Financial Crime World

Paraguay Tightens Banking Compliance Procedures

The Paraguayan government has introduced significant changes to banking regulations through Law 5,787/16. The new law aims to strengthen the country’s financial system by implementing stricter requirements for banking professionals and increasing transparency.

Key Provisions of the New Law

  • Vetting of Potential Applicants: The Central Bank of Paraguay (BCP) is empowered to vet potential applicants for bank licenses and reject those that do not meet its standards.
  • Shareholder Transparency: The BCP may request information about shareholders, up to the final beneficiary, in order to ensure transparency.
  • Stricter Requirements for Banking Professionals: Those who have been convicted of intentional crimes or sanctioned by financial regulators for poor performance are prohibited from serving as president, director, manager, accountant or auditor of a financial entity.

Liability and Sanctions

  • President and Board Liability: Bank presidents and boards of directors may be held liable for failing to comply with regulations, including those related to risk management, corporate governance, and information disclosure.
  • Sanctions by the BCP: The BCP may issue sanctions against banks that fail to meet these requirements.

Increased Transparency

  • Bank Secrecy Lifted in Certain Circumstances: The law lifts bank secrecy in certain circumstances, allowing the BCP and other supervisory authorities to access customer information in order to exercise their legal powers.
  • Access to Customer Information by Judicial Authorities: Judicial authorities, the General Comptroller of the Republic, the Taxation Under-secretariat, the National Customs Office, the Attorney General’s office, public prosecutors, and the Secretariat on Prevention of Money and Asset Laundering (SEPRELAD) are also entitled to access customer information in specific cases.

Conclusion

These changes aim to improve transparency, accountability, and oversight in Paraguay’s banking sector. By strengthening the country’s financial system, the government can promote economic stability and growth.