U.S. Urging Panama to Establish Anti-Narcotics Police : Drug war: Washington also seeks new banking regulations to curb flow of illicit funds.

The United States has begun delicate talks with the Panamanian government in hopes of persuading its leaders to create an anti-narcotics police force and to implement new restrictions on banking in order to consolidate gains in the war on drugs won with the ouster of Manuel A. Noriega, according to U.S. and Panamanian officials.

As a gesture of good faith, a senior State Department official announced here Wednesday that the Bush Administration plans to move with unprecedented haste to formally certify that Panama is cooperating with the United States on anti-drug matters. Such a move would thereby restore trade benefits cut off by Congress to punish the Noriega regime for its reputed sponsorship of international drug trafficking.

But sources familiar with the discussions said that new President Guillermo Endara and acting Atty. Gen. Ricardo Arias Calderon reacted with “some sensitivity” to the proposals by Assistant Secretary of State Melvyn R. Levitsky on banking and law enforcement, which would require reforms in two Panamanian institutions.

The quest for further safeguards against a resumption of drug-related activities here comes as U.S. officials, in a softening of earlier pronouncements, acknowledged that the removal of Noriega was, by itself, likely to have only minimal impact on the flow of cocaine to the United States.

The officials said that even under Noriega, who is facing trial in the United States on drug trafficking charges, Panama played only an insignificant role as a transit point for cocaine shipments on their way north from South America. Although Panamanian banks were favored repositories for illicit drug profits, even that money-laundering role appears to have diminished in the last two years because of the weak economy here, they said.

An indication of the more sober assessment of the extent of the Noriega regime’s direct participation in drug trafficking came as the State Department anti-narcotics chief sought to explain what would be different about the new Panamanian government.

“It’s primarily a question of attitude,” he said. “The message from this government (to drug traffickers) is: ‘Hands off Panama. Don’t come here.’ ”

In an earlier interview, Drug Enforcement Administration spokesman Frank Shults described cocaine trafficking through Panama under Noriega as a “minor matter.” A reduction in shipments as a result of the strongman’s ouster alone “is not going to happen,” he warned bluntly.

The officials stressed that the removal of Noriega could nevertheless provide a major benefit to the drug war by depriving drug traffickers of the haven they once enjoyed, and by opening the way for vigorous enforcement of drug laws by the new Endara regime.

But a senior U.S. official with expertise in drug matters also emphasized the need to consolidate that gain through persuading the Endara government to introduce new anti-drug reforms that might bring about tangible achievements.

The changes being encouraged by the United States, which would primarily affect the banking and law enforcement systems, are designed to reform institutions whose characteristics offer an enduring opportunity for drug traffickers, officials said.

Because drug enforcement remains the responsibility of a joint military-police organization dominated by former members of the pro-Noriega Panama Defense Forces, the prospect that those forces might prove lax in cracking down on narcotics operations remains a “major concern,” the U.S. official said.

As an alternative, State Department anti-narcotics chief Levitsky is said to have urged Endara and other officials in private meetings Tuesday and Wednesday to establish a separate anti-drug force “well insulated” from the taint of PDF corruption.

On banking, where secrecy laws continue to make Panamanian banks prospective storage places for illicit cash, the U.S. envoy urged the Panamanians to approve regulations that would require bank executives to report large or suspicious transactions to authorities, according to sources with knowledge of the discussion.

Such a restriction could well diminish the attraction of Panama as a banking center, even to some depositors who acquired their funds legally--and on that basis it was greeted coldly by the new Panamanian leaders, the sources said. But the American representatives held out hope that pressure from the United States might persuade the Panamanians to accept additional restrictions because “they don’t want to get crosswise with us,” according to one source.

Prospects for the separate reforms in the law enforcement system remained less clear, with the Panamanian leadership apparently undecided as to the wisdom of going outside the unitary security force to establish a separate anti-drug team.

More immediately, the congressional certification would restore to Panama a guaranteed share of the U.S. sugar market and would grant most-favored-nation status for other Panamanian exports.