Money Laundering Panamanian Style

UNCLAS PANAMA 001187

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT ALSO FOR WHA/CEN, INL AND INR/B
SOUTHCOM FOR POLAD

E.O. 12958:N/A
TAGS: PGOV PREL PINR PM
SUBJECT: Money Laundering Panamanian Style

SUMMARY
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1. (SBU) Acting jointly, DEA and several Latin American
authorities knocked out a sophisticated multi-national drug
cartel that smuggled tons of cocaine on a monthly to the
U.S. Drug lord Pablo Rayo Montano was arrested on May 16
in Brazil. Authorities have seized millions of dollars in
assets and cash and arrested over 100 of his collaborators.
In Panama, a long list of cartel assets is now under Public
Ministry control. Using his real name, Rayo Montano became
a legal resident in Panama. What he could get away with
and how local authorities continually turned a blind eye to
his suspicious activities is a cautionary take for law
enforcement in Panama. End summary.

Background
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2. (SBU) On Tuesday, May 16 DEA announced the results of
Operation Twin Oceans, a multi-jurisdictional investigation
that targeted and effectively dismantled the Pablo RAYO-
Montano drug trafficking organization. Rayo Montano, a
Colombian citizen, ran a cocaine ring that smuggled more
that 15 tons of cocaine per month from Colombia to the U.S.
and Europe. The Brazilian Federal Police, Panamanian
Judicial Police, Colombian National Police, and DEA
spearheaded an international coalition responsible for
putting the cartel out of business. Rayo-Montano was
apprehended in Sao Paulo, Brazil on May 16. The
investigation took three years and resulted in over 100
arrests in Panama, Colombia, Venezuela, Costa Rica, the
U.S. and Ecuador. Fifteen people were arrested in Panama:
eleven Colombians and four Panamanians. Overall,
authorities seized almost 52 tons of cocaine and nearly
US$70 million in assets in six countries.

Pablo Joaquin Rayo Montano
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3. (SBU) Rayo Montano is a 46-year old Afro-Colombian who
first arrived in Panama in 1996, but according to
immigration records settled in Panama in 1999. Rayo
Montano always used his real name in Panama. After 2002
and 2003 hits against his operations in Panama by local
authorities and DEA, Rayo Montano moved to Brazil. In
1999, Panamanian immigration authorities issued Rayo
Montano a "technician" visa. Immigration records show that
in 2000, Rayo Montano got an "investor's visa", and in 2002
Rayo Montano received his Panamanian "cedula" (i.d. card)
giving him the status of a legal resident of Panama.
Despite being mandatory, Rayo Montano's cedula did not show
his place of birth. The cedula has now being cancelled by
current authorities.

Properties in Panama
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4. (SBU) Through third parties in Panama, Rayo Montano owned a
long list of assets. Many of his properties were on the
Atlantic coast, including three inhabited islands --Las
Tres Marias ("The three Marys") that his group used to
refuel boats and to hide; several hectares of beach-front
land; three beach houses in another island; and a
restaurant, which had been visited throughout the years by
Embassy officers on their way to Isla Grande, a local
tourist destination.


5. (SBU) Rayo Montano's properties in the rest of the
country included three apartments in the historical Casco
Viejo area, just a few blocks away from Panama's
presidency; a small hotel; an art gallery; a house in the
old Canal zone area, where he and his family lived before
moving to Brazil, two large fishing supplies stores
("Nautipesca"); a yacht named after his daughter Isa Pilar;
two beach-front homes on the Pacific, and fishing stores in
the western province of Chiriqui. Authorities also seized
thirty-nine bank accounts; eight boats; thirty-four
vehicles; and over US $300,000 in cash.

"A la Panamena" (Panamanian style)
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6. (SBU) Despite Rayo Montano's large operations in Panama
and the amount of wealth and property he and his people
controlled no Panamanian ever reported any suspicion about
Rayo Montano's activities to the authorities. This can be
taken as a sign of how complacent Panamanian society is and
how easily things can be done in Panama. It also confirms
public corruption. To pick just a few glaring
discrepancies:

-- Just one year after Rayo Montano is granted a
"technician" visa, he qualifies for an "investor's" visa
without raising suspicion. How often does a technician
become an investor in Panama?

-- Immigration authorities granted a resident's cedula to
Rayo Montano that did not state his place of birth which is
mandatory. Probably no other cedula in Panama fails to
state place of birth.

-- Current National Maritime Director Ricardo Traad lives
in the same Casco Viejo building where Rayo Montano owned
three apartments. Traad publicly claimed not to know of
Rayo Montano's properties in the building. Considering
that Rayo Montano paid US $200,000 for each apartment in the
relatively small building, it is difficult to believe Traad
was not aware of who else was investing in his building.
Are these apartments really worth US $200,000 each in that
neighborhood?

-- Rayo Montano paid US $150,000 for a run-down restaurant
("Los Canones") near Isla Grande on the Atlantic coast.
Its small marina was attractive to the cartel;

-- Two-term former Revolutionary Democratic Party (PRD)
legislator Abelardo Antonio sold land in Portobello, Colon
to Rayo Montano's group. Then-mayor and current PRD
legislator Nelson Jackson Palma approved the transaction.
Following the pattern, chances are that Rayo Montano also
overpaid. Could these individuals, both natives of Colon
and well-acquainted with its population, fail to be aware
or suspicious of Rayo Montano's operations?

-- How did this "unknown" group of foreigners was able to
obtain a special government concession to control three
islands? Authorities are investigating who in the Ministry
of Economy and Finance approved it.

-- Why did no one question that Nautipesca, Rayo Montano's
fishing supply store, was able to sponsor fishing
tournaments with US $300,000 in prize money?

COMMENT
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7. (SBU) Rayo Montano's case is one example of what drug
and weapon smugglers, money launderers and many other
criminals can achieve in Panama when money is no object.
"No questions asked" seems to be the rule. Businessmen,
lawyers, bankers, and public servants of all levels are
willing "to help," for the right price. How many Rayo
Montanos are out there?

Arreaga