VZCZCXYZ0023
RR RUEHWEB

DE RUEHZP #1798/01 2562248
ZNR UUUUU ZZH
R 132248Z SEP 06
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC 8944
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RHEFHLC/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEANQT/FINCEN VIENNA VA

...UNCLAS PANAMA 001798 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ETRD KCRM PM
SUBJECT: FINCEN DIRECTOR BOOSTS USG ANTI-MONEY LAUNDERING 
MESSAGE 
 
REF: A. PANAMA 1477 
 
     ¶B. PANAMA 1532 
     ¶C. PANAMA 1187 
 
¶1.  This message is SENSITIVE.  Please protect accordingly. 
 
2.(U) Summary:   FinCEN Director Robert Werner, Deputy 
Director William Baity, and staff member Mauricio Pastora 
visited Panama on August 23 and 24.  Director Werner 
delivered the keynote address at the 10th Hemispheric 
Conference on Money Laundering and Terrorist Financing, where 
he reinforced USG anti-money laundering messages.  FinCEN and 
Emboffs met with Director of the Financial Analysis Unit 
(UAF) Amado Barahona, Banking Superintendent Olegario 
Barrelier, Colon Free Zone (CFZ) Vice President Juan Fidel 
Macias and CFZ User,s Association Vice President Digna 
Donado.  FinCEN signed an MOU with the UAF governing the 
exchange of information between the two agencies. 
 
--------------------------------------------- ---- 
Director Stresses Economic Impact & International Cooperation 
--------------------------------------------- ---- 
 
¶2. (U) Director Werner,s keynote address to an estimated 400 
conference attendees reinforced the USG,s commitment to 
combating money laundering world-wide.  The speech 
highlighted the distortionary effect of illicit funds on 
legitimate economic activity and the importance of preventing 
those engaged in illegal activity from being able to enjoy 
the proceeds.  Director Werner discussed the transborder 
nature of money laundering, emphasized international 
cooperation in anti-money laundering activities and 
maintaining the autonomy of regulatory institutions to ensure 
their ability to effectively carry out their mandate.   He 
expressed concern over the proliferation of front companies 
and the use of off-shore accounts in financial institutions 
with branches in Panama.  The speech discussed the risk-based 
approach adopted by FinCEN in effectively administering and 
enforcing anti-money laundering regulations. 
 
--------------------------------------------- - 
FinCEN signs Information Exchange MOU with UAF 
--------------------------------------------- - 
 
¶3. (U) FinCEN met with the Financial Analysis Unit (UAF) on 
Wednesday August 24th.  Director Werner and UAF Director 
Amado Barahona signed an MOU governing information sharing 
between the two agencies.  The MOU will formalize and 
stream-line existing information exchanges previously handled 
on a case-by-case basis under the information sharing 
principles of the Egmont Group of Financial Intelligence 
Units. 
 
¶4.  (SBU) Barahona expressed concern regarding the level of 
detail in the FinCEN responses on certain information 
requests.  Barahona stated he had difficulty obtaining 
related information from US law enforcement agencies.  He 
also requested access to US bank account information. 
Director Werner explained that FinCEN could not disclose law 
enforcement related information without permission from the 
originating agency but agreed to look into both issues. 
Barahona stated the UAF recently created a statistical and 
strategic analysis unit and planned to post some reports on 
their website.  Director Barahona emphasized that the UAF 
itself does not have enforcement capabilities.  In the event 
of suspected money laundering activity, the UAF requests the 
industry regulators to administer sanctions and/or fines on 
an individual or organization.  Barahona also commented that 
Panama,s high income tax on casinos (10% of gross revenue 
and 35% of net revenue) discouraged money launderers from 
establishing a casino for the purposes of laundering money. 
 
--------------------------------------------- -------- 
Colon Free Zone Officials Discuss Complaints and Cash 
Transactions 
--------------------------------------------- -------- 
 
¶6.  (U)   The FinCEN delegation met with CFZ Administration 
Vice President Juan Fidel Macias and CFZ User,s Association 
Vice President Digna Donado on Thursday August 24th to 
discuss the CFZ,s anti-money laundering efforts and 
oversight of CFZ businesses.  Motta Group Chief Financial 
Officer Fernando Guardia Williamson was also in attendance. 
Guardia emphatically noted widespread frustration among CFZ 
businessmen who believe they are subject to higher standards 
than the import/export firms in the United States with which 
they compete.  Director Werner noted that the U.S. had a 
 
variety of controls to monitor transactions by U.S. firms and 
through U.S. banks but that money laundering is a cross 
border activity that cannot be solved without international 
cooperation. 
 
