New Banking Regulations in Paraguay: Strengthening the Financial System
The Law on Modernization and Strengthening of Paraguayan Financial System Regulations (Law 5,787/16) has introduced significant changes to the country’s banking law. The new regulations aim to strengthen the financial system and prevent money laundering.
Key Provisions of the New Law
- Suitability of Bank Establishment: The Paraguayan Central Bank (BCP) has the power to reject applications for bank establishment or other financial institutions if it is not satisfied with the suitability of the project or the profile of the directors, administrators, auditors, shareholders, and origin of capital funding.
- Transparency Regarding Final Beneficiaries: Financial entities are required to provide transparency regarding final beneficiaries. The BCP may request information about any shareholder, up to the ultimate beneficiary of a corporate entity shareholder.
- Conflict of Interest Prohibition: Individuals who have been convicted of intentional crimes, sanctioned by local or international financial regulators for poor professional performance, or have a conflict of interest that could affect the entity’s proper functioning are prohibited from serving as president, director, manager, accountant, or auditor of a financial entity.
Liability and Confidentiality
- The president and board of directors of financial entities are liable for approving operations and agreements that conflict with applicable laws, failing to implement efficient policies and procedures for risk management and corporate governance, non-compliance with BCP instructions, and failure to provide timely information to the Supervisor of Banking (SB).
- Financial entities must maintain confidentiality when requested by authorized authorities, such as the BCP, judicial authorities, the General Comptroller, Taxation Under-secretariat, National Customs Office, Attorney General, public prosecutors, and the Secretariat on Prevention of Money and Asset Laundering.
Consequences of Non-Compliance
Banks in Paraguay must comply with these strict procedures to maintain their licenses and avoid sanctions. The law aims to strengthen the financial system and prevent money laundering, and banks that fail to comply risk losing their licenses or facing severe penalties.