to be largely due to drug trafficking revenues because of the country's location on major drug trafficking routes.

Tax evasion, bank fraud, and corruption are also believed to be among the main sources of illicit funds. Numerous factors hinder the fight against money laundering, including the existence of anonymous client actions in corporations, lack of collaboration among government agencies, inconsistent enforcement of laws and regulations, and a weak judicial system susceptible to corruption and favoritism.

Money is laundered through cash and bulk trading by operating at the airport, using free trade zones and tapping into the lack of regulatory oversight in many sectors of the economy.

The magnifying glass on the free trade zones

The highest risk for money laundering in Panama is focused on the construction, real estate, legal services and especially in the free zones.

The government of Panama says it has an offensive to prevent corruption and organized crime, after being involved in the international scandal known as Panama Papers and receiving accusations of tax haven, which were reactivated when executives of the multinational Odebrecht confessed bribes in that country ..

The weaknesses of the Colon Duty Free Zone, the second largest in the world, were pointed out in many aspects of the analysis carried out by the Ministry of Economy and Finance of Panama, through the National Risk Assessment of Money Laundering and Financing of Terrorism.

In the face of a 30 percent fall in economic activity in the ZCL, small and medium-sized businessmen carry out transactions with cash, which was pointed out in the report as a failure, even if it is only 10 percent of the trade.

The same document put on second-level, with high-risk for money laundering, family remittances, pawn shops, metal and precious metal dealers, casinos and gambling, and purchase and sale of brand new and used cars.

Another segment that, although of low alarm, captures the attention of the regulators is the managements in notaries, mortgage banks, transport of values, National Lottery of Charity and National Posts and Telegraphs.

In its report, the MEF noted that the investigations show that money laundering is mainly associated with drug-related, financial crimes, corruption of public servants, unjustified enrichment, transnational illegalities and against copyright and related crimes.

As part of the proposals to clean up institutions, the Superintendence of Banks published a list of entities sanctioned with fines, which between 2015 and 2016 represented the sum of 3.4 million dollars only to eight banks in the square.

In the presentation of the study, MEF minister Dulcidio De La Guardia said that with this tool, Panama will be able to better safeguard its financial services platform and will continue to strengthen its competitiveness.

A report published by the Ministry of Economy and Finance underlines an open secret: Panama's free zones are prone to facilitate money laundering and other crimes

The country of the Isthmus has 16 free zones, including the Free Zone of Colon (ZLC), the second largest free zone in the world.

The strategic geographical location of Panama, its dollarized economy its status as a financial center, trade and regional logistics and inconsistencies in the regulatory system make it an attractive target for money laundering.

The money laundered in Panama is believed to be largely due to drug trafficking revenues because of the country's location on major drug trafficking routes.

Tax evasion, bank fraud, and corruption are also believed to be among the main sources of illicit funds. Numerous factors hinder the fight against money laundering, including the existence of anonymous client actions in corporations, lack of collaboration among government agencies, inconsistent enforcement of laws and regulations, and a weak judicial system susceptible to corruption and favoritism.

Money is laundered through cash and bulk trading by operating at the airport, using free trade zones and tapping into the lack of regulatory oversight in many sectors of the economy.

The magnifying glass on the free zones

The highest risk for money laundering in Panama is focused on the construction, real estate, legal services and especially in the free zones.

The government of Panama says it has an offensive to prevent corruption and organized crime, after being involved in the international scandal known as Panama Papers and receiving accusations of tax haven, which were reactivated when executives of the multinational Odebrecht confessed bribes in that country ..

The weaknesses of the Colon Free Zone, the second largest in the world, were pointed out in many aspects of the analysis carried out by the Ministry of Economy and Finance of Panama, through the National Risk Assessment of Money Laundering and Financing of Terrorism.

In the face of a 30 percent fall in economic activity in the ZCL, small and medium-sized businessmen carry out transactions with cash, which was pointed out in the report as a failure, even if it is only 10 percent of the trade.

The same document put on second-level, with high-risk for money laundering, family remittances, pawn shops, metal and precious metal dealers, casinos and gambling, and purchase and sale of brand new and used cars.

Another segment that, although of low alarm, captures the attention of the regulators is the managements in notaries, mortgage banks, transport of values, National Lottery of Charity and National Posts and Telegraphs.

In its report, the MEF noted that the investigations show that money laundering is mainly associated with drug-related, financial crimes, corruption of public servants, unjustified enrichment, transnational illegalities and against copyright and related crimes.

As part of the proposals to clean up institutions, the Superintendence of Banks published a list of entities sanctioned with fines, which between 2015 and 2016 represented the sum of 3.4 million dollars only to eight banks in the square.

In the presentation of the study, MEF minister Dulcidio De La Guardia said that with this tool, Panama will be able to better safeguard its financial services platform and will continue to strengthen its competitiveness.

Recommended for You