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Banking Compliance Checklist in Paraguay: What You Need to Know

In December 2016, the Law of Modernization and Strengthening of the Norms that Regulate the Functioning of the Paraguayan Financial System (Law 5.787/16) was promulgated, introducing significant changes to the country’s banking regulations.

For financial institutions operating in Paraguay, it is essential to be aware of these new requirements to ensure compliance and avoid potential sanctions. Here are some key points to consider:

Initial Vetting

• The Paraguayan Central Bank (BCP) can reject applications to establish banks and other financial institutions if it is not satisfied with the suitability of the project, the profile of directors, administrators or auditors, and the origin of capital funds.

Transparency on Final Beneficiaries

• Financial entities must provide information regarding any shareholder, up to the final beneficiary of a corporate entity shareholder.

Prohibition on Serving in Key Roles

• Individuals convicted for intentional crimes, sanctioned by local or international financial regulators, or with conflicts of interest that could affect the proper functioning of the entity are prohibited from serving as president, director, manager, accountant or auditor of a financial institution.

Responsibility of President and Board of Directors

• The head of a financial institution and its board of directors must ensure that the institution:
  • Complies with applicable laws
  • Adopts efficient policies and procedures for risk management and corporate governance
  • Provides timely information to regulatory authorities
  • Responds to communications from regulators
  • Adopt measures to guarantee adequate supervision of external auditors

Lifting of Bank Secrecy

• The BCP can request information on financial transactions when:
  • Performing its legal faculties
  • In the context of judicial proceedings
  • For verification purposes by other government agencies, including:
    • General Comptroller’s Office
    • Taxation Subsecretariat
    • National Customs Direction
    • Attorney General’s Office
    • Public prosecutors

It is essential to note that this article provides general guidance only. Financial institutions operating in Paraguay should consult with legal experts to ensure compliance with these new regulations.