## _cr09235 ## Source details **Canonical URL:** [_cr09235](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09235.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09235.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09235.pdf.json) --- ### Preface — Scope, mission, team, outputs - Assessment based on the Forty Recommendations 2003 and the Nine Special Recommendations on Terrorist Financing 2001 of the Financial Action Task Force (FATF). - Prepared using the AML/CFT assessment Methodology 2004, as updated in February 2008. - On-site mission: June 24 to July 9, 2008; visits to Asunción and Ciudad del Este. - Assessment team composition: - IMF staff and three (3) experts; team leader Mr. A. Antonio Hyman-Bouchereau (LEG). - Other members listed: Mr. Francisco Figueroa (LEG); Mr. Mariano Federici; Mrs. Carolina Claver; Mr. André Cuisset. - Observer: Mr. Esteban Fullin (GAFISUD Secretariat). - Outputs: - Summary and analysis of Paraguay’s AML/CFT measures, levels of compliance with FATF 40+9 Recommendations (see Table 1 in source), and recommendations for strengthening the system (see Table 2 in source). - Report presented to and endorsed by GAFISUD on December 3, 2008. ### Executive summary — Key findings (major issues) - Overall assessment: - Significant gaps in Paraguay’s AML/CFT framework; low awareness of ML/FT risks in public and private sectors. - Country falls well short of complying with most FATF Recommendations; legal provisions often not effectively implemented. - No provisions allow freezing suspected terrorist assets in accordance with relevant UN Security Council Resolutions. - Crime, geography, and ML vulnerability: - Substantial contraband trade on borders with Argentina and Brazil facilitates money laundering. - Paraguay is at center of a regional transit zone (Bolivia, Brazil, Argentina); major transit point for narcotics trafficking, smuggling, counterfeit goods. - Paraguay is identified as the leading marijuana-producing country in South America. - Ciudad del Este described as the heart of Paraguay’s informal economy and facilitating much ML. - Convictions and enforcement: - At least fifteen (15) convictions for ML since 1997; six (6) confirmed and final rulings. - Implementation of ML offence since criminalization in 1996 has been modest. - Terrorist financing (FT) risk and legal gap: - No domestic FT criminalization despite Paraguay being a Party to the SFT Convention. - No specific provisions to freeze assets under UNSCR 1267 or UNSCR 1373. - Authorities unable to confirm incidence of FT; remittances to the Middle East reported but no definitive evidence of FT. - FIU and institutional capacity: - UAF (FIU) has inadequate legal framework, governance that inhibits operational independence, and insufficient resources. - ML offense does not extend to an adequate range of predicate offences and FT not criminalized. - Preventive regime weaknesses: - Deficiencies in CDD on beneficial owners, STR reporting, wire transfers, internal controls, supervision, training, and resources. - Informal MVTS and cross-border cash controls ineffective. ### Legal systems and institutional measures — ML/FT criminalization, sanctions, predicate offences - Money laundering offence under Article 196 of the Criminal Code (CC): - ML classified as a misdemeanor (punishable up to five (5) years imprisonment or a fine) under Article 196. - Article 196 text retained in full in source; includes aggravated ML (prison up to ten (10) years), negligent ML (up to two (2) years), and other elements. - Article 196 not fully aligned with UN Vienna Convention and Palermo Convention; gaps include explicit coverage of “conversion”, “transfer”, “acquisition”, “possession”, and broader laundering conducts. - Conflicting judicial practice on whether a prior conviction for the predicate offence is required to prove proceeds of crime. - Predicate offences under Article 196: - Coverage limited to crimes (punishable by more than five (5) years) except when committed by criminal organizations and select narcotics provisions. - In practice, predicates include trafficking in human beings; sexual exploitation of children; illicit trafficking in narcotics; illicit arms trafficking; murder; grievous bodily injury; kidnapping; hostage taking; robbery. - Law No. 3,440/08 (reform passed during mission) amends Article 196 to expand predicates and clarify autonomy of ML offence; amendments will not enter into force until mid-2009. - Sanctions and effectiveness: - Paragraphs 1–2 of Article 196: natural persons subject to six (6) months to five (5) years imprisonment or a fine. - Comparative regional context: most GAFISUD countries contemplate ML sanctions up to 15 years; Paraguay’s sanctions are at the lower end. - Six (6) confirmed final ML convictions: highest sanction imposed was three (3) years and two (2) months. - No criminal liability for legal persons; administrative sanctions available under Law 1,015/96 remain but not effectively applied to ML. - Mission recommendations (legal): - Amend CC to include conversion/transfer/acquisition/possession/assistance conducts; clarify no prior predicate conviction required; expand predicate offences; criminalize ancillary conduct (conspiracy/facilitation/counseling); make legal persons criminally liable; re-categorize ML as a crime; raise sanction ranges; permit concurrent imprisonment and fines. ### Confiscation, freezing and seizing of proceeds (R.3) — legal and practical gaps - Forfeiture framework: - Forfeiture (Comiso) set out in CC (Articles 86, 90, 94); “special forfeiture” and “extended special forfeiture” exist but have legal and practical limitations. - Provisional measures: Final Chapter of Law No. 1,015/96 remains in effect; Article 36 enables judges to attach/seize property, but law does not explicitly provide for freezing as required by UNSCRs. - Limitations: Article 86 not covering forfeiture of property of corresponding value except under special forfeiture; Article 36 silent on ex parte measures; legal basis for FIU powers to request information weak (SEPRELAD vs UAF delegation issues). - Operational constraints: - Registries: many registries are manual; only merchant’s registry, automobile registry and a portion of real estate registry uploaded electronically. - Inconsistencies: Real Estate Registry reports 1.5 million properties vs National Cadastre 2.4 million. - Trusts and company registries incomplete; bearer shares unregulated and pose ML risk. - Statistics on forfeiture limited: on seven (7) ML cases (fifteen (15) convictions) property forfeited in relation with eight (8) convictions; four (4) of those have final rulings. - Recommendations: - Amend CC to allow forfeiture of property of corresponding value; permit ex parte provisional measures; transfer explicit powers to FIU to request/obtain information; allow courts to void prejudicial actions; improve registries (informatization, facilities, lower costs, sanctions for non-registration); strengthen customs cross-border cash controls. ### Freezing terrorist assets (SR.III) — compliance gaps - No specific provisions to freeze assets of persons/entities designated under UNSCR 1267 or UNSCR 1373. - Authorities claim constitutional constraints on freezing; in practice seizure via judicial order in prosecution might be possible but unclear. - No written procedures or guidance for financial institutions on actions when matches to sanctions lists occur; circulation of UNSCR 1267 list exists but no binding bank procedures. - Recommendations: - Put in place legal framework for ex parte freezing, mechanisms to recognize foreign freezing actions/lists, dissemination procedures to financial sector, unfreezing and basic expenses procedures, protection of bona fide third parties, monitoring and sanctions, and judicial review procedures. ### Financial Intelligence Unit (UAF-SEPRELAD) — structure, STR processing, resources, outputs - Institutional status: - SEPRELAD established by Law 1,015/97; UAF operates within SEPRELAD as FIU. - SEPRELAD is a council of six (6) high-level members; meetings infrequent; UAF director has assumed many SEPRELAD functions in practice. - UAF lacks an approved official organizational chart and true autonomy; insufficient budget and inadequate premises and IT security. - STR processing and workflow: - STR definition: Article 19 of Law 1015 includes examples; de facto STRs received directly by UAF. - Submission: manual, paper format; STR forms standardized per Resolution No. 233 (10/11/2005). - Wire Transfer Reports (WTRs): WTRs must be sent monthly within the ten first days of the calendar month as consolidated summaries (no detailed IDs). - Processing phases: 7-phase process (Reception → Director Secretariat → Coordination → Financial analyst → Legal adviser → Director approval → Prosecutor). Phases 1,2,3,5,6,7 typically one to three days; Phase 4 (analysis) can range from minimum two (2) months to several months. - Resources and staffing: - Analysts increased from 3 to 11 since August 2007; core financial analysis relies on 3 analysts (most senior with five (5) years experience). - Many staff on six-month renewable contracts; remuneration less than 1,000 USD per month for analysts. - Budget constraints: permanent civil employee costs ~65 percent of 2007 budget. - STR outputs and effectiveness: - 90 Percent of STRs concern financial activities of legal entities. - UAF transmitted 26 cases to DECC (OAG); 11 (11) investigations opened (42.3 percent), 15 (15) did not develop into criminal investigations (57.7 percent). - Paraguay has evidence of fifteen (15) ML convictions across seven (7) cases; six (6) final confirmed rulings; nine (9) convictions on appeal. - Feedback loop weak: UAF receives little to no feedback on outcomes of analyses. - Typologies and risk analysis: none prepared by SEPRELAD; no systematic STR pattern analysis. - Regulations and sectoral resolutions: - SEPRELAD Resolutions include: No. 233 (10/11/2005); No. 312 (12/6/2006); No. 262/263/264/265/266 (11/07/2007); Res. No. 059/060/061/062/063 (03/13/2008) — covering stock broking, remittances, cross-border cash, gambling, AML policies. - Noted regulatory coverage gaps: investment societies, trust companies, administrators of mutual/pension funds, NGOs, foundations, persons in trading precious metals/stones/jewelry, works of art, stamps/coins. - International cooperation and Egmont: - UAF-SEPRELAD Egmont member since 1998; 23 MOUs signed with other FIUs; limited use of Egmont network in practice (UAF received 54 requests and sent 16 over a period; variable response times). - Mission recommendations (UAF): - Adopt new law clarifying UAF duties and operational autonomy; reconsider SEPRELAD/UAF structure. - Secure computerized STR submission system; equip UAF with analytical tools and adequate remuneration. - Strengthen investigative function under Law 1,015 and coordination with SENAD UIDF; improve coordination with police, SENAD, Customs, and OAG. - Establish monitoring/typologies, develop statistics, systematic use of Egmont, analyst training, prevention outreach, and move to secure premises. ### Preventive measures — Financial institutions (CDD, beneficial ownership, PEPs, wire transfers, recordkeeping) - Legal basis: - Law No. 1,015/97 provides AML preventive framework but many essential elements are in SEPRELAD resolutions (OEMs) rather than primary/secondary legislation. - Article 13 lists obligors; gaps