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Compliance Regulations in Paraguayan Banking Sector Undergo Significant Changes

The Paraguayan government has recently introduced significant amendments to its financial regulations, aimed at strengthening the country’s banking system.

Key Amendments

The Law on Modernization and Strengthening of Paraguayan Financial System Regulations (Law 5,787/16) has modified the previous banking law in several key ways:

  • Initial Vetting for Financial Entities: The Central Bank of Paraguay (BCP) now has the power to reject applications from banks and other financial institutions if it is not satisfied with the suitability of the project or the profile of the directors, administrators, or auditors.
  • 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.
  • Prohibition of Convicted Individuals and Conflicts of Interest: Individuals who have been convicted of intentional crimes, sanctioned by local or international financial regulators, or have a conflict of interest are prohibited from serving as president, director, manager, accountant, or auditor of a financial entity.

New Responsibilities for Financial Entities

Financial entities are now also held liable for various infractions, including:

  • Approved Operations and Agreements: Approving operations and adopting agreements that conflict with applicable laws.
  • Risk Management and Corporate Governance: Failing to implement efficient policies and procedures for risk management and corporate governance.
  • Noncompliance with BCP Instructions: Noncompliance with BCP instructions.
  • Timely Information Provision: Failure to provide timely information to the Superintendent of Banking.
  • Response to Communications: Failure to respond to communications from the BCP or other authorities.

Bank Secrecy

The law lifts bank secrecy in certain circumstances, including:

  • BCP Requests: When requested by the BCP.
  • Judicial Authorities: When requested by judicial authorities.
  • Republic’s General Comptroller: When requested by the Republic’s General Comptroller.
  • Taxation Under-secretariat: When requested by the head of the Taxation Under-secretariat.
  • National Customs Office: When requested by the National Customs Office.
  • Attorney General and Public Prosecutors: When requested by the Attorney General, public prosecutors, or financial entities exchanging information with one another while preserving confidentiality.

Conclusion

These changes are aimed at strengthening the country’s banking system and improving transparency and compliance. However, it is essential for financial institutions to seek specialist advice on how these regulations apply to their specific circumstances.