Newspaper article The Christian Science Monitor

US-Panama Drug Pact to End Bitter Rift DRYING UP MONEY LAUNDERING

Newspaper article The Christian Science Monitor

US-Panama Drug Pact to End Bitter Rift DRYING UP MONEY LAUNDERING

Article excerpt

AFTER a nasty, year-long dispute, the United States and Panama are set to sign, as soon as today, a controversial treaty to help track drug traffickers and money launderers.

But Panama has successfully resisted intense US pressure to include tax evasion crimes under the pact's scope, for fear the accord would hurt Panama's banking sector, Panamanian officials say.

Although US and Panamanian officials express satisfaction over the agreement, the dominant mood is relief that the signing will end a bitter quarrel that soured relations between the two nations.

"It's kind of like this big sigh of relief," says a US official "But it hasn't been signed yet, so we're not sighing yet."

The Mutual Legal Assistance Treaty requires both nations to swap information on crime investigations and allows US prosecutors access to bank records of suspected drug bandits. The accord still must be ratified by the US Senate and Panama's National Assembly. The text is not yet public.

Panama resisted US efforts to cooperate on tax evasion cases, causing negotiations to drag on for more than a year. Panamanian bankers and lawyers consider the fiscal issue critical because Panama is a tax haven for foreigners, permitting some to avoid taxes and shield illicit corporate activities.

Offshore banks and "dummy" corporations are a pillar of Panama's economy, employing thousands of lawyers and bank workers and pumping millions of dollars into the country. Bankers argued the pact would harm Panama's financial sector, discouraging investment by foreigners fearful of US prying into financial records.

Panamanian Foreign Ministry officials say the pact will allow cooperation on tax evasion cases only if they are tied to other criminal activity. The accord will unlock bank records related to drug investigations and may be a deterrent, discouraging drug lords from washing profits in Panama. …

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