exist versus FATF-listed financial institutions. - Customer Due Diligence (CDD): - Article 14 requires identification when establishing business relations; no explicit threshold or requirements for occasional transactions linked or wire transfers; no general legal obligation to identify beneficial owners in primary law. - Resolutions provide sector-specific CDD documentation lists (SIB Res. No. 312/233; SIS Res. No. 263; CNV Res. No. 59; INCOOP Res. No. 262; Money remitters Res. No. 60) with required documents for legal persons. - No explicit primary/secondary requirement to identify beneficial owner(s) across all sectors; SIS and Res. No. 60 include some beneficial owner elements but Res. No. 312 and Res. No. 59 silent. - No general requirement for ongoing due diligence in primary law; resolutions require customer profiling and some monitoring but do not fully meet FATF essential criteria. - Politically Exposed Persons (PEPs): - Resolutions (SIB/CNV/SIS/INCOOP) include PEP definitions and require senior management approval and measures to establish source of funds/wealth (varies by sector); only Res. No. 59 extends to domestic PEPs. - Gaps: inconsistent requirements to establish source of wealth; INCOOP lacks ongoing monitoring obligation. - Wire transfers and SR.VII: - Banks and exchange houses required to maintain registries of funds transfers with originator and beneficiary information (outgoing and incoming detailed lists included). - Shortfalls: handling batched and domestic transfers, ensuring intermediary/beneficiary FI in chain carry full originator info, risk-based procedures for transfers without complete originator info. - Money remitters: Res. No. 60 requires registration of transactions equal or exceeding US$10,000; money remitters are not directly supervised as distinct entities. - Record-keeping: - Article 18 requires retention for at least five (5) years from transaction completion or account closure; not explicitly requiring retention of identification data and account files for five (5) years after business relationship end in primary law. - Monitoring, unusual transactions and STRs: - Article 19 requires reporting of suspicious transactions regardless of amount but Article 19 does not explicitly designate the FIU as STR recipient; in practice reporting to SEPRELAD (UAF). - Low STR volume outside banks; insurance, securities and cooperatives report few or none. - No legal reporting obligation for TF-related suspicious transactions because FT not criminalized. - Internal controls, compliance officers, audit and training: - Resolutions require compliance officers at senior management level, internal audit (semiannual), external audit and training programs but lack detail on independence, access to information, resourcing, and training content. - Supervisory and sanctioning regime: - Supervisors: SIB, SIS, CNV, INCOOP supervise respective sectors. - In practice, SIB only supervisory authority actively conducting AML supervision; CNV and INCOOP limited or no AML inspection activity; SIS limited. - No evidence of sanctions imposed by supervisors for AML non-compliance. - Recommendations (financial sector): - Enact primary/secondary legislation to fill gaps: prohibit anonymous accounts; mandate CDD timing and scope (including occasional transactions, wire transfers, when suspicion arises, and verification refresh); require beneficial ownership identification and ongoing due diligence; require enhanced measures for higher risk categories and PEPs; strengthen wire transfer rules; require record retention and access; strengthen supervisory powers, inspection frequency and sanctioning regimes; require risk assessments and group-level policies; designate supervisor for money remitters and MVTS; address payable-through/sub-agency gaps (Western Union sub-agents). ### Designated Non-Financial Businesses and Professions (DNFBPs) and other NFBPs - Coverage under Article 13, Law 1,015/97: - Gambling Establishments (paragraph j), Real Estate Agents (paragraph k), Pawn shops (paragraph m), Dealers in Precious Stones and Metals (paragraph n). - Lawyers, notaries, other independent legal professionals and accountants are not covered; no separate Trust and Company Service Providers category. - Implementation and supervisory gaps: - SEPRELAD Resolutions issued: No. 62 (gambling), No. 264/266 (real estate), No. 265/267 (pawnbrokers); no SEPRELAD regulation issued for Dealers in Precious Metals and Stones. - Implementation status: requirements not implemented in practice by gambling establishments, real estate agents, dealers in precious metals and stones, and pawnbrokers. - CONAJZAR (National Gaming Commission) not effectively supervising casinos; only five (5) gambling establishments authorized; largest casino in Asunción ~3000 to 4000 people per week. - DNFBP CDD/STR/audit/training issues: - CDD, beneficial ownership, timing, ongoing due diligence, PEPs, non-face-to-face and new technology measures largely incomplete or absent. - No STRs reported from DNFBPs to date. - Internal audit and compliance functions required by resolutions but not effectively implemented; compliance officers’ independence and access not guaranteed. - Pawnbrokers: - Res. No. 265/267 issued; requirements not implemented; significant gaps across Recommendations 5, 6, 8–11, 13–15, 17 and 21. - Recommendations for DNFBPs: - Expand Article 13 coverage to include lawyers/notaries/accountants when performing FATF-specified activities and Trust and Company Service Providers. - Issue and enforce SEPRELAD regulations for Dealers in Precious Metals and Stones. - Require full CDD, beneficial ownership identification, ongoing monitoring, PEPs attention, recordkeeping exceeding five (5) years upon authority request, STR protection and tipping-off rules, independent audit functions, and AML training. - Assign supervisory bodies and sanctioning regimes (e.g., empower CONAJZAR and appropriate authorities), include Internet gambling, prevent criminals/associates from being beneficial owners. ### Legal persons, trusts, registries — transparency and access to beneficial ownership (R.33 & R.34) - National Direction of Public Registries: - Registries manual; records only from 1986 onwards for legal persons; trusts registries record only trust agreements involving transfer of ownership rights of property subject to registration. - No laws requiring adequate transparency concerning beneficial ownership and control of legal persons or trusts. - Bearer shares permitted; no measures to prevent misuse. - No sanctions for failure to update ownership records; many corporate stock ledgers lost. - Mission recommendations: - Require transparency on ownership and control of legal persons and trusts. - Ensure competent authorities can obtain timely, adequate, accurate and current beneficial ownership/control information. - Prevent misuse of bearer shares. - Allocate resources to National Direction of Public Registries: speed up informatization, improve facilities, reduce registration costs, increase public awareness, amend laws to sanction registration failures. - Compliance ratings: - R.33: NC - R.34: R.34 NC ### Non-profit organisations (SR.VIII) - Findings: - Paraguay has not reviewed adequacy of domestic laws/regulations relating to NPOs. - No outreach to NPO sector to protect it from terrorist financing abuse. - Authorities unable to provide information required to assess supervision/monitoring of NPOs accounting for significant resources or international activities. - Recommendations: - Conduct domestic reviews of NPO sector, identify at-risk NPOs, undertake outreach, require registration/licensing, require maintenance of records for at least five (5) years, enable investigative access and inter-agency coordination, and adopt sanctions for violations. - Compliance rating: - SR.VIII — NC ### Law enforcement, investigations, special techniques, resources (R.27–28, 30) - Institutional roles: - SENAD (Law No. 1,340/88) with Financial Crimes Investigation Unit (FCIU) / UIDF; DECC (OAG) Directorate against Economic Crimes and Corruption: 11 prosecutors. - National Police DEFC: 125 officers; Department of Economic Crime Investigation (Law No. 222/93). - Special investigative techniques: - Controlled deliveries and undercover operations authorized under Law No. 1,881/2002 but limited to drug trafficking; no broad legal framework for special techniques for ML/FT. - Lack of systematic witness protection, limited use of interception (Article 200 CPC exceptional). - Resources and integrity: - SENAD FCIU: 6 officers; SENAD budget $1.5 million with $150,000 allocated to counter-narcotics. - Prosecutorial capacity limited but improved: three financial crimes prosecutors added in 2007 (total 11). - Low police salaries (approx. USD 200.00 to USD 800.00 per month cited); perceived vulnerability to corruption. - Statistics and effectiveness: - No centralized national statistics for ML cases; limited data consolidation. - Recommendations: - Increase budgets of SENAD and National Police specialized units; develop training on operational investigations and inter-agency coordination; develop specialized training for judges on ML evidence and autonomy of offence; consider creating permanent interagency task force and specialized financial criminal jurisdiction. - Compliance ratings: - R.27: NC - R.28: C - R.30: NC (insufficient resources, integrity and training) ### Cross-border cash controls and SR.IX - Legal framework: - SEPRELAD Resolution No. 61 (03/11/2008) obliges declaration of amounts exceeding 10,000 USD or equivalent in negotiable bearer instruments. - Implementation gaps: - Forms not applied by Customs; declaration not collected/checked in many cases. - No controls at Ciudad del Este land bridge; airports and land ports provide no effective cross-border cash control. - No criminal penalty specified for false declarations in Resolution; Resolution silent on retention period. - No centralized database of declarations; no statistics on cross-border cash movements. - Recommendations: - Apply effective control on cross-border cash transport; coordinate SEPRELAD with Customs and Police to implement Resolution No. 61; develop procedures to detect/stop/restrain/seize cross-border cash and bearer negotiable instruments. - Compliance rating: - SR.IX — NC ### Mutual legal assistance, extradition, international cooperation (R.36–40, SR.V) - Channels: - OAG is Central Authority for MLA within scope of multilateral conventions and certain bilateral treaties; MFA Central Authority for requests outside multilateral instruments. - DIA (OAG) processes MLA requests; letters received by OAG processed more promptly than by MFA. - Capabilities and limits: - Paraguayan law permits broad MLA measures (production, search/seizure, depositions, confiscation) but practical effectiveness difficult to assess due to lack of compiled statistics. - Dual criminality applied flexibly; ML extraditable (Article 147 CPP); FT not criminalized—limits MLA on FT. - No specific provision for applying provisional measures at foreign request in absence of treaty; no asset sharing mechanism or asset forfeiture fund. - FIU-to-FIU cooperation: - UAF-SEPRELAD has 23 MOUs; uses Egmont secure web; limited practical use (UAF received 54 requests and sent 16 in specified period). - Recommendations: - Compile and maintain MLA/extradition statistics; consider asset forfeiture fund and