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U.S. DEPARTMENT OF STATE
INTERNATIONAL NARCOTICS CONTROL STRATEGY REPORT, MARCH 1996: PANAMA
United States Department of State
Bureau for International Narcotics and Law Enforcement Affairs
I. Summary
Panama's financial institutions are used by traffickers to launder drug-
related proceeds. The country is also a major transshipment site for
cocaine being moved from Colombia to the U.S. The Government of Panama
(GOP) continued to make progress in drug control in 1995. Among the
GOP's accomplishments were the passage of money laundering legislation
and the arrest of two major money launderers who operated out of the
Colon Free Zone (CFZ), one of whom was expelled to the United States
where he pled guilty to related charges. The GOP has yet to
successfully prosecute major money launderers in Panama, to tighten up
money laundering controls, particularly in the CFZ, or to make
functional its new financial analysis unit. The GOP made major seizures
and arrests in territorial waters and successfully eradicated
cultivations of marijuana and coca. The GOP has also acknowledged a
severe domestic drug abuse problem and is aggressively pursuing
prevention and education campaigns.
II. Status of Country
As a financial and commercial center with a location that is ideal for
narcotics smuggling and illicit financial transactions, money laundering
remains the major problem in Panama. Factors that facilitate money
laundering in Panama, and especially in the Colon Free Zone, include
weak controls on cash and commodity imports/exports, lax incorporation
regulations, and a dollar-based economy. Steps to improve regulations
include recently passed legislation requiring financial institutions to
implement a suspicious transaction reporting regime and "know-your-
customer" procedures. Armed with more effective legal, policy, and
institutional underpinnings, the GOP expects to control money laundering
more effectively in 1996.
Although not a large grower of coca or marijuana, Panama is a major drug
transit point due to its close proximity to the source countries of
South America. Panama has not yet developed the resources or expertise
to interdict narcotics on a consistent basis.
III. Country Actions Against Drugs in 1995
Policy Initiatives. The Perez Balladares administration strengthened
the GOP's anti-money laundering policy by enacting new legislation which
will help Panama to fulfill its obligations under the 1988 UN
Convention.
Accomplishments. Panama is meeting the 1988 UN Convention's guidelines
under demand reduction, chemical control, crop eradication, and
interdiction. Progress was also made, to a lesser degree, on money
laundering. In 1995, the GOP initiated the first of its money
laundering controls, the establishment of the Financial Analysis Unit
(FAU), which is expected to be fully operational in 1996.
Law Enforcement. Cocaine seizures by GOP public security forces
exceeded five metric tons. Late in 1995, JICC (Joint Information
Coordination Center) administrators held a training seminar with the
Judicial Technical Police (PTJ) during multi-lateral operations
throughout Central America. Cooperation with DEA at the working level
was excellent. Cooperation with USG authorities resulted in major
maritime seizures.
Money Laundering. A presidential decree in March 1995 formalized the
position of "drug czar" and established a permanent presidential
commission to oversee money laundering control efforts. The commission
will ensure cooperation and policy compliance by government agencies and
key private sector institutions. The FAU will collect and analyze data
on financial transactions to identify criminal activities. Although the
FAU was inaugurated in July 1995, it probably will not become fully
functional until the second quarter of 1996.
The PTJ will establish a special unit to investigate financial crime.
In November a law was passed to modify Law 41 of 1990, Panama's criminal
statute against money-laundering. It contains provisions to strengthen
Panama's anti-money-laundering efforts, including suspicious transaction
requirements, "know your client" procedures, "whistle-blower"
protection, and prescribed punishment for code violations. The PTJ
detained two of Panama's alleged principal money launderers who were
wanted on U.S. warrants. The GOP expelled one of the two accused money
launderers, an Israeli citizen, to the U.S., where he subsequently pled
guilty. The other suspect, a Panamanian, was detained pending a U.S.
extradition request. As Panama's law prohibits extradition of its
nationals, at year's end USG and GOP officials were working together to
gather enough evidence to prosecute the Panamanian in Panama's courts.
Asset Seizure. Panamanian law provides for seizure of narcotics-
generated proceeds, but forfeiture of assets rarely occurs. United
States Customs shared with the GOP approximately $40,000 in the proceeds
of assets forfeited in the U.S.
Precursor Chemicals. Panama is not a major producer or significant
consumer of essential chemicals. It processes small amounts of cocaine
and heroin. Law 13 of 1994 establishes penalties for the illicit
manufacture, use, and transport of precursors. In 1995 over a dozen
chemical companies were examined based on US government information;
however, none were charged with violations.