¶7.  (SBU)   According to the CFZ Administration, 
approximately 40 of the 2,300 or so CFZ companies are audited 
for compliance with CFZ regulations each year.  Cash 
transaction reporting and record keeping is reviewed with a 
team of six auditors.  Officials stated the CFZ and the UAF 
have proposed establishing suspicious transaction reporting 
specifically for the CFZ.  According to Guardia, 
approximately 20 percent of Motta,s sales are paid in cash. 
CFZ administrators concurred, estimating 20 to 25 percent of 
overall CFZ sales are paid in cash.  CFZ exports are reported 
to be over $5 billion per year (not including sales by CFZ 
firms of goods that are shipped directly from the 
manufacturer to the customer or otherwise do not physically 
pass through the CFZ).  However, Director Barahona stated 
only about $70 million worth of cash transactions over 
$10,000 were reported to the UAF by CFZ businesses in 2004 
and about $50 million in 2005 (approximately 1-2%). 
 
¶8. (SBU) Guardia and the CFZ representatives explained that 
they believe the discrepancy is the result of customers 
dividing their business among multiple CFZ firms to acquire a 
range of products, but spending less than $10,000 at each 
firm.  They stated that the level of cash flowing through any 
individual CFZ firm could be monitored by cash transaction 
reports filed by banks on the deposits made by the firm and 
via the firm's tax filing which should reflect their cash 
flow. 
 
--------------------------------------------- --------- 
New Banking Superintendent Stresses Need to Learn From 
Experience 
--------------------------------------------- --------- 
 
¶9.  (SBU) Newly appointed Superintendent of Banks Olegario 
Barrelier (Ref A & B) admitted that he was not familiar with 
many of the changes that had occurred in anti-money 
laundering regulations and technologies in recent years but 
added that he hoped to learn quickly and wanted to make sure 
that Panama incorporated the most up-to-date technology and 
processes to safeguard the financial system.  The UAF 
provides the Superintendency with profiles on each bank prior 
to each bank inspection and the Superintendency agreed to 
additional or targeted inspections in response to requests 
from the UAF.   Barrelier noted that the Pablo Rayo Montano 
drug money laundering case (Ref C) had caused a lot of 
concern in the banking community.  He stated he planned to 
meet informally with the sector to get their observations. 
He proposed studying the Panamanian accounts in Montano,s 
network to see what new controls might be necessary.  UAF 
director Barahona noted that one bank did file a suspicious 
activity report on a transfer to Brazil made by the 
Montano-owned company Nautipesca.  The meeting identified 
that bank cash flow data transmitted from the bank to the UAF 
(via the Superintendency,s electronic reporting system) was 
consolidated and did not identify cash flow by branch. 
 
------- 
Comment 
------- 
 
¶10. (SBU)   Panamanian officials were pleased to have the 
opportunity to meet with the FinCEN delegation and reiterated 
their commitment to combating money laundering.  Relations 
between the UAF and the Banking Superintendency appeared 
positive.  However, the meetings highlighted several gaps in 
Panama,s regulatory efforts and activities.  Discussions 
between the UAF and the Banking Superintendency indicated a 
lack of clarity regarding inter-agency responsibilities.  A 
former Banking Superintendency official told Econchief the 
current UAF Director is less proactive than his predecessors. 
 In fact, Director Barahona,s comment regarding casinos and 
money laundering appeared disingenuous as the high income tax 
on casino revenue is only relevant if the illicit funds are 
being properly recorded and reported.  Further, money 
launderers who are not casino owners can still attempt to 
launder funds as casino players. 
 
¶11. (SBU) FinCEN and Emboffs noted the fact that CFZ 
regulators did not want to meet separately from the User,s 
Association.  At several points in the meeting, CFZ officials 
deferred to Motta Industry representative Mr. Guardia who 
appeared to be running the meeting.  CFZ representatives 
 
seemed unconcerned with the low level of cash transaction 
reporting (reports which would be key to tracking payments 
made through the Colombian Black Market Peso Exchange) and 
instead were focused on how bank and tax filings could show 
that their businesses were not fronts for drug traffickers. 
The premise that over 95% of the $5 billion in annual CFZ 
business is conducted in transactions less than $10,000 is 
not credible. 
 
¶12. (U) This message is approved by the FinCEN delegation. 
ARREAGA