Paraguay Strengthens Laws on Financial Crimes

As part of efforts to improve transparency and accountability in the financial sector, Paraguay has recently amended its banking laws. The new regulations aim to prevent and combat financial crimes such as money laundering and terrorism financing.

Key Amendments to Bank Law

The changes, introduced through Law 5.787/16, which came into effect on December 19, 2016, modify key aspects of the Bank law. Some of the main amendments include:

Initial Vetting for Establishment of Financial Entities

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

Transparency on Final Beneficiaries

• The BCP can request information about any shareholder of a financial entity, up to the final beneficiary of a corporate entity shareholder.

Prohibition on Serving in Key Roles for those with a Conviction Record or Poor Professional Performance

• Individuals who have been convicted of intentional crimes or sanctioned by local or international financial regulators may not serve as:
  • President
  • Director
  • Manager
  • Accountant
  • Auditor of a financial entity
• The Banking Superintendent (BS) of the BCP can also demand that individuals who incur in one of these infractions while serving in one of these roles step down from their position.

Responsibility of Presidents and Boards of Directors

• The new law makes presidents and boards of directors responsible for:
  • Approving operations or adopting agreements that conflict with applicable laws
  • Failing to implement efficient policies and procedures for risk management and corporate governance
  • Noncompliance with BCP guidance
  • Failure to provide timely information to the SB in the correct format

Lifting of Bank Secrecy

• The new law lifts bank secrecy when information is requested by:
  • The BCP
  • Judicial authorities
  • The Republic’s General Comptroller
  • The head of the Taxation Subsecretariat or the National Customs Direction
  • The Attorney General and public prosecutors
  • SEPRELAD (Secretariat on Prevention of Money and Assets Laundering)
  • Financial entities exchanging information among them

Enhancing Transparency and Accountability

These amendments aim to enhance transparency and accountability in the financial sector, prevent financial crimes, and protect the integrity of the Paraguayan financial system.