FATF’s Traditional Risk-Based Approach: A Key Foundation for Compliance

Paraguay has made significant progress in improving its Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) system, focusing on supervising obliged entities. The Financial Action Task Force (FATF) has emphasized a traditional risk-based approach as an essential foundation for compliance with international standards since 2012.

Supervisory Programs

Paraguay’s financial institutions have been rated non-compliant with FATF Recommendation 23 (Regulation and Supervision of Financial Institutions) in its third-round Mutual Evaluation Report by the Latin American Financial Action Task Force (GAFILAT). The country has also been rated non-compliant with former FATF Recommendation 24 (Regulation and Supervision of Designated Non-Financial Businesses and Professions or DNFBPs).

Capacity Building

The U.S. Bureau of International Narcotics and Law Enforcement Affairs (INL) noted in 2016 that Paraguay lacked adequate capacity to investigate and prosecute money laundering crimes. The country’s prosecutors faced limited resources for investigating and prosecuting financial crimes cases, and there was a lack of a formal system for tracking money laundering cases.

Financial Crimes Working Group

To address these challenges, the Overseas Technical Assistance (OTA) Economic Crimes Team created a financial crimes working group that met regularly to develop a case-tracking mechanism and operations manual. This project objective aimed to improve AML/CFT case development and create a financial crimes task force.

Asset Forfeiture and Recovery Program

Paraguay had not enacted an asset forfeiture law, although the need for authorities to seize, manage, and forfeit assets was well recognized. The OTA Economic Crimes Team developed an asset recovery manual that identified remedies to existing impediments.

Evaluation Findings

The evaluation team found that the ECT achieved significant success in increasing the effectiveness of SEPRELAD’s analysis and reporting, as well as developing an asset recovery program. However, some project objectives were not fully achieved due to various challenges and obstacles.

Recent GAFILAT Mutual Evaluation Report

Paraguay recently underwent a GAFILAT Mutual Evaluation, which further supports aspects of the evaluation’s findings and represents a milestone achievement for the country. The report highlights Paraguay’s progress in improving its AML/CFT system and emphasizes the importance of continued efforts to strengthen its supervisory programs.

Conclusion

The FATF’s traditional risk-based approach remains an essential foundation for compliance with international standards, as demonstrated by Paraguay’s progress in strengthening its AML/CFT system. The country has made significant strides in improving its supervisory programs, capacity building, and asset forfeiture and recovery efforts. However, continued efforts are necessary to address remaining challenges and achieve full compliance with FATF recommendations.