Financial Crime World

Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Measures in Paraguay: A Review

Key Findings

The Financial Action Task Force (FATF) has evaluated the AML/CFT measures in Paraguay, highlighting several key findings:

  • Paraguay’s AML/CFT framework is inadequate, with low awareness of money laundering/financial terrorism (ML/FT) risks in both public and private sectors.
  • The country falls short of complying with most FATF Recommendations, and implementation is generally ineffective.
  • Significant contraband trade on borders with Argentina and Brazil facilitates ML in Paraguay.
  • Paraguay is a major transit point for narcotics trafficking, smuggling, and counterfeit goods destined for other South American countries.

Recommendations

To strengthen the AML/CFT framework in Paraguay, the following recommendations are made:

  1. Strengthen the UAF’s legal framework and governance structure: Ensure operational independence to effectively perform its mission.
  2. Improve resources and capacity: Enhance resources and capacity to effectively perform its mission.
  3. Enhance preventive measures on financial institutions: Improve customer due diligence, reporting of suspicious transactions, wire transfers, internal control systems, regulation and supervision by competent authorities, training, and resources.

The FATF evaluation also highlighted the following issues with Paraguay’s legal system:

  • The money laundering offense under Article 196 of the Criminal Code is not in line with the UN Vienna Convention and Palermo Convention.
  • ML is categorized as a misdemeanor, which only carries a sanction of imprisonment not exceeding five years in prison or a fine.

Additional Recommendations

To further strengthen the AML/CFT framework in Paraguay, the following additional recommendations are made:

  1. Clarify prior conviction for predicate offense: Clarify whether a prior conviction for the predicate offense is necessary when proving that property is the proceeds of crime.
  2. Broaden range of predicate offenses: Broaden the range of predicate offenses to restrict authorities’ ability to prosecute ML and grant legal assistance and extradition requests related to ML.