coordination arrangements; establish mechanisms for provisional measures at foreign authority request; speed extradition processes and consider simplified procedures. - Compliance ratings: - R.36: PC - R.37: LC/PC (assessment sections differ) - R.38: NC - R.39: PC - R.40: PC - SR.V: NC ### Overall ratings and priority recommendations (summary) - Recurring assessment ratings (selection): - R.1: PC; R.2: PC; R.3: PC; R.4: PC; R.5: NC; R.6: NC; R.7: NC; R.8: PC; R.9: NA; R.10: PC; R.11: NC; R.12: NC; R.13: PC; R.14: C; R.15: NC; R.16: NC; R.17: NC; R.18: LC; R.19: NC; R.20: NC; R.21: NC; R.22: NC; R.23: NC; R.24: NC; R.25: NC; R.26: PC; R.27: NC; R.28: C; R.29: NC; R.30: NC; R.31: NC; R.32: NC; R.33: NC; R.34: NC; R.35: PC; SR.I: NC; SR.II: NC; SR.III: NC; SR.IV: NC; SR.V: NC; SR.VI: NC; SR.VII: NC; SR.VIII: NC; SR.IX: NC. - Highest-priority actions recommended by mission (selected, exact formulations preserved where in source): - Amend CC (Article 196) to: clarify autonomy of ML offence (no prior predicate conviction needed), expand predicate offences, criminalize FT, criminalize conversion/transfer/acquisition/possession/assistance, criminal liability for legal persons, re-categorize ML as a crime and raise sanctions. - Put in place legal framework for freezing terrorist assets ex parte and without delay; adopt procedures for UNSCR 1267 and 1373 implementation; provide guidance to financial institutions on matches and unfreezing. - Strengthen UAF-SEPRELAD operational autonomy, resources, IT, analyst capacity, STR feedback, typologies and systematic Egmont use. - Expand AML/CFT coverage and supervisory capacity: designate and resource supervisors (SIB, SIS, CNV, INCOOP) to conduct frequent AML inspections, impose effective sanctions, and supervise money remitters and MVTS; impose CDD/beneficial ownership/ongoing monitoring requirements in law/regulation; remedy wire transfer, recordkeeping and originator information gaps. - Improve registries and transparency: speed informatization, improve records facilities, reduce registration costs, require beneficial ownership transparency, regulate bearer shares. - Strengthen law enforcement: increase budgets for SENAD/Police specialized units, implement special investigative techniques for ML beyond drug trafficking, enhance prosecutor/judge training, consider interagency task force and specialized jurisdiction. - Improve cross-border controls: implement Resolution No. 61 with Customs/Police cooperation for cash courier controls; enhance border controls at Ciudad del Este and other crossings. - Address DNFBP gaps: include lawyers/notaries/accountants/TCSPs where relevant, issue and enforce SEPRELAD regulations, require independent audit/compliance/training, and assign supervisory bodies with sanctioning powers. - Conduct NPO sector review and outreach; implement measures of SR.VIII. - Compile and maintain comprehensive AML/CFT statistics (STRs, inspections, sanctions, prosecutions, seizures/confiscations, MLA/extradition requests). *Italic: Source: _cr09235, IMF staff report chapter/section, https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09235.pdf* ### Preface ................................................................................................................ ### _cr09235 - Preface ### Scope and Methodology - Assessment based on the Forty Recommendations 2003 and the Nine Special Recommendations on Terrorist Financing 2001 of the Financial Action Task Force (FATF). - Prepared using the AML/CFT assessment Methodology 2004, as updated in February 2008. - Mission considered materials supplied by the authorities, information obtained on site during the mission from June 24 to July 9, 2008, and other verifiable information subsequently provided by the authorities. - Assessment conducted in the current third round of mutual evaluations, with the amendments introduced to the assessment methodology in 2007 emphasizing capacity, implementation and effectiveness distinctively. ### Mission, Coverage and Activities - On-site visits and meetings held in Asunción and Ciudad del Este. - The assessors reviewed: - Institutional framework. - Relevant AML/CFT laws, regulations, guidelines and other requirements. - Regulatory and other systems in place to deter and punish money laundering (ML) and the financing of terrorism (FT) through financial institutions and Designated Non-Financial Businesses and Professions (DNFBP). - Capacity, implementation, and effectiveness of all these systems. - A list of bodies met during the mission is set out in Annex 2 to the detailed assessment report. ### Assessment Team - Team composed of staff of the International Monetary Fund (IMF) and three (3) experts acting under the supervision of the IMF. - Evaluation team members: - Mr. A. Antonio Hyman-Bouchereau (LEG, team leader) - Mr. Francisco Figueroa (LEG) - Mr. Mariano Federici, IMF AML/CFT Technical Regional Coordinator - Mrs. Carolina Claver, National Securities Commission of Argentina - Mr. André Cuisset, International Consultant based in Mexico - Participation as observer: - Mr. Esteban Fullin, from the Financial Action Task Force of South America (GAFISUD) Secretariat, participated as an observer during the assessment visit by prior agreement with the authorities. ### Outputs and Institutional Follow-up - The report: - Provides a summary of the AML/CFT measures in place in Paraguay at the time of the mission or shortly thereafter. - Describes and analyzes those measures. - Sets out Paraguay’s levels of compliance with the FATF 40+9 Recommendations (see Table 1). - Provides recommendations on how certain aspects of the system could be strengthened (see Table 2). - The report was presented to the GAFISUD and endorsed by this organization on its plenary meeting of December 3, 2008. ### Acknowledgements - The assessors expressed gratitude to the Paraguayan authorities for their cooperation and hospitality extended to the team throughout the mission. *Source: _cr09235 - Preface, https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09235.pdf* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Key Findings - 1. There are significant gaps in Paraguay’s AML/CFT framework and the level of awareness of ML/FT risks is low in both the public and private sectors. The country falls well short of complying with most of the FATF Recommendations and, where legal provisions exist, implementation is generally not effective. There are also no provisions that would allow the authorities to freeze suspected terrorist assets in accordance with the relevant UN Security Council Resolutions. - 2. The substantial contraband trade that occurs on the borders shared with Argentina and Brazil facilitates money laundering in Paraguay. Paraguay is located at the center of an important regional transit zone flanked by Bolivia, Brazil and Argentina. Paraguay is considered to be a major transit point for narcotics trafficking, smuggling, and counterfeit goods destined for other countries in South America. Paraguay is also the leading marijuana-producing country in South America. These crimes, along with corruption of local officials, appear to be the main offences generating earnings that can potentially be laundered in the country. Ciudad del Este, on Paraguay’s border with Brazil and Argentina, represents the heart of Paraguay’s informal economy and is believed to facilitate much of the money laundering taking place in Paraguay. - 3. Achievements in the implementation of Paraguay’s AML framework remain modest since the criminalization of the ML offence in 1996. Although relevant statistics are not routinely kept or updated, the mission could confirm that at least 15 convictions for ML (with only six confirmed and final rulings) have been achieved since 1997. While the number of convictions obtained is respectable relative to other countries in the region, the number remains low considering the perceived level of criminal conduct. Corruption at all levels in the public sector is currently a serious obstacle to combating ML and serious predicate offences, and poses a major threat to the country’s development. - 4. Paraguay has not been confronted with terrorism at the national level, as there are no local subversive organizations active in the country. Nevertheless, given the presence of organized criminal groups operating at Paraguay’s border with Brazil and Argentina, there have been allegations that proceeds from the various forms of offences perpetrated in this area could possibly be diverted to finance terrorist activities in the Middle East. Although the authorities confirmed that significant amounts of money originating at Paraguay’s border with Brazil and Argentina are regularly sent to the Middle East and elsewhere both through wire transfers and informal means, they could not confirm without reservations the incidence of FT in Paraguay. Although FT activity at Paraguay’s border with Brazil and Argentina has not been clearly established, the combination of illicit activity in the area and weak law enforcement is a cause of concern and should be given priority attention by the authorities. - 5. The UAF has an inadequate legal framework and a governance structure that inhibits its operational independence. The UAF also lacks sufficient resources to effectively perform its mission. The ML offense does not extend to an adequate range of predicate offenses and FT is not yet criminalized. - 6. The regime of preventive measures imposed on financial institutions is generally weak. The mission identified a number of deficiencies within the regime, notably in the areas of customer due diligence on beneficial owners, reporting of suspicious transactions, wire transfers, internal control systems, regulation and supervision by competent authorities, training, and resources. ### Legal Systems and Related Institutional Measures - 7. The money laundering offence under Article 196 of the Criminal Code (CC) is not in line with the UN Vienna Convention (Articles 3.1(b) & (c)) and the Palermo Convention. In addition, under Paraguayan legislation, ML is a misdemeanor (as opposed to a crime), which only carries a sanction of imprisonment not exceeding five years in prison or a fine. The categorization of ML as a misdemeanor, together with limited resources and capacity across all relevant government agencies, is a major factor that prevents authorities from applying effective, proportional and dissuasive sanctions to ML offenders. The lack of clarity as to whether a prior conviction for the predicate offence is necessary when proving that property is the proceeds of crime represents an additional obstacle to the effective prosecution of ML offences. Moreover, the narrow range of predicate offences restricts the authorities’ ability to prosecute ML and to grant legal assistance and extradition requests related to ML to other countries. - 8. Although Paraguay is a Party to the UN International Convention for the Suppression of the Financing of Terrorism (the SFT Convention), its legislation does not include provisions that criminalize FT. Paraguay does not have specific provisions that would allow freezing terrorist funds or other assets of persons and legal entities designated pursuant to UN Security Council Resolution No. 1,267 (1999) (UNSCR 1267) or of persons and legal entities designated in the context of UN Security Council Resolution No. 1,373 (2001) (UNSCR 1,373). - 9. In recent