Corruption. The GOP customs director fired over 60 customs inspectors
in 1995. The drug prosecutor's office claims that approximately half
the drug arrests in 1995 involved active duty or retired public security
personnel. Both the Immigration Service and the National Police have
moved strongly against cases of narcotics-related corruption as they are
uncovered. Corruption in the judiciary is also a problem. The GOP does
not encourage or facilitate illicit production or distribution of drugs,
or the laundering of illicit proceeds. Despite the GOP's efforts,
corruption is widespread.
Agreements and Treaties. Panama is party to the 1988 UN Convention, the
1961 Single Convention on narcotic drugs, the 1972 protocol amending the
single convention, and the 1971 convention on psychotropic substances.
The US/Panamanian Mutual Legal Assistance Agreement, which was ratified
by the GOP in 1991, was put into effect in 1995. The GOP is an active
participant in CICAD; Panama's attorney general was CICAD president in
1995. Panama actively participates in the Caribbean Financial Action
Task Force (CFATF) and the Basel committee's Offshore Group of Bank
Supervisors (OGBS). In 1995, the USG signed five new letters of
agreement for counternarcotics cooperation with the GOP. The
US/Panamanian extradition treaty is rarely invoked because Panama uses
its domestic law when extradition involves drug trafficking offenses.
Cultivation and Production. Panama is a small-scale producer of coca
leaf. With USG support, the GOP's National Air Service (SAN) conducted
successful coca eradication campaigns. Approximately 45 hectares of
coca were sprayed in March in the Darien province, and 60 hectares were
eradicated in November. SAN forces also destroyed a maceration pit
which had the potential to produce 75-100 kilos of paste per week.
During the November operation, over 40 hectares of marijuana also were
sprayed.
Drug Flow/Transit. The majority of drug seizures in Panama is cocaine,
although lesser amounts of marijuana and heroin are also confiscated.
Drugs transit Panama by sea, air, and land. Most seizures in 1995 took
place in Panamanian territorial waters or port facilities on both
coasts.
Demand Reduction. Drug abuse continues to be a serious problem in
Panama, which has one of the highest levels of cocaine addiction in
Central America. The Ministry of Education (MOE) provides monthly
training for youth leaders from public schools in prevention and
reduction techniques. With USG support, the ministry established a
national drug awareness resource center and provided training to over
100 physical education teachers. In December, Panama's First Lady and
the USG worked together to sponsor an anti-drug seminar at the
presidential palace which was conducted by two US experts to help form a
coalition modeled on the Partnership for a Drug Free America. Demand
reduction efforts are also being carried out by the National Drug
Prevention and Rehabilitation Committee (CONAPRED), the Ministry of
Health, and leading NGO's such as Pride/Panama and Cruz Blanca.
IV. US Policy Initiatives and Programs
Policy Initiatives. The USG continues to provide materiel, information
and training to the GOP to improve the performance of its
counternarcotics institutions. This assistance is used against money
laundering and trafficking organizations and to disrupt the flow of
drugs. The USG is committed to strengthening Panama's judicial system,
encouraging revision of laws and regulations, and ensuring strict law
enforcement.
Bilateral Cooperation. USG and Panamanian law enforcement agencies
conducted joint investigations, shared intelligence, and collaborated on
the interdiction of illegal narcotics. The USG supported several
extensive GOP projects, including long term on-site assistance to the
National Maritime Service (SMN) by a US Coast Guard International
Maritime Law Enforcement Team (IMLET). In 1995, a total of 43 SMN
students graduated from the US Naval Small Craft Instruction and
Technical Training School (NAVSCIATTS) and 13 SAN personnel received
training from the School of the Americas in Panama. Two joint
"operation vista" patrols were conducted involving SMN vessels, SAN
aircraft, and US Coast Guard cutters.
The GOP is making progress toward accomplishing the goals of its
bilateral agreements with the USG for maritime law enforcement and
chemical control. The PTJ continues to provide information on suspected
essential chemical shipments.
The Road Ahead. The GOP must upgrade existing institutions, continue to
improve its laws, and more actively investigate and prosecute money
laundering and narcotrafficking offenses. The GOP is still not fully
providing asset forfeiture assistance to the US or other countries. Due
to limited resources and expertise, the GOP will continue to seek
foreign assistance to build effective institutions. The USG's
objectives for 1996 include better implementation of money laundering
controls, including cross-border currency declarations,
institutionalized coordination of national drug control policies, and
tighter customs controls at ports and airports. The USG also hopes to
create SAN independence in crop eradication and interdiction.
[Editor's Note: EXCEL file; see Charts and Graphs Directory]
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