Financial Crime World

Financial Action Task Force Report on Paraguay’s Anti-Money Laundering/Combating the Financing of Terrorism Measures

Overview

The Financial Action Task Force (FATF) has released a report highlighting significant gaps in Paraguay’s framework for combating Money Laundering/Financing of Terrorism (AML/CFT). The report emphasizes low awareness of ML/FT risks and recommends a comprehensive approach to strengthen the country’s efforts against money laundering and terrorism financing.

Key Findings

The FATF report identifies several key findings that highlight weaknesses in Paraguay’s AML/CFT framework:

  • Contraband trade: Substantial contraband trade along Paraguay’s borders with Argentina and Brazil facilitates Money Laundering (ML).
  • Ciudad del Este: This major transit point for narcotics trafficking, smuggling, and counterfeit goods is believed to facilitate much of the money laundering in Paraguay.
  • Corruption: Corruption at all levels in the public sector hinders combating ML and serious predicate offences.
  • Lack of clear evidence: Despite allegations that proceeds from illicit activities could be diverted to finance terrorist activities in the Middle East, FT activity in Paraguay has not been clearly established.

Weaknesses in the UAF

The report also identifies weaknesses in the Unidad de Análisis Financiero (Financial Analysis Unit) and its operational independence. The ML offense does not extend to an adequate range of predicate offenses, and FT is not yet criminalized.

Key Recommendations

To address these gaps and strengthen Paraguay’s efforts against money laundering and terrorism financing, the report recommends:

  1. Strengthening the UAF: Improve the legal framework and governance structure of the UAF.
  2. Enhancing preventive measures: Improve the regime of preventive measures imposed on financial institutions, including customer due diligence, reporting of suspicious transactions, wire transfers, internal control systems, regulation, supervision, training, and resources.
  3. Aligning ML offense with international standards: Enhance the money laundering offense under Article 196 of the Criminal Code to align with international standards.
  4. Increasing sanctions for ML offenses: Increase sanctions for ML offenses to make them effective, proportional, and dissuasive.
  5. Clarifying prior convictions: Clarify whether a prior conviction for the predicate offence is necessary when proving that property is the proceeds of crime.
  6. Expanding predicate offences: Expand the range of predicate offenses to enable more effective prosecution of ML cases.
  7. Criminalizing FT: Criminalize FT and provide specific provisions for freezing terrorist funds or assets designated by UN Security Council Resolutions.

Conclusion

The FATF report highlights significant weaknesses in Paraguay’s AML/CFT framework and recommends a comprehensive approach to address these gaps and strengthen the country’s efforts against money laundering and terrorism financing.