times, the country has made significant efforts to strengthen the UAF. The UAF was established in 1997 within the Money Laundering Prevention Secretariat (Secretaría de Prevención de Lavado de Dinero o Bienes - SEPRELAD) of the Ministry of Industry and Commerce (MIC), although it started its operations only from 2004. The organizational structure of the SEPRELAD, which is comprised of high-level officials and chaired by the Minister of Industry and Commerce, hinders the efficacy of this Secretariat to carry out its main function of ensuring the implementation of Law No. 1,015/97 (the AML Law). In practice, the UAF has assumed all of the functions and duties attributed by Law No. 1,015/97 to the SEPRELAD, despite the inadequacy of its financial and human resources. Since the appointment of a new UAF Director in August 2007, significant efforts have been carried out to strengthen the UAF and overcome the legacy of weak and erratic leadership that has beleaguered it since it started operations. Since the appointment of the new director, UAF has adopted a policy of reinforcement of the operational capacity through the hiring and training of additional analysts, and the updating of the AML regulation. - 10. The budget allocated to the UAF is insufficient to meet the expense of its operative equipment, particularly in database processing, and to assure adequate salaries to its qualified employees. More than half of the suspicions transactions reports’ analyses which the UAF transmits to the Office of the Attorney General (OAG), do not derive into a criminal investigation. Only a small number of the criminal convictions on ML to date have resulted from financial intelligence provided through the UAF. Paraguay should re-examine the AML legislation with regard to the SEPRELAD, and take measures to ensure the UAF has true autonomy and to grant it the necessary resources to carry out its operations effectively. ### Preventive Measures — Financial Institutions - 11. The AML regime in Paraguay provides the basic legal and regulatory framework for preventing money laundering from taking place within the financial sector. However, this framework needs further strengthening in a number of areas. Terrorist financing has not been criminalized in Paraguay. - 12. The AML law needs to be amended to expand the range of reporting entities. Although the SEPRELAD has taken the necessary measures to strengthen the regime, by issuing sector specific resolutions, with respect to customer identification and due diligence, these require further refinement to adapt them to the activities of each sector, particularly in areas like PEPs, beneficial owners, wire transfers, money remitters, internal control systems, internal audit function, designation of compliance officers, training, and other related obligations. - 13. The volume of suspicious transaction reports is low and this might be directly related to inconsistencies in the interpretation of resolutions covering these aspects, coupled with the lack of effective supervision through the sector. Currently, the majority of the suspicious transaction reports are received from banks and few from insurance companies. Additional guidance and clarity is necessary to provide the financial institutions with sufficient information on what they are expected to report when there are suspicions of transactions and/or customers linked to money laundering. - 14. Additional resources are also needed throughout all supervisory authorities, including funding, personnel, and technology. This lack of resources has negatively impacted the level of supervision in sectors like insurance, securities, and cooperatives; training capacity for all supervisors and financial institutions, and sanctions for noncompliance, given that in some sectors AML supervision is not taking place. - 15. The authorities have not taken the initiative to address the issue of informal money or value transfer systems. Based on anecdotal evidence, these informal systems seem to be operating in Paraguay. ### Preventive Measures — Designated Non-Financial Businesses and Professions (DNFBPs) - 16. Law No. 1,015/97 should be amended to extend the list of reporting entities as it is contemplated in the Methodology for Assessing Compliance with the FATF 49 Recommendations. Not all categories of DNFBP envisaged by the FATF are considered as reporting entities under Article 13, Law No. 1,015/97. Lawyers, notaries, other independent legal professionals and accountants are not covered by Law No. 1,015/97. There is no separate category of business dealing with Trust and Company Services. Trust and company formation services are offered by lawyers. They are not required to submit STRs and are not subject to other AML/CFT measures. - 17. There is limited indication that the currently covered DNFBPs are in fact implementing preventive measures. No systems exist for monitoring and ensuring compliance of DNFBPs with AML/CFT requirements and little training has been provided to DNFBPs. No STRs have been submitted by DNFBPs. ### Legal Persons and Arrangements & Non-Profit Organizations - 18. Legal entities have legal status from the moment they are entered in the National Direction of Public Registries is administratively dependant of the Supreme Court of Justice. Registries are manual and only record information from 1986 onwards (i.e. from five years after the creation the National Direction of Public Registries). Prior to the creation of the National Direction of Public Registries, records were registered with the courts. While some of these records have been recovered from the courts, the vast majority of them have been reported lost. Moreover, there are no laws requiring adequate transparency concerning the beneficial ownership of legal persons. The mission was unable to obtain precise information on the number of registered corporations or non-profit organizations since it is still being maintained manually. - 19. There are no measures in place to ensure that bearer shares are not misused for money laundering. The laws do not require adequate transparency concerning the beneficial ownership and control of legal persons issuing bearer shares and competent authorities are unable to obtain or have access in a timely fashion to adequate, accurate and current information on their beneficial ownership and control. - 20. The National Direction of Public Registries records only those trust agreements involving the transfer of ownership rights of property subject to registration. As a result, trust agreements involving any other type of property are not subject to registration requirements. - 21. Paraguay has not reviewed the adequacy of domestic laws and regulations that relate to nonprofit organizations, nor has it used available sources of information to undertake domestic reviews of, nor has the capacity to obtain timely information on the activities, size and other relevant features of its non-profit sectors for the purpose of identifying the features and types of NPOs that are at risk of being misused for terrorist financing by virtue of their activities or characteristics. ### National and International Co-operation - 22. There is an extremely narrow level of cooperation and coordination among law enforcement authorities which significantly affects the effective detection and pursuit of serious offences, particularly those committed by organized crime, such as drug trafficking offences. Given the high levels of drug production and trafficking, trafficking in persons, smuggling and suspected arms trafficking, the lack of adequate controls at the borders is of significant concern. While competent authorities in Paraguay have some legal authority to identify and trace property that is, or may become, subject to forfeiture, the poor conditions of the national registries make it extremely difficult for them to obtain adequate, accurate and current information of a person’s property in a timely fashion. - 23. Foreign authorities may request legal assistance on criminal matters either through the MFA or the OAG. Letters of request may be received at the MFA or at the OAG (Article 13.5 of Law No. 1,562/00 assigns the OAG a role in the promotion of international cooperation against organized crime). - 24. The OAG is the Central Authority for letters of request formulated in the context of the multilateral conventions and bilateral treaties of which Paraguay is a party, while the MFA is the Central Authority for all requests outside the context of international instruments. Letters of request received by the OAG are processed more promptly than through the MFA, which can take several months. - 25. While the OAG appears to have the means a its disposal that would allow it to expedite the MLA process, the effectiveness of the measures and mechanisms in place for international cooperation are difficult to assess due to the limited information available. There may be delays when dealing with requests that are not transmitted directly to the OAG but the lack of systematic compilation of data and statistics on all incoming and outgoing requests prevents the mission to form a comprehensive view on the use of mutual legal assistance. - 26. In any event, given the limitations of the ML offence together with the absence of a FT offense, the possibility of providing both MLA and extradition in relation to ML or FT appear rather limited. ### Other Issues - 27. Competent authorities are not adequately resourced to address AML/CFT issues. Competent authorities do not have an adequate structure and sufficient technical staff and other resources for full AML/CFT supervision across all sectors. The UAF does not have sufficient funding and staff for undertaking its functions and this may lead to inadequate attention to AML/CFT issues. Statistics on AML inspections conducted, and on the sanctions applied, on STRs, prosecutions for money laundering, as well as related seizure and confiscation data is not comprehensive or consistently kept, which makes the assessment of the effectiveness of these regimes difficult. The competent authorities do not appear to use the limited information that is available to review the effectiveness and efficiency of systems for combating money laundering. ### 1. GENERAL — 1.1. General Information on Paraguay - 28. Paraguay occupies a strategic position at the centre of South America. The Republic of Paraguay is a landlocked country lying on both banks of the Paraguay River, bordering Argentina to the south and southwest, Brazil to the east and northeast, and Bolivia to the northwest. The country's total area is 406,752 km²; the Paraguay River divides it into two regions with very different characteristics. The Western Region or Chaco presents a flat topography in almost its entirety, its surface represents more than 60 percent of the national territory. The Eastern Region, covering an area of 159,827 km², is inhabited by around 98 percent of the population. The population of Paraguay amounts to 5,163,198 inhabitants, of which 2,928,438 (56.7 percent) reside in the urban areas, while and 2,234,761 (43.3 percent) reside in rural areas. Two-thirds of the population of is concentrated in the city of Asunción. - 29. Politically and administratively the country is divided into 17 departments, themselves divided into districts, which in turn are divided into municipalities and rural districts, which enjoy political, administrative