Financial Crimes Haunt Paraguay, Wreaking Havoc on Economy and Society
A New Report Sheds Light on the Consequences of Financial Crimes in Paraguay
A recent report by a Washington D.C.-based think tank has highlighted the far-reaching consequences of financial crimes in Paraguay, a country already grappling with high levels of violence and insecurity. The report emphasizes the complex and dynamic nature of financial crime threats in Latin America and the Caribbean.
Corruption: The Most Prevalent Financial Crime Affecting Paraguay
According to the study, corruption is the most prevalent financial crime affecting Paraguay, followed closely by money laundering, trade-based money laundering, and terrorism financing. Experts interviewed for the report estimated that corruption generates the largest source of illicit proceeds in the country, surpassing even drug trafficking and other forms of organized crime.
Channels Used to Move Illicit Proceeds Within Paraguay
The primary channels used to move illicit proceeds within Paraguay include:
- Financial Institutions: The use of financial institutions as a means to launder money is a significant concern.
- Real Estate: Real estate is often used to hide and disguise illicit proceeds.
- Bulk-Cash Smuggling: Bulk-cash smuggling is a method used to transport large amounts of cash, making it difficult to track.
- Trade-Based Money Laundering (TBML): TBML involves the use of trade transactions to launder money.
Implementation and Effectiveness of AML/CFT Laws
While some progress has been made in strengthening anti-money laundering and combating the financing of terrorism (AML/CFT) laws, implementation is often incomplete, and political will varies. The report’s findings are based on 250 expert interviews with government officials, civil society representatives, private sector actors, and international organizations.
Assessing the Effectiveness of Current National AML/CFT Efforts
Experts interviewed were asked to rate their country’s efforts on a scale from 1 (weak) to 5 (strong). The average score for Paraguay was a dismal 2.47/5, indicating that many experts believe current efforts are insufficient and that additional work is urgently needed.
Recommendations to Address Financial Crime Threats in Paraguay
The report makes several key recommendations to address the financial crime threats in Paraguay, including:
- U.S. Technical Assistance Programs: U.S. technical assistance programs should account for the fact that people who receive training will return to the same systemic challenges.
- U.S. Counter-Narcotic Responses: U.S. counter-narcotic responses need to recognize the presence of corruption in the environments in which they operate and implement mitigation measures.
- Courts Specialized in Financial Crimes: Countries should establish courts that only address financial crime, staffed by prosecutors/judges/attorneys/etc. trained in the relevant subject matter.
- FATF Mutual Evaluations: FATF mutual evaluations should take into consideration whether countries “weaponize” AML/CFT and anti-corruption laws against political opponents, non-profits, etc.
Conclusion
The report is part of a larger project by GFI that analyzes financial crimes in Latin America and the Caribbean. The other reports focus on extortion, cryptocurrencies, financial fraud, and private investment funds.