Why Panama Remains a Money Laundering Haven
Panama has made some key moves in order to get itself removed from the international "grey list" of nations that aren't doing enough to fight money laundering, but these efforts may yet fall short. The grey list is maintained by the Financial Action Task Force (FATF), an inter-governmental body that promotes anti-money laundering policies. Panama has been on the list since June 2014, alongside other countries like Afghanistan, Sudan, and Syria.
One of the main sticking points in these ongoing negotiations has been Panama's limited regulation of bearer shares. These are equity securities that are exclusively owned by whoever physically possesses them. Bearer shares are also highly vulnerable to money laundering, as those who issue them don't keep records of the buyers, and selling them is as easy as delivering a piece of paper to someone else.
No one keeps tracks of this buying and selling process, which makes it extremely difficult to determine who owns the share. Before Congress passed reforms earlier this year, Panamanian law made it even more difficult, as the original owner of the bearer share was not required under any circumstance to turn it over to an authorized custodian such as a bank or an attorney.
Another impediment to Panama's removal from the FATF grey list is the ease with which companies can be formed. Corporations in Panama will often opt to register as a sociedad anónima ("anonymous society"
, or bearer share corporation. This protects the confidentiality of the company's assets, the identity of its owner or owners, and all business and banking transactions under Law 32.
While the founders of a sociedad anónima are required to sign documents identifying themselves as such before a Panamanian notary, laws firms in the country offer a convenient loophole. For a fee, the sociedad anonima can hire lawyers to sign the required paperwork before a notary in their place, further concealing the identities of the company's owners.
There are other regulations in Panama that may attract those looking to set up front companies. Companies that operate outside of Panama do not need to obtain a license for their foreign business operations.
Another sticking point between the FATF and Panama is lax regulations over the shipping industry. While Panama's shipping registration process has helped create the world's largest commercial shipping fleet, it has also made the shipping industry highly conducive to money laundering, tax evasion, and drug trafficking.
More worrying still is that Panama's current registration system allows ship owners to operate under a veil of anonymity, as it is virtually impossible to determine a ship's actual owner or owners, which allows them to engage in unlawful acts with near impunity. Furthermore, importers and exporters manipulate trade invoices to avoid paying customs duties, valued-added taxes (VAT), or income taxes on their goods.
There have been other troubling signs that it might not be so easy for Panama to shed its notoriety as a money laundering hub, including lucrative government contracts to the Odebrecht Group (a scandal-plagued Brazilian conglomerate whose CEO is currently in prison on money laundering charges), and the fact that one of the most influential members of President Juan Carlos Varela's cabinet runs a law firm, Mossack Fonseca, which is reportedly one of the most prolific creators of shell companies in the world. Meanwhile, several real estate developers -- which a leaked US Embassy cable linked to money laundering and other illicit activities -- continue to operate in the country.
While the FATF has acknowledged Panama's advances in fighting money laundering, the international agency says there is still significant room for improvement. In a June 2015 memorandum, the FATF asserted that of the 40 recommendations that the organization issued in 2012, Panama only fully complies with one of them.
Ultimately, Panama will determine whether it leaves the grey list or not, and only skillful maneuvering by its government will allow it to safely navigate the treacherous waters of international finance and commerce without sinking its own economic self-interests.
At: http://www.insightcrime.org/news-analysis/7038-why-panama-remains-a-money-laundering-haven
___________________________________________________________
You won't see this on the Wall Street Journal, that's for sure.
= new reply since forum marked as read
"sociedad anónima" is crazy! How could they get by with it in an even partially clean society?
Didn't know the material about shipping, money-laundering, etc.
I remembered reading an article recently about Senator Mitch McConnell, and his wife, Elaine Chow's family, owners of a large shipping company:
Mitch McConnell’s Freighted Ties to a Shadowy Shipping Company
After drugs were found aboard the Ping May, a vessel owned by his wife’s family’s company, Colombian authorities are investigating.
By Lee Fang
October 30, 2014
[font size=1]
Mitch McConnell’s father-in-law, James Chao (second from right), at the christening of the Ping May in Shanghai (Image: Shanghai Mulan Education Foundation)
[/font]
Before the Ping May, a rusty cargo vessel, could disembark from the port of Santa Marta en route to the Netherlands in late August, Colombian inspectors boarded the boat and made a discovery. Hidden in the ship’s chain locker, amidst its load of coal bound for Europe, were approximately 40 kilograms, or about ninety pounds, of cocaine. A Colombian Coast Guard official told The Nation that there is an ongoing investigation.
The seizure of the narcotics shipment in the Caribbean port occurred far away from Kentucky, the state in which Senator Mitch McConnell is now facing a career-defining election. But the Republican Senate minority leader has the closest of ties to the owner of the Ping May, the vessel containing the illicit materials: the Foremost Maritime Corporation, a firm founded and owned by McConnell’s in-laws, the Chao family.
Though Foremost has played a pivotal role in McConnell’s life, bestowing the senator with most of his personal wealth and generating thousands in donations to his campaign committees, the drug bust went unnoticed in Kentucky, where every bit of McConnell-related news has generated fodder for the campaign trail. That’s because, like many international shipping companies, Chao’s firm is shrouded from public view, concealing its identity and limiting its legal liability through an array of tax shelters and foreign registrations. Registered through a limited liability company in the Marshall Islands, the Ping May flies the Liberian flag.
[font size=1]
Mitch McConnell and his wife Elaine Chao with James Chao (image: ElaineLChao.com)
[/font]
McConnell’s ties to the Chaos go back to the late 1980s, when James Chao began donating to the senator. In 1993, McConnell married James’s daughter, Elaine Chao, a Republican activist and former Reagan administration official who would later serve as secretary of labor in the George W. Bush cabinet. James Chao emigrated to the United States from Taiwan, and founded the Foremost Maritime Corporation upon settling in New York. The company has grown significantly over the years, from acting as maritime agent during the Vietnam War to controlling a fleet of approximately sixteen dry-bulk cargo ships in operation today.
More:
http://www.thenation.com/article/mitch-mcconnells-freighted-ties-shadowy-shipping-company/
Odd combinations of elements, isn't it?
Thank you for this.
(I always wondered why Elaine Chow married Mitch McConnell.)
My goodness!
We learned he is an
[center]"Oceangoing Sea Captain
Businessleader
Philanthropist" [/center]
He's such a philanthropist he gave his daughter to a U.S. politician!
I've never seen a WikipeCIA page like this one. Crazy! They've really had their way with it.
[center]
[/center]
My guess though is that McConnell dances less like Fred Astaire, and more like...