and rule-making autonomy for the management of their interests, and self-sufficiency in the collection and investment of its resources. The city of Asuncion is the capital of the Republic and seat of the branches of government. It is a Municipality, and is independent of any department. - 30. The 1992 Constitution establishes a presidential government system, with three independent branches: the Executive, the Legislative and the Judiciary. The Executive Power is exercised by the President of the Republic, which can be substituted with all its powers by the Vice-President. Both are democratically elected by popular vote to serve five-year term and cannot be reappointed to their posts. The President heads the Executive branch and is the chief of staff and commander of the armed forces. The meeting of all ministers, convened by the President is called the Council of Ministers. The Council of Ministers aims to coordinate the executive tasks boost the government's policy and take collective decisions. The government of each department is exercised by a governor and a Departmental Board, elected by direct vote of citizens living in the respective departments, in elections coinciding with general elections, and last five years in office. The governor represents the executive branch in implementing national policy. The government of Municipalities is headed by a mayor and a Municipal Board, which are popularly elected. - 31. The 2008 Paraguayan general election was held in Paraguay on April 20, 2008. The presidential election was won by opposition candidate Fernando Lugo of the Patriotic Alliance for Change, who defeated Blanca Ovelar of the long-ruling Colorado Party. The new government assumed its functions on August 15, 2008. - 32. The Legislative Power is exercised by the Congress, composed of a Senate (45 members) and a Chamber of Deputies (80 members); members are elected by popular vote to serve five –year terms. *Source: _cr09235 - EXECUTIVE SUMMARY* ### 33. The Judiciary branch is headed by the Supreme Court which is composed of nine members ### _cr09235 - 33. The Judiciary branch is headed by the Supreme Court which is composed of nine members ### Judiciary - The Judiciary branch is headed by the Supreme Court which is composed of nine members and by courts established by law. - The Supreme Court is the highest court of the Republic of Paraguay. - The Senate, in agreement with the President, appoints the nine members (ministers) based on lists submitted by the Council of the Magistracy, after selection based on suitability, with consideration of merit and qualifications. ### Economy — structure, performance, and governance - Structure and informal sector - Paraguay’s economy is fundamentally agrarian, with over 40 percent of the population living in rural areas according to official statistics. - Agriculture and agribusiness represent about 40 percent of output and employment and account for almost all registered exports. - The informal sector traditionally forms an important part of the Paraguayan economy; unregistered individual workers and vendors are prominent, especially in informal import and re-export of goods (electric appliances, cigarettes, liquor). - Paraguay is known as a conduit for counterfeit branded goods destined for other countries in South America; a significant number of these goods are counterfeit. - Since 2003 the Paraguayan government has taken measures to tackle illicit commerce and trade in the informal economy and to develop strategies to implement a formal, diversified economy. - Macroeconomic performance (selected indicators and figures) - Real GDP growth averaged 3.8 percent for the 2004-2006 periods. - GDP growth was 6.4 percent in 2007. - GDP per capita improvement in 2007 was 4.5 percent. - 2007 GDP is equaled USD 9.208.953.000,00. - Inflation during 2007 was 6.4 percent, 12.5 percent lower than the result observed in 2006. - Per capita GDP in 2007 equaled USD 1.546,00. - The unemployment rate was 6.7 percent for 2006. - Paraguay ranks 95th among 155 countries in the Human Development Index (United Nations Development Program's Human Development Report 2007/2008, compiled on the basis of 2005 data and published on November 27, 2007). - Fiscal and external sector - In 2007, the central government ended the fiscal year with an accumulated surplus of PYG 592 billion representing approximately 1Percent of 2007 (GDP). - Fiscal surpluses in recent years: PYG 357,147 million in 2005 and PYG 264,412 million in 2006. - Increases in revenue attributed to: - Income Tax: PYG 724,052 million (11.5 Percent) - Non-Income Tax: PYG 531,852 million (16.3 Percent) - Capital Gains taxes: PYG 4,676 million ( 9.2 percent) - Running costs increased by PYG 826,043 (11.6 percent). - Capital Expenditure increased by PYG 106,128 million (4.8 percent). - In late 2007, terms of trade recorded improvements of 1.4 percent in year terms. - Merchandise trade in 2007 recorded a deficit balance of $ 3.124,2 million, lower than the 6.7 percent deficit seen in 2006 which reached USD 3.347,9 million. - Regional and local concentrations - Ciudad del Este (third biggest city) with over 700,000 inhabitants: - Generates about 60 percent of Paraguay's GDP. - Is the third largest free-tax commerce zone in the world, after Miami and Hong Kong. - Heavily reliant on Brazilian economy: 95 percent of Paraguay's share of energy from the Itaipú Dam is sold to Brazil. - Daily cross-border purchases by Brazilians (mostly electronics) are significant. - Smuggling is a major occupation; some estimates put the value of this black market at five times the national economy. - Governance indicators and corruption - World Bank governance indicators (Score -2.5 to +2.5) - Voice and Accountability: 2005 -0.40, 2006 -0.40, 2007 -0.37 - Political Stability: 2005 -0.52, 2006 -0.60, 2007 - 0.25 - Government Effectiveness: 2005 -0.83, 2006 -0.85, 2007 -0.85 - Regulatory Quality: 2005 -0.80, 2006 -0.64, 2007 -0.57 - Rule of Law: 2005 -1.00, 2006 -0.99, 2007 -0.97 - Control of Corruption: 2005 -1.28, 2006 -1.12, 2007 -0.96 - Transparency International Corruption Perceptions Index progression: - 2003: 129th out of 133 countries, score 1.6. - 2007: 138th of 180 countries, score 2.4. - Transparency Paraguay’s 2007 National Survey on Corruption indicates the general public believes corruption encompasses all levels of society and reaches the highest levels of government. - Authorities acknowledge corruption is a serious problem; public sector characterized by lack of controls and oversight, overlapping authority and functions. - Perceived problems include lack of independence of the Judiciary and widespread dishonesty among customs and law enforcement officers. - The fight against corruption is identified as one of the incoming government’s highest priorities. ### General situation of Money Laundering (ML) and Financing of Terrorism (FT) - Principal illicit activities generating proceeds prone to ML: - Drug trafficking and smuggling (regular contraband and counterfeited goods). - Drug trafficking and production - Paraguay is a major transit point for cocaine due to geographic location; traffic estimated by national antidrug authorities between 30 and 40 metric tons a year, destined to the Southern cone, Europe, Africa and the Middle East. - During 2007, 823 kg of cocaine were seized according to the national antidrug authorities. - Paraguay is identified by the United Nations World Drug Report as the leading marijuana-producing country in South America with production considered to 5,900 tons per year, corresponding to 59 percent of total production in South America (see 2008 World Drug Report, page 98). - Marijuana production concentrated near the Brazilian border in the northwest; Paraguayan marijuana trafficked primarily to neighboring countries. - Estimated illicit gains from marijuana: production cost USD 10 per kg in Paraguay and selling price USD 300 to USD 1,000 per kg in neighboring countries; "the gain of this illicit business would at least generate more of USD 2 billion per year." - Smuggling and counterfeits - Revenue from smuggling estimated at USD 100 million per year in the US Department of State’s 2008 International Narcotics Control Strategy Report. - SEIZURES: Paraguayan Ministry of Industry and Economy’s (MIC) Specialized Technical Unit (UTE) for combating crimes against intellectual and industrial property rights reports goods with total value USD 45 million were seized in 2007. - Smuggling includes import-export to avoid taxes and trafficking of counterfeited goods (CDs, DVDs, clothing, electronics, cigarettes). - Corruption as a laundering source - Criminal proceedings opened against senior public officials (including former Presidents) indicate public corruption as a significant source of laundered illicit income. - Other profit-generating traffics - Illicit trafficking of human beings, weapons, motor vehicles, and protected animal and vegetal species concentrated in northwest border area (Salto del Guairá, Pedro Juan Caballero, Ciudad del Este). - Ciudad del Este described again as third biggest city with 700.000 inhabitants, bordering Foz de Iguazú; bridge over Paraná River facilitates crossings and illicit trade. - Law enforcement and controls - Mission findings: law enforcement performance not leading to decline in illicit activities; principal leaders of organized smuggling organizations appear not to be targeted. - Authorities did not provide sufficient data to assess economic loss from these crimes or estimate volume of illicit earnings susceptible to ML. - 90 percent of Suspicious Transaction Reports (STRs) received by the UAF operating within SEPRELAD are linked to financial operations conducted by legal entities — commercial activities appear as the most common mechanism for ML after banking. - Other ML methods: use of currency exchange houses, money remitters for sending high amounts abroad; reported presence of persons likely to carry out Hawala transfers from Ciudad del Este. - Cross-border cash controls: absence of effective controls on amounts of currency brought into or out of Paraguay; persons transporting U.S. $10,000 into or out of Paraguay are required to file a customs report, but reports are not collected or checked. - Customs operations at airports and land ports provide no control of cross-border cash movements. - Additional reported ML vehicles: investments in real estate, importation and sale of luxury automobiles, jewelry businesses, cattle dealing, and farming. - Terrorism financing (FT) legal framework and risk - Paraguay had not enacted legislation against terrorism and its financing at time of mission; this deficiency affected relations with international organizations like Egmont Group. - Paraguay has not been confronted by terrorism at the national level; no local subversive organizations active in the country. - Authorities reported periodic remittances (wire transfers and informal ways) to Middle Eastern-origin communities and presence of Islamic charitable organizations; mission found no objective and significant data that funds reached designated terrorist organizations. - In the last three years criminal proceedings were brought against individuals operating at the border designated in 2006 as terrorist financiers; Paraguayan authorities found no evidence of financial support to terrorist groups; criminal cases ended with convictions for tax