Financial Crime World

Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) in Paraguay: Areas for Improvement

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Significant Gaps in AML/CFT Framework

Paraguay’s AML/CFT framework is plagued by significant gaps, with low awareness of money laundering/financial terrorism (ML/FT) risks in both the public and private sectors. This lack of understanding creates an environment conducive to ML and CFT.

Low Awareness of ML/FT Risks

  • The level of awareness of ML/FT risks is low in both the public and private sectors.
  • This lack of understanding creates an environment conducive to ML and CFT.

Substantial Contraband Trade

Paraguay’s location at the center of a regional transit zone makes it a major transit point for narcotics trafficking, smuggling, and counterfeit goods destined for other countries in South America. This facilitates money laundering in the country.

Major Transit Point

  • Paraguay is located at the center of a regional transit zone.
  • It is a major transit point for narcotics trafficking, smuggling, and counterfeit goods destined for other countries in South America.

Low Convictions for ML

Although relevant statistics are not routinely kept or updated, the mission could confirm that at least 15 convictions for ML (with only six confirmed and final rulings) have been achieved since 1997. The number of convictions remains low considering the perceived level of criminal conduct.

Limited Convictions

  • At least 15 convictions for ML have been achieved since 1997.
  • Only six of these convictions were confirmed and finalized.
  • The number of convictions remains low considering the perceived level of criminal conduct.

Corruption Threats Development

Corruption at all levels in the public sector is a serious obstacle to combating ML and serious predicate offences, posing a major threat to the country’s development.

Serious Obstacle

  • Corruption at all levels in the public sector is a serious obstacle to combating ML and serious predicate offences.
  • It poses a major threat to the country’s development.

The Unified Anti-Laundering Force (UAF) has an inadequate legal framework and governance structure that inhibits its operational independence. It also lacks sufficient resources to effectively perform its mission.

Inadequate Governance Structure

  • The UAF has an inadequate legal framework and governance structure.
  • This inhibits the UAF’s operational independence.
  • It also lacks sufficient resources to effectively perform its mission.

Weak Regime of Preventive Measures

The regime of preventive measures imposed on financial institutions is generally weak, with several deficiencies identified in areas such as customer due diligence, reporting of suspicious transactions, and updating AML regulations.

Deficiencies in Preventive Measures

  • The regime of preventive measures imposed on financial institutions is generally weak.
  • Several deficiencies have been identified in areas such as:
    • Customer due diligence
    • Reporting of suspicious transactions
    • Updating AML regulations

Inadequate Sanctions for ML Offenders

Under Paraguayan legislation, ML is a misdemeanor that only carries a sanction of imprisonment not exceeding five years in prison or a fine. This restricts the authorities’ ability to apply effective sanctions to ML offenders.

Limited Sanctions

  • Under Paraguayan legislation, ML is a misdemeanor.
  • It only carries a sanction of imprisonment not exceeding five years in prison or a fine.
  • This restricts the authorities’ ability to apply effective sanctions to ML offenders.

Lack of Provisions for CFT

Although Paraguay is a Party to the UN International Convention for the Suppression of the Financing of Terrorism (SFT Convention), its legislation does not include provisions that criminalize CFT, and it does not have specific provisions that would allow freezing terrorist funds or assets designated pursuant to UN Security Council Resolutions.

Lack of Provisions

  • Paraguay is a Party to the UN International Convention for the Suppression of the Financing of Terrorism (SFT Convention).
  • Its legislation does not include provisions that criminalize CFT.
  • It does not have specific provisions that would allow freezing terrorist funds or assets designated pursuant to UN Security Council Resolutions.

Efforts to Strengthen UAF

The country has made significant efforts to strengthen the UAF since the appointment of a new director in August 2007, including hiring and training additional analysts, updating AML regulations, and improving its operational capacity.

Strengthening the UAF

  • The country has made significant efforts to strengthen the UAF.
  • This includes:
    • Hiring and training additional analysts
    • Updating AML regulations
    • Improving its operational capacity

Insufficient Budget for UAF

Despite these efforts, the budget allocated to the UAF is insufficient to meet the expenses of its operative equipment, personnel, and other necessary resources.

Insufficient Funding

  • Despite efforts to strengthen the UAF, its budget remains insufficient.
  • It does not cover the expenses of:
    • Operative equipment
    • Personnel
    • Other necessary resources.