Paraguay Toughens Up Banking Laws to Combat Financial Crimes
The Paraguayan government has introduced new legislation, Law 5,787/16, aimed at strengthening banking laws to combat financial crimes such as money laundering. This move is designed to prevent illicit activities in the country’s financial system.
Key Amendments to Combat Financial Crimes
- Initial Vetting Process: The Paraguayan Central Bank (BCP) can reject applications for establishing banks and other financial institutions if it finds any unsuitability in the project or the profile of the directors, administrators, auditors, shareholders, or origin of capital funding.
- Transparency Requirements: Financial entities must disclose information about final beneficiaries of shareholders. The BCP can request this information up to the final beneficiary of a corporate entity shareholder.
Prohibited Activities and Roles
- Individuals with a history of intentional crimes, poor professional performance, or conflict of interest are prohibited from serving as president, director, manager, accountant, or auditor of a financial entity.
- Those who incur such infractions while in these roles must step down.
Liability and Sanctions
- The law holds the president and board of directors of financial entities liable for approving operations that conflict with applicable laws, failing to implement risk management policies, noncompliance with BCP instructions, failure to provide timely information, or failure to adopt measures needed to guarantee adequate supervision by an external auditor.
- The BCP can issue sanctions for such conduct.
Disclosure of Information
- Bank secrecy is lifted in specific circumstances, allowing the disclosure of information to authorities such as the Paraguayan Central Bank, judicial authorities, the Republic’s General Comptroller, and others in the exercise of their functions.
- This is done while preserving confidentiality.
These amendments aim to strengthen financial regulations and prevent financial crimes in Paraguay. The government hopes that these changes will help create a more transparent and secure banking system for its citizens.