evasion for some indicted individuals. - Cross-border control weaknesses, shortcomings in oversight of commercial and financial activity of foreign-origin populations, and presence of criminal organizations create vulnerability to FT and related risks. - 3 + 1 Group on Tri-Border Area Security (Paraguay, Brazil, Argentina, United States) issued joint declarations (January 2008 and December 2006) that no terrorism or FT activities have been detected in the area; assertions not confirmed to date, but combination of illicit activities and weak law enforcement is worrying and should require priority attention from the GOP. - SENAD reported cocaine seizures with marks of a subversive organization from an Andean country designated as a terrorist organization by the European Union; reports of drugs exchanged for arms on some occasions — illustrating FT risk and the stated need for Paraguay to adopt anti-terrorism legislation consistent with international norms. ### Overview of the Financial Sector — institutions, sizes, and supervisory responsibilities - Supervisory authorities and sector composition - Financial institutions are under supervision of: - Superintendence of Bank (SIB) - Superintendence of Insurance (SIS) - Securities National Commission (CNV) - National Institute of Cooperatives (INCOOP) - Aggregate banking sector size - Total assets of banking institutions amounted to Gs 21,861,093 million (approximately US$5,580 million) in 2007. - Banking sector accounted for approximately 67 percent of total financial sector assets. - Cooperatives sector accounted for an additional 24 percent of the financial sector. - Permitted activities and supervisory authority (summary from table) - Banks: acceptance of deposits, granting credit facilities, discount, purchase or sale of negotiable instruments, trading in foreign exchange instruments, issuance of checks and other payment instruments, and any other activities specified by a decision from the CBP — supervised by SIB. - Exchange Bureaus: changing and trading in different currencies and travelers checks, and acceptance of remittances from licensed correspondents — supervised by SIB. - Finance Companies: granting credits or any specialized lending activities decided by the CBP — supervised by SIB. - Brokerage and Mutual Funds Firms: engaging in offering, selling, buying or otherwise dealing or trading in securities — supervised by CNV. - Insurance Companies: insurance coverage against accidents and fire, marine and land insurance, health insurance and others — supervised by SIS. - Cooperatives: acceptance of deposits, granting credit facilities, issuance of checks and other payment instruments, and any other activities specified by a decision from the INCOOP — supervised by INCOOP. - Money remitters: acceptance and remittance of funds — None designated. - Structure of the financial sector (number of institutions) - Commercial banks (includes 1 government owned): 14 - Savings and Loans: 2 - Agencies (of foreign banks): 2 - Finance companies: 11 - Retirement Fund: 1 - Development Bank: 3 - Exchange Bureaus: 27 - Insurance companies: 31 - Re-insurance companies: 131 - Insurance agents: 517 - Insurance brokers: * (data not available from the authorities) - Life insurance companies: 2 - Re-insurance agents: 5 - Registered Cooperatives: 1,110 - Cooperative (Active): 648 *Italic: Content derived from the IMF chapter _cr09235 - 33. The Judiciary branch is headed by the Supreme Court which is composed of nine members* ### 63. There are 31 insurance companies operating in the market, of which about two recently ### _cr09235 - 63. There are 31 insurance companies operating in the market, of which about two recently ### Insurance market structure - There are 31 insurance companies operating in the market, of which about two recently started offering life insurance products. The rest of the companies are involved almost exclusively in non-life business. ### Legal and supervisory framework for financial sector - Central Bank of Paraguay (CBP) established by Law No. 489/95: competent authority for licensing for banks, finance companies, exchange bureaus and other entities, and insurance companies. The CBP houses two superintendencies, banking and insurance. - Superintendence of Banks established by Law No. 861/96: empowered by the Central Bank to supervise and control banks, finance companies, exchange bureaus, and other entities, savings and loans (equivalent) companies, agencies, government owned banks, and development banks, including with respect to ML. - Superintendence of Insurance established by Law No. 827/96: empowered by the Central Bank to supervise and control insurance companies, including with respect to ML insurance companies, agents, brokers, re-insurance companies, appraisers, and external auditors. - National Securities Commission established by Law. No. 1284: supervisor for brokerage and mutual funds firms, including stock exchanges and investment businesses for both domestic and foreign. - National Institute of Cooperatives established by Law No. 438/94: responsible for licensing, supervision and control of cooperatives, including with respect to ML. - Any financial institution conducting financial activities in or from Paraguay must be authorized by one of the competent supervisory authorities. ### Designated Non-Financial Businesses and Professions (DNFBP) - DNFBPs that are reporting entities under Article 13, Law No. 1,015/97: Gambling Establishments (paragraph j), Real Estate Agents (paragraph k), Pawn shops (paragraph m) and Dealers in Precious Stones and Metals (paragraph n). - Lawyers, notaries, other independent legal professionals and accountants are not covered by Law No. 1,015/97. - No separate category of business dealing with Trust and Company Services; trust and company formation services are offered by lawyers. - No information provided about activities, number, or size of DNFBPs generally. - Gambling Establishments: - Supervisory Body: National Commission for Gaming (CONAJZAR). - There are currently 5 (five) Gambling Establishments in Paraguay. - Internet Gambling Establishments are not regulated. - The largest Casino is located in Asuncion which has approximately 3000 to 4000 people per week. - Real Estate Agents: - Authorized and controlled in the field of taxation by the Undersecretary of State Tax Ministry of Finance under the provisions of Law No. 125/91 and Law No. 2,421/05 respectively. - Two Unions: Paraguayan Loteadoras Business Association (APEL) and Paraguayan Chamber of Real Estate Companies (CAPEI). - No evidence of control or supervision regarding Real Estate Agents to ensure compliance with AML/CFT requirements. - Dealers in precious stones and metals: - It is not known if they are subject to any oversight body. - Authorities state they must comply with obligations under existing trade and tax legislation. ### Legal persons and arrangements — company forms, registration, and transparency - Core legal entities for business activity: stock corporation (Sociedad Anónima) and limited liability company (sociedad de responsabilidad limitada). - Other legal persons provided in Paraguayan Civil Code (Law No. 1,183/85): (1) simple partnership (sociedad simple); (2) general partnership (sociedad colectiva); ordinary limited partnership (sociedad en comandita simple); (3) limited partnership with shares (sociedad en comandita por acciones); (5) limited liability personal company (empresa individual de responsabilidad limitada); and (6) branches of companies established in a foreign country. - Corporations: - Minimum of two shareholders to execute articles of incorporation in form of public instrument with a notary public and then register at the Public Registry (Registro de las Personas Jurídicas y Asociaciones) under Judiciary administration. - Consultation with the Treasury’s Legal Service (Abogacía del Tesoro) within the Ministry of Finance (MOF) must be issued within a period no longer than 8 working days. - Must be registered with the Public Registry of Commerce under the General Directorate of Public Records. - Share certificates must be numbered and signed, and may be nominative or bearer. - Within one month from establishment, the corporation is registered with the State Revenue Undersecretariat (Subsecretaría de Estado de Tributación). - Limited liability company (SRL): - May be formed by two (but not more than twenty-five) partners upon public deed. - Capital must be fully subscribed and at least 50 Percent paid-in in cash. - No minimum capital requirements, but must be adequate for the type of business. - Managers (gerentes) administer and represent the SRL; managers may be personally and severally liable for mismanagement or violation of company charter. - All partners have participation and voting rights; unanimous consent required for certain fundamental changes. - SRL can operate once social contract is registered in the Public Registry of Commerce; registration omission creates unlimited liability for partners towards third parties. - Registration system limitations: - System is manual and only records information from 1986 onwards. - Entries are not regularly updated so the number of stock corporations or SRL in the country is uncertain. - Although authorities state administrative and law enforcement have full access, registry is not reliable, limiting usefulness for identifying beneficial owners. - Trusts: - Regulated by Law No. 921/96. - Unknown number of trusts active; only trust agreements involving transfer of ownership rights of property subject to registration are recorded. - Registry affected by same limitations. - No laws requiring transparency concerning beneficial ownership and control of trusts, making them vulnerable to criminal abuse. ### AML/CFT strategy, priorities, and recent legislative steps - Authorities’ priorities despite capacity constraints: establishing an effective financial intelligence institutional structure legal and regulatory AML/CFT regimes; building capacity of regulatory and enforcement institutions; ensuring effective national and international cooperation. - With enactment of Law No. 1,015/97 Paraguay: - Defined predicate offences. - Set up SEPRELAD. - Introduced money laundering as a crime in the Penal Code (Article 196). - Implementation measures and coordination: - Memoranda coordination of the Financial Analysis Unit (UAF)-SEPRELAD with national and international agencies. - Administrative decisions issued by SEPRELAD (regulations of the Law No. 1,015/97) aimed at setting greater control and prevention. - A bill presented to Congress (currently stalled) that would introduce important modifications in terms of prevention and control of ML. - Counterterrorism legislative work: - Inter-agency working group set up to draft a special law that criminalizes terrorism and its financing with Judiciary, OAG, and UAF participation. - An amendment to Law No. 1,015/97 aiming to improve UAF operations submitted to Congress and currently being examined. - Cooperation agreements: - Money laundering prevention and suppression agreements signed between UAF-SEPRELAD and SENAD, the OAG, the National Institute of Cooperatives (INCOOP), the Paraguayan Association for the Protection of Intellectual Phonographic Rights, the National Customs Directorate, and Interpol Paraguay. - Bilateral exchanges of confidential information on ML/FT issues with counterpart agencies at the