Financial Crime World

Paraguay Cracks Down on Brazilian Bank Over Money Laundering Scandal

Historic Fine Imposed on Banco Itaú

In a significant move, Paraguay’s Central Bank of Paraguay (Banco Central del Paraguay – BCP) has imposed a $9.64 million fine on Brazil’s Banco Itaú for violating anti-money laundering regulations in August 2020. This fine is the largest related to money laundering in Paraguayan history.

Background on the Fine

The bank allegedly failed to report suspicious transactions to the Secretariat for the Prevention of Money or Property Laundering (Secretaría de Prevención de Lavado de Dinero o Bienes – SEPRELED), thereby violating Article 19 of Paraguay’s Law No. 1015 concerning money laundering.

Systemic Failure

According to Diego Marcet, general director of SEPRELED’s legal department, the lack of adherence to anti-money laundering regulations was systemic in Banco Itaú.

Banco Itaú’s Troubled History

Banco Itaú has faced several scandals in recent years:

  • A $16.4 million worth of illegal transactions used for the payment of bribes in Brazil’s Operation Car Wash (Lava Jato) anti-corruption probe in October 2019.
  • The city of São Paolo fined Itaú $662 million for evading state taxes in November 2019.

Paraguay’s Efforts to Combat Money Laundering

Paraguay has been named as one of the countries with the highest risk of money laundering in Latin America. However, the country has taken steps to combat the problem:

  • Creating an anti-money laundering unit within the Attorney General’s Office in 2015.

International Cooperation

The investigation into Banco Itaú was conducted by Paraguayan authorities without the involvement of Brazilian authorities. This is unusual, as big banks in Latin America have often ignored anti-money laundering controls while profiting from illicit flows.

However, the fining of Banco Itaú may signal that such impunity is finally being challenged. The case highlights the importance of international cooperation in combating financial crimes and suggests that Paraguay’s efforts to combat money laundering are bearing fruit.