WTO: “Money Laundering Tariff” Judgment for Panama against Colombia
09 Jun 2016

On Tuesday, the World Trade Organization (WTO) granted an appellate ruling in favor of Panama against Colombia. The ruling pertained to Colombia’s use of high tariffs on imported textiles, clothing, and shoes as part of a plan to address alleged money laundering.

The Latin American nation of Panama recently made the news when it was discovered that a prominent law firm was taking advantage of the country’s loose financial laws in order to help foreign nationals to launder money and avoid taxes in their home countries. The so-called “Panama Papers” scandal has had far-reaching consequences throughout the world.

Strangely, Columbia’s tariffs attached to physical goods traded with Panama, claiming that the goods were part of an “illicit trade” pattern because they were imported at below market prices. Columbia argued that this showed that the goods were just part of an effort to legitimize funds paid into Panama. Colombia flagged these transactions and attached a higher than usual tariff to them in an effort to allegedly discourage such practices.

The Appellate Body of the World Trade Organization delivered its ruling on Tuesday, upholding a prior ruling that held the Colombian tariff a violation of the WTO’s trade rules. Moreover, it held that the tariff did not appear necessary to combat money laundering as Colombia claimed.

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