Paraguay: Banking Compliance Best Practices Taken to the Next Level

The Paraguayan government has recently modified its banking law through Law 5,787/16, aimed at strengthening the country’s financial system. This legislation introduces significant changes that will shape the future of banking compliance in the region.

Key Changes

• Initial Vetting Process: The Paraguayan Central Bank (BCP) may reject applications from financial entities seeking establishment if it is not fully satisfied with the suitability of the project or the profile of the directors, administrators, and auditors. This ensures that only financially stable and reputable institutions are granted licenses.
• Transparency on Final Beneficiaries: The BCP may request information about any shareholder of a financial entity, up to the final beneficiary of a corporate entity shareholder. This increased transparency is designed to prevent money laundering and other illicit activities.

Additional Measures

• Prohibition on Individuals with Certain Convictions or Sanctions: Individuals convicted of intentional crimes, sanctioned by local or international financial regulators for poor professional performance, or with a conflict of interest that could affect the entity’s proper functioning are not permitted to hold key positions within financial entities.
• Increased Liability: Financial entities and their leaders will face increased liability under the new law. The president and board of directors may be held liable for:
  • Approving operations and adopting agreements that conflict with applicable laws
  • Failing to implement efficient policies and procedures for risk management and corporate governance
  • Noncompliance with BCP instructions
  • Failure to provide timely information to the Superintendent of Banking

Lifting Bank Secrecy

• Information Sharing: Financial entities are permitted to exchange information with one another while preserving confidentiality. Information may also be requested by:
  • The Paraguayan Central Bank (BCP) and its supervisory authorities
  • Judicial authorities
  • The Republic’s General Comptroller
  • The head of the Taxation Under-secretariat or the National Customs Office
  • The Attorney General and public prosecutors
  • The Secretariat on Prevention of Money and Asset Laundering (SEPRELAD)

Conclusion

The new law aims to improve banking compliance in Paraguay and ensure that financial institutions operate in a transparent and accountable manner. It is essential for financial institutions and their leaders to familiarize themselves with the changes and implement best practices to comply with the new regulations.