Sat | Jul 21, 2018

Panama rejects money-launder label following documents leak

Published:Wednesday | April 6, 2016 | 12:00 AM
Ramon Fonseca is seen during an event in Panama City in June 2014.


Panamanians have long shrugged off their country's checkered reputation as a financial haven for drug lords, tax dodgers and corrupt oligarchs. They like to joke that if they're crooks, they've learned it from the world's wealthy nations.

That same defensiveness has re-emerged amid the fallout from the leak of 11.5 million confidential documents from the Panama-based law firm Mossack Fonseca revealing details of how some of the globe's richest people funnel their assets into secretive shell companies set up here and in other lightly regulated jurisdictions.

Ramon Fonseca, a co-founder of the firm, said that his country's success in establishing itself as an offshore banking giant has bred jealousy from first-world rivals at a time of increasing competition and scrutiny of the industry in the aftermath of the global financial crisis.

"It's very unfair what's happening because there's not a level playing field," Fonseca told The Associated Press in an interview. "Without a doubt, if this happened to a company in Delaware nothing would happen, but, because it's Panama, it's the front page of the world's newspapers."

Panama cemented its status as a money-laundering centre in the 1980s, when dictator General Manuel Noriega rolled out the red carpet to Colombian drug cartels. It has remained a magnet for illicit money, as well as for legitimate funds, because its dollarised economy sits at the crossroad of the Americas. Breakneck economic growth averaging 8.5 per cent a year for a decade has been fed by the flood of cash, transforming the capital's skyline into Latin America's Dubai.




But Panama isn't alone in its permissive attitude toward shell companies, which the British-based Tax Justice Network estimates hide $21 trillion to $32 trillion in untaxed or lightly taxed financial wealth around the globe. Panama ranks 13th on the watchdog group's financial secrecy index, better than the US, which is at number three.

Panamanian President Juan Carlos Varela has promised to cooperate with any judicial investigations stemming from the leaked data, and the country's chief prosecutor's office said on Monday that it will look into the documents to see if they reveal any wrongdoing.

Varela says he has "zero tolerance" for financial crimes and likes to cite the ramming through congress last year of legislation expanding supervision over more than 12 non-financial industries, from real estate to casinos. The legislation paved the way for Panama's removal in February from a black list of high-risk jurisdictions kept by the Financial Action Task Force, an inter-government agency that sets standards for controlling money laundering and terror financing.

In a statement issued on Monday, Mossack Fonseca said: "Our industry is not particularly well understood by the public, and unfortunately this series of articles will only serve to deepen that confusion. The facts are these: while we may have been the victim of a data breach, nothing in this illegally obtained cache of documents suggests we've done anything wrong or illegal, and that's very much in keeping with the global reputation we've worked hard to build over the past 40 years of doing business the right way."