Panama’s Anti-Money Laundering Efforts Lacking, Says NRA Report
A recent report by the National Risk Assessment (NRA) has highlighted significant vulnerabilities in Panama’s anti-money laundering (AML) efforts. The report identifies illicit funds derived from various threats, including drug trafficking, gun and human trafficking, smuggling, financial crimes, corruption, and terrorism financing, as not being adequately addressed.
Flawed AML Strategy
The NRA found that Panama’s AML strategy is flawed due to significant weaknesses in the main risk sectors, including:
- Corporate services
- Free zones
- Real estate
- Financial sectors
To address these weaknesses, the report recommends that Panama adopt significant legislative measures and set forth rules governing the operations of trade platforms and services rendered in the country.
Financial Intelligence Unit (FIU) Criticisms
The FIU is also criticized for its poor contribution to the prosecution of money laundering cases related to predicate offenses and terrorist financing. The FIU has access to a broad range of information but fails to disseminate its analysis effectively, resulting in a low level of intelligence sharing with other authorities.
Low Registration of Suspicious Transaction Reports (STRs)
The report also highlights a low registration of STRs on the FIU’s online reporting platform, particularly for high-risk sectors such as:
- Real estate and constructions
- Colon Free Zone
- Attorneys acting as resident agents
Additionally, there have been no cases of STRs or cash or quasi-cash transaction reports (CTRs) related to terrorist financing.
Criminal Procedure System Challenges
The country’s criminal procedure system is undergoing a significant change from a mixed inquisitive system to an accusatory system, which presents challenges for the investigation and prosecution of money laundering cases. The report recommends that relevant institutions, including:
- Police
- Prosecutor’s Office
- Department of Seized Property
- Judges responsible for procedural safeguards
- Criminal courts
continue to strengthen their processes.
Progress in Investigating and Prosecuting Money Laundering Offenses
Despite these challenges, the NRA notes that there are efforts underway to investigate and prosecute money laundering offenses linked to drug trafficking and corruption investigations. The report also highlights a progressive increase in sentences related to corruption cases and some risk sectors within the framework of the effective implementation of Law No. 4 of 2017.
Terrorist Financing (TF) Risk Evaluation
The NRA’s evaluation of TF risk found that it is low due to Panama’s lack of individuals or organizations linked to terrorism and its limited relations with countries at greater risk of terrorism. However, the report notes that financial institutions and designated non-financial businesses and professions (DNFBPs) do not fully understand TF risks.
Recommendations
The NRA concludes that:
- Financial institutions have an adequate level of understanding of their AML obligations
- DNFBPs require further education and training to effectively identify and mitigate ML risks
The report calls for a comprehensive overhaul of Panama’s AML regime to address the significant vulnerabilities identified in the assessment.