international level have been contracted. ### Institutional framework for combating ML/TF — Financial intelligence, supervision, and law enforcement - SEPRELAD: - Secretariat attached to the Office of the President established by Law 1015 of 1997 as authority responsible for implementing AML preventive legal provisions. - Intergovernmental council composition includes: - The Minister of Industry and Trade, who shall preside over the Secretariat; - A member of the board of directors of the CBP, nominated by the — board, who shall deputize for the president if the latter is absent or indisposed; - A member of the National Securities Commission, nominated by the Commission; - The Executive Secretary of the National Drug Control Secretariat (SENAD); - The Superintendent of Banks; and - The Commander of the National Police Force. - Article 28 of Law No. 1,015/97 functions (selected): - Issue administrative regulations to be observed by obligors to prevent, detect and report operations to launder money or property; - Obtain from public institutions and the obligors all information that may be related to money laundering; - Examine information received to establish suspicious transactions and operations or patterns of money or property laundering; - Keep statistical records of the movement of property connected with money or property laundering; - Order investigation of transactions that give rise to reasonable presumption of an offence of money or property laundering; - Refer to the Office of the Public Prosecutor any cases with circumstantial evidence of an offence of money or property laundering for judicial investigation; - Report to supervisory bodies any detected administrative infringements for investigation and punishment as appropriate. - UAF: - Operates within SEPRELAD as the country’s FIU. - Responsible for the "Financial Analysis Unit" to assess and analyze information received by SEPRELAD. - Processes financial information and forwards analysis to the OAG, as appropriate. - De facto secretariat of SEPRELAD; administers and safekeeps all reports and documents dealt by SEPRELAD. - Coordinates joint work with national and international agencies responsible for enforcing AML laws. - Financial supervision: - CBP: promotes efficiency, stability, and soundness of the financial system; supervises compliance with tax provision by banks and other credit institutions; adopts surveillance and discipline measures for banks, entities carrying out financial/credit operations, money exchange houses, and natural or legal persons under special laws. - Superintendence of Banks: technical body within the Central Bank with functional, administrative and financial autonomy; oversight over all banks and financial institutions. - Superintendence of Insurance: technical body within the Central Bank with functional, administrative and financial autonomy; oversight over all insurance and reinsurance companies. - National Securities Commission: supervises compliance with Law No. 1,284/98 for Stock Exchange Markets and its regulations. - INCOOP: autonomous legal person of public law established by Law No. 438/94 as supervisory authority for the cooperatives sector. - Law enforcement / Prosecutions: - The Judiciary: administration of justice per Article 247 of the Constitution; Supreme Court, courts and courts; enjoys budgetary autonomy; appointment process for Supreme Court and other courts described. - Office of the Attorney General (OAG): represents society in courts per section 266 of the Constitution; Attorney General appointed for a 5-year term; in AML works with UAF and UIDF; responsible for investigation and preparation of indictments through its Economic Crimes and Anticorruption Office. - National Police: under Interior Ministry; Department of Economic Crime Investigation per Law No. 222/93 responsible for investigating economic and financial offences, including money laundering. - Secretariat for the Prevention and Investigation of Terrorism (SEPRINTE): counterterrorism Secretariat under the Police Command; responsible for planning, coordinating and executing tasks related to prevention and suppression of terrorist acts; coordinates with National Defense Council and Council for the Internal Security of the Nation pursuant to Law No. 1,337/99; monitors national territory including border with Brazil and Argentina in coordination with Department of Economic and Financial Crimes (DEFC) of the National Police. *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09235.pdf* ### 103. SENAD. Governmental Authority with the task of implementing and enforcing the ### _cr09235 - 103. SENAD. Governmental Authority with the task of implementing and enforcing the ### Governmental authorities and specialized units - SENAD - Governmental Authority with the task of implementing and enforcing the government policy for combating drug trafficking and the prevention of drug-related money laundering and the recovery of the proceeds of illicit drug trafficking. - Includes within its organizational structure a Financial Crimes Investigation Unit (UIDF) established by Article 31 of Law No. 1,015/97. - UIDF is responsible for conducting the investigation into the operations arising out prima facie evidence of money laundering. - Results of UIDF investigations should be reported to the Executive Secretary of the SENAD for submission to the SEPRELAD, according to Article 28 of Law No. 1,015/97. - National Customs Directorate - An autonomous institution responsible for enforcing the legislation facilitating the cross-border transportation of goods, and preventing and suppressing smuggling. - UTE (Specialized Technical Unit) - Created by executive decree within the MIC to identify, prevent and prosecute piracy, forgery and tax evasion. - Composed of specialists from the MIC, the MOF, the Ministry of Interior, the National Directorate of Customs and the Armed Forces, working in coordination with the Attorney General. - Ministry of Foreign Affairs (MFA) - The General Directorate for Special Affairs is responsible for human trafficking and migration; security and counter-terrorism issues; and the fight against drug trafficking, economic crimes and related offences. - Coordinates with other government institutions, Paraguayan diplomatic missions abroad, foreign diplomatic missions in the country, and international organizations. - National Gaming Commission (CONAJZAR) - An administrative dependency of the MOF responsible for the planning, control and oversight over the activities of persons and legal entities operating in the gaming sector. ### Approach concerning risk - Authorities in Paraguay have not conducted an AML/CFT risk assessment. - Financial institutions and DNFBPs do not employ a risk-based approach in relation to their AML/CFT obligations. ### Progress since the last IMF/WB assessment or mutual evaluation - The second round mutual evaluation of Paraguay by GAFISUD was completed in December 2005. - Main recommendations made by GAFISUD assessors in 2005 included: - Incorporate all categories of predicate offences mentioned in the 40 Recommendations; - Specifically criminalize the financing of terrorism and establish it as an underlying crime of money laundering; - Develop statistics regarding the implementation of measures to confiscate, freeze and seize proceeds of crime; - Establish an effective system for implementing the UN resolutions and allow the freezing of the accounts involved; - The SEPRELAD/UAF should issue STR reporting guidelines and develop periodic reports, such as statistics regarding the outcome of STRs received and trends; - Law enforcement authorities, prosecutors and other competent authorities should develop their own training programmes, implement special investigative techniques and develop statistics to have consistent information about effectiveness and efficiency of systems; - Establish cross-border controls for cash and negotiable instruments; - Develop specific measures relating to the risk of money laundering and terrorist financing in the required areas; - Extend the application of AML/CFT preventive provisions to the securities and cooperatives sector; - Establish measures to allow exchange of information between FIUs; - Establish provisions on electronic fund transfers in legislation; - Enact legislation on the regulation and supervision of the cooperative sector; - Require Money or Value Transfer Systems (MVTS) operators to maintain an updated list of its agents and provide that the same is available to the designated competent authority; - Establish AML/CFT obligations across DNFBPs sectors; - Consider extending AML/CFT controls to additional sectors, according to the needs of the country; - Establish legal requirement for financial institutions to verify the identity of the beneficial owner; - Redefine the functions of the competent authorities in order to resolve overlap of functions between the UAF and Supervisors; - Establish mechanisms to implement the 1999 UN Convention for the Suppression of the Financing of Terrorism (the SFT Convention); - Implement the United Nations Security Council Resolutions (UNSCRs) related to the prevention and suppression of financing of terrorist acts, particularly Resolution No. 1,373; - Consider sharing confiscated assets with other governments, whose assistance contributed to the success of the forfeiture action; - Assign responsibility for managing the funds of seized assets; - Allow mutual legal assistance (MLA) in all cases concerning FT; - Allow extradition in all cases concerning the FT; - Allow other forms of cooperation in all cases concerning the FT. - Mission assessment of progress: - Modest progress overall since the last FATF evaluation. - Issuance of a number of Resolutions by the UAF and the ratification of the remaining UN instruments against terrorism. - AML/CFT system condition has not changed significantly and is supported by basically the same legal and institutional framework as in 2005. - Number of STRs has increased in some sectors and prosecutions have been brought, but many implementation-related weaknesses have not been addressed adequately. - Standards have become more rigorous with the revision of FATF 40 in 2003 and the introduction of a new assessment Methodology; appraisal of effectiveness in the ratings of the FATF 40+9 Recommendations is a significant change. ### Legal system and related institutional measures — Criminalization of Money Laundering (R.1 & 2) - Legal Framework - Money laundering is a criminal offense in Paraguay under Article 196 of Paraguay's CC, adopted in 1997 (Law No. 1,160/97) (the “CC”). - The offence had been previously criminalized under the special Anti Money Laundering Law (Law No. 1,015/96). - Amendment to the CC incorporated a new and different money laundering offence under Article 196 of the CC, thereby tacitly repealing the criminal provisions contained under Chapter 2 of Law No. 1,015/96, including the money laundering offence contained therein. - Although the criminal provisions in Chapter 2 of Law No. 1,015/96 are no longer applicable, all other provisions contained under such law have remained in effect. - Under Article 13 of the CC: - Crimes (crímenes) are “punishable acts sanctioned by more than five years in prison”. - Misdemeanors (delitos) are “punishable acts sanctioned with up to five years in prison or fine”. - Money laundering is a misdemeanor, as the conducts