EMBASSY ANTI-MONEY LAUNDERING OUTREACH

C O N F I D E N T I A L PANAMA 000021

SENSITIVE
SIPDIS

PASS TO SARA SENICH AT TREASURY

E.O. 12958: DECL: 01/05/2019
TAGS: ECON EFIN SNAR KTFN PM
SUBJECT: EMBASSY ANTI-MONEY LAUNDERING OUTREACH

Classified By: Ambassador Stephenson for reasons 1.4 (b) and (d).


1. (C) Summary: Spearheading Mission Panama's anti-money
laundering outreach, Ambassador Stephenson met with Colon
Free Zone (CFZ) General Manager Nilda Quijano during a
December 17 visit to Colon. Quijano described the
competitive advantages of the CFZ for legitimate businesses
and the steps being taken to scrutinize illegal activity and
marginalize illicit firms. On December 22, Ambassador
raised with First Vice President and Foreign Minister Samuel
Lewis Navarro press coverage of the apparent failure of
Panama's Financial Analysis Unit (UAF) to report unusual
transactions of Colombian pyramid scheme kingpin David Murcia
Guzman. Ambassador Stephenson emphasized the importance of
UAF credibility and efficacy. End Summary.


2. (C) At the CFZ, Quijano, who is appointed to a five-year
term by the President, spoke about her efforts to reform the
CFZ, which are crucial to the zone's growth strategy. She
emphasized that significant growth in government support over
the past 4 years has, combined with revenue, allowed current
and capital expenses to rise from $29 million in 2005 to $60
million in 2008. Those funds are being spent to digitize
records of cargo movement in the Zone - a project that
currently is at 70% completion. Quijano praised the
NAS-funded evolusoft project, noting that voluntary
participation and certification in anti-money laundering
training for firm representatives will become mandatory and
that monitoring of transactions under this project also will
become mandatory. Quijano spoke at length about pushing out
the bad actors in the zone - "I've raised the rent, and if a
company goes sixty days without a transaction, they don't
belong here."


3. (U) Recent growth in the CFZ, the second largest free
trade zone in the world after Hong Kong, is fueled primarily
by imports from Asia (63%) and re-exports to Central and
South America (94%). The United States and Canada provide
only 15% of imports into the CFZ and receive only 5% of its
re-exports. Growth through most of 2008 had been 30% above
2007 levels. However, due to the global financial crisis,
growth is expected to be flat -- at best -- in 2009. The
CFZ's comparative advantage is its close proximity to the
Canal (which carries 5% of world trade) and modern ports, and
the Kansas City Southern Railroad. Merchants' ability to
assume credit and inventory risk, to sell goods in scalable
quantities, and to arrange finance and transport all have
contributed to the CFZ's success since its founding in 1948.
Logistics firms increasingly are using the Zone to repackage
or modify higher value goods for specific markets. Also,
the network of FTA's during the past decade has drastically
reduced tariffs in the Americas, further fueling the growth
of the CFZ.


4. (C) On December 22, during a wide ranging conversation
with First Vice President and Foreign Minister Samuel Lewis,
Ambassador Stephenson raised press coverage of the Financial
Analysis Unit's (UAF's) reported failure to report suspicious
transactions by Colombian pyramid kingpin David Murcia Guzman
(DMG). Guzman was arrested by Panamanian public forces and
deported to Colombia on November 20. While, according to the
press, DMG's bank, Multibank, duly reported transactions
totaling $1.23 million in late 2006, the UAF failed to
provide this information to the Attorney General as required
by law. Ambassador stressed that the credibility and
efficacy of the UAF were crucial in fight against money
laundering. First Vice President Lewis agreed and added that
"we as a government need to pull together all of the measures
we have taken to tighten financial regulations so that we can
present it in a clear fashion."


5. (C) Comment: Post will subsequently report on the
progress of automation efforts in the CFZ. Ambassador's
message to Lewis was a powerful indicator of USG interest in
ensuring that the UAF can function as a full partner with
U.S. FINCEN and other financial analysis units.
STEPHENSON