Panama’s Anti-Money Laundering Strategy Criticized for Significant Weaknesses
Panama’s Vulnerability to Money Laundering Activities
A recent report by the National Risk Assessment (NRA) has highlighted significant vulnerabilities in Panama’s anti-money laundering (AML) strategy, allowing illicit funds to flow through the country undetected. The NRA identified several key risk sectors, including:
- Corporate services
- Free zones
- Real estate
- Financial sectors
These sectors are particularly vulnerable to money laundering activities linked to drug trafficking, gun running, human trafficking, and other criminal activities.
Weaknesses in AML Measures
The report highlights the following weaknesses in AML measures:
- Lack of legislative action: Panama must adopt significant legislative measures and set forth new rules governing the operation of trade platforms and services in the country.
- Poor contribution by Financial Intelligence Unit (FIU): The FIU has been criticized for its poor contribution to the prosecution of AML cases, with a low level of disseminated reports and limited access to information.
- Unawareness among reporting institutions: Reporting institutions have been found to be unaware of their obligations to submit suspicious transaction reports (STRs) and cash or quasi-cash transaction reports (CTRs).
- Lack of understanding about terrorist financing (TF): Financial institutions and designated non-financial businesses and professions (DNFBPs) lack an understanding of the risks associated with TF.
Challenges in Investigation and Prosecution
The criminal procedure system is undergoing significant changes, shifting from a mixed inquisitive system to an accusatory system. This change poses challenges for the investigation and prosecution of money laundering cases, and it is essential that relevant institutions, including:
- Police
- Prosecutor’s Office
- Department of Seized Property
- Judges
receive adequate training and support.
Need for Improvement
While there have been some positive developments in the prosecution of ML offenses linked to drug trafficking and corruption investigations, more needs to be done to combat money laundering and terrorist financing. The NRA has concluded that Panama is at low risk of TF due to its lack of connections with countries considered high-risk for terrorism. However, experts argue that this assessment is overly simplistic and that financial institutions and DNFBPs do not fully understand the risks associated with TF.
Recommendations
The report concludes that Panama’s AML strategy is in need of significant improvement to effectively combat money laundering and terrorist financing. It recommends that the country adopt a more comprehensive approach to AML and implement targeted measures to address the identified weaknesses.