Double corruption whammy to Panama name and economy

THE ARREST of member of a prominent Panama family accused of a major role in one of the world’s biggest money laundering operations, combined with new revelations  in the Mossack Fonseca scandal  has affected  Panama’s image and economy  like an extreme  earthquake  according to many observers.

Businessman Nidal Waked, a member of one of the wealthiest families in Panama, was arrested  in Bogota (Colombia),   on Wednesday May 4  for being, according to US authorities, one of the world’s largest launderers  of drug money.

“This is like a 10 degrees  earthquake for the economic system and Panamanian society, but this should not be a surprise,” said Miguel Antonio Bernal, Professor of Constitutional Law at the University of Panama.

Waked, 44, was arrested when he arrived in  his native Colombia on a flight from Panama, where his family of origin Lebanese origin  manage scores of businesses numerous businesses ranging from shopping malls, to  hotels, newspapers, in free zone operators  and  a bank,

He  is wanted  by the US Southern District Court of Florida for “conspiracy to commit money laundering.” And the prosecutor is calling for a 50-year jail sentence.

“The country’s image has been damaged by these twin scandals,” said Francisco Bustamante, former official of the Inter-American Development Bank (IDB).

In April, the Mossack Fonseca revelations highlighted how the Panamanian law firm created countless offshore companies for personalities from around the world, with the alleged purpose of evading taxes. On Monday May 9 details of hundreds of thousands of companies and individuals will be made available digitally to international investigators Meanwhile  the Panamanian government has pledged to to  fight against money laundering and has  created a committee of experts, including  Nobel economist Joseph Stiglitz, to bring its financial system transparency standards  to the level required by the Organization for Economic Co-operation and Development (OECD).

With a canal that transmits five percent of the world’s seaborne trade, plus free zones, ports, tourism and robust logistics and banking system, Panama has achieved an economic growth of over 6% annually in recent years, the largest in the region.

However, it is considered by some countries as a tax haven, despite reforms that eliminated the use of bearer shares, the creation of a public body to prevent money laundering in 16 economic activities including real estate and signing thirty bilateral treaties on exchange of financial information.
The lack of speed in lifting banking secrecy and introducing the automatic exchange of information has led to the country remaining in the crosshairs of Europe, the United States and the OECD.

“We cannot go out there like we were corsairs or pirates of the eighteenth century,” Bernal said.

For academics, the Panamanian financial center must be reformed to prevent money laundering, “but the government cannot do it because most of them integrate with interests in the same type of operations.”

Entrepreneurs have also shown their fear: “There can be situations that people start to question whetherto   invest or not,” said Jorge Garcia president of the Chamber of Commerce,

Analysts also believe that scandals can be used by the Panamanian authorities to push reforms of the financial system and meld with the transparency requirements of the international community.

THE JUSTICE SYSTEM
They also believe that new international requirements will test the Panamanian justice system and enforcement of laws against money laundering.

“This is a golden opportunity for the government of Panama. It must demonstrate that the law exists, is applied and it works” Bustamante said.

“Panama will have to contribute its share of sacrifice to prevent the continued use of our institutions for these crimes,” said Annette Planells, leader of the Panama Independent Movement (MOVIN)
However, they recognize the weakness and shortcomings of Panamanian institutions and the justice system often permeated by corruption

“We must ensure as a state and as a country that investigations are given until the end,” said the president of the Panamanian Association of Business Executives, Morabia Guerrero.