criminalized under Article 196 are sanctioned with up to five years in prison or fine. - Except for offences committed by a criminal organization, the scope of predicate offences under Article 196 covers only crimes (i.e. offences that carry a maximum penalty of more than five years). - Article 196 of the CC (money laundering offence) - Text of Article 196 as set out in the source: - 1. The person who: 1. Hides an object proceeding from: a) a crime; b) a punishable act carried out by a member of a criminal organization as defined under Article 239 of the CC; c) a punishable act referred to under Law No. 1,340/88, sections 37 through 45; or 2. With respect to such object, disguises its source, frustrates or endangers the knowledge of its source or location, its finding, its forfeiture, its special forfeiture or seizure, shall be punished with a prison sanction of up to five years or a fine. - 2. The same sanction is applicable to the person who: 1. Obtains an object referred to in the previous paragraph, provides it to a third party; or 2. Guards it or uses it for self or for another, having known its source at the moment of obtaining it. - 3. The attempt shall also be punished in such cases. - 4. When the author acts commercially or as a member of a band established for the continuous conduct of money laundering, the prison sanction may be increased up to ten years. The provisions of sections 57 and 94 shall also be applicable. - 5. The person who in the cases of paragraphs 1 and 2, and for gross negligence, had no knowledge of the source of the object of an illicit act referred to under paragraphs 1 and 2, shall be punished with a prison sanction of up to two years or with a fine. - 6. The act shall not be punished in accordance with paragraph 2, when the object has been obtained by a bona fide third party. - 7. The objects proceeding from a punishable act conducted outside of the scope of application of this law shall be considered as those referred to under paragraphs 1, 2 and 5, when the act is criminally punishable in the place where it is conducted. - 8. The punishment for money laundering shall not be applied to: 1. The person who voluntarily informs or makes someone inform the competent authority about the act, provided that the act were not totally or partially discovered, and that the author was aware of it; and 2. The person who, in the cases of Paragraphs 1 and 2, and with the conditions of the preceding sub-paragraph, facilitates the seizure of the objects related to the punishable act. - 9. When the author, by a voluntary revelation of knowledge, makes a considerable contribution to the clarification: 1. Of the circumstances of the act, beyond the author’s contribution to it; or 2. Of an act referred to under Paragraph 1, illicitly carried out by someone else, the court may reduce the sanction in accordance with Article 67 or decide not to apply it. - Origins and amendment - Article 196 has its source in Article 261 of the German CC. - A new reform to the CC was passed during the on-site visit (Law No. 3,440/08). - Law No. 3,440/08 includes an amendment to Article 196 which will address a number of deficiencies, including: - Setting forth that a prior conviction for the predicate offence shall not be necessary to prosecute for money laundering (autonomy of the money laundering offence). - Expansion of the list of predicate offences. - Law No. 3,440/08 would not enter into force until mid-2009. - Criminalization — physical and material elements (c. 1.1) - Article 196 is not fully in line with the UN Vienna Convention (Articles 3.1(b) &(c)) and the Palermo Convention (Article 6.1). - Conducts criminalized are limited to: ‘To hide’; ‘to disguise the source of’; ‘to frustrate or endanger the knowledge of the source or location of’; ‘the finding of’; ‘the forfeiture of, or the seizure of’; ‘to obtain, to give to a third party’ and ‘to guard or use’ the object knowing its precedence. - Article 196 fails to explicitly cover: - “conversion” or “transfer” - “acquisition” or “possession” - Full coverage of ‘hiding’ or ‘disguising’ the true nature, location, disposition, movement or ownership of or rights with respect to property as required by the conventions - “assistance of a person involved in the commission of the predicate offense evade the legal consequences of his or her actions” - Authorities argue that “conversion”, “acquisition”, and “possession” would be typically covered respectively by “hiding”, “obtaining”, and “guarding” under Article 196, but no case-law was shown to support these arguments. - Definitions and distinctions noted (from Dictionary of the Royal Spanish Academy, 22nd Edition): - To “convert” = to transform into something different. - To “hide” = to cover or disguise from sight. - To “acquire” = to purchase, win, or achieve through one’s own work. - To “obtain” = to reach or get when deserved, requested or pretended. - To “possess” = to hold it regardless of ownership. - To “guard” = to take care of, watch over, put in a safe place, keep, or retain. - The laundered property (c. 1.2) - Offence extends to any type of property, regardless of its value, that directly or indirectly represents the proceeds of crime. - Article 196 uses the term “object” (objeto) proceeding from..., which is not defined in the CC but is defined in Law No. 1,015/96. - Authorities argue that the “definitions section” under Law No. 1,015/96 remains in effect and that “object” in the CC should be understood as defined under Law No. 1,015/96. - Law No. 1,015/96 defines “object” as “the goods obtained or derived directly or indirectly from the commission of an offence criminalized in this law”. - “Goods” are defined under Law No. 1,015/96 as “assets of any kind, corporal or incorporeal, movable or real estate, tangible or intangible, and the documents or legal instruments that evidence the property or other rights over such assets”. - The offence extends to any type of property regardless of its value as it makes no reference to a minimum value. - Proving property is the proceeds of crime (c. 1.2.1) - It is not clear that a conviction for a predicate offence is not necessary when proving that property is the proceeds of crime; the mission received conflicting opinions from judges and prosecutors. - Article 196’s reference to “object” proceeding from a “crime” or “punishable acts” raises the issue whether “crime” or “punishable acts” are legal elements requiring conviction. - Some judges argue a prior conviction for the predicate “crime” or “punishable act” is necessary to prove proceeds of crime. - Other judges and prosecutors argue a broader interpretation is appropriate, referencing paragraph 5 of Article 196 and language in other CC offences and the German source; they consider only the “unlawfulness” of the predicate act must be proved and not a prior conviction. - Case history: - Only one case where a money laundering conviction was obtained without a prior conviction for the predicate offence; that ruling is not final as it was appealed to the Supreme Court. - None of the six confirmed and final money laundering convictions in Paraguay were reached without a prior conviction for the predicate offence. - Mission view and recommendation: - The CC should be amended to state clearly that a prior conviction for the predicate offense is not required to prove that property is the proceeds of a crime. - Enactment of the amendments to the money laundering offence (Law No. 3,440/08) would provide a solution by referring to the object derived from an “unlawful act” and explicitly declaring the autonomy of the money laundering offence; however, these amendments will not enter into force until mid-2009. *Source: _cr09235 - 103.* ### 137. The ML offence under Article 196 of the CC limits the coverage of predicate offences to ### _cr09235 - 137. The ML offence under Article 196 of the CC limits the coverage of predicate offences to ### Coverage of Predicate Offences under Article 196 - Article 196 limits predicate offences to offences defined as crimes (i.e. punishable acts sanctioned by more than five years in prison), except: - acts carried out by a criminal organization; and - acts criminalized under sections 37 to 45 of Law No. 1,340/88 (Counter Narcotics Trafficking Law), where misdemeanors (i.e. punishable acts sanctioned with up to five years in prison or fine) are also covered. - In practice, only the following designated offences are captured as predicate offences to ML under Article 196: - trafficking in human beings; - sexual exploitation of children; - illicit trafficking in narcotic drugs and psychotropic substances; - illicit arms trafficking; - murder; - grievous bodily injury; - kidnapping; - hostage taking; and - robbery. - With the exception of terrorism and terrorist financing, the remaining designated categories have been criminalized domestically but, because they fall under misdemeanors, they are predicate offences to ML only if committed by a criminal organization. - Law No. 3,440/08 amends Article 196 to explicitly include a number of offences categorized as “delitos” (including: piracy; extortion; fraud; corruption; and bribery). These amendments will not come into force until mid-2009. ### Threshold Approach and Extraterritoriality - Paraguay uses a combined threshold approach for ML predicate offences: - serious offences defined as crimes; - misdemeanors committed by criminal organizations; - a list of specific offences under counter-narcotics legislation. - This approach does not cover the full range of offences within each designated category. - Para. 7 under Article 196 extends predicate offences for ML to conduct that occurred in another country when: - such conduct constitutes an offence in that country; and - it would have constituted an offence had it occurred domestically. - Paraguayan legislation does not allow prosecution for ML where the laundered proceeds originate from conduct that is not an offence in the foreign country where it occurred. ### Liability and Mental Element - The ML offence applies to persons who commit the predicate offence; no particular quality for the author is required—any person, including the predicate offender, can commit ML. - Article 17 of the CC: except where negligent conduct is expressly punished, only intentional and knowing conducts are punished. - Paragraph 5 under Article 196 provides a less severe range of criminal sanctions for acts involving gross negligence. - Article 173 of the Code of Criminal Procedures establishes “evidentiary freedom”, permitting the inference of the intentional element from objective factual circumstances and indicia. ### Ancillary Conducts, Attempts, and Participation - Paraguay has not criminalized “conspiracy”, “facilitation” or “counseling” to commit ML; no indication that domestic law prevents criminalizing such conducts. - Article 27 of the CC: attempt to commit a misdemeanor punishable only when law expressly provides it. Article 196, Paragraph 3, expressly punishes attempt to commit ML. - Article 67: sanction for attempting ML may involve reduction to a prison term from a minimum of six (6) months to a maximum of three (3) years and nine (9) months or a reduction in the range of the fine from a minimum of five (5) “days of fine” to a maximum of two hundred and seventy (270) “days of fine”. - Aiding and abetting punished under Article 31 of the CC with the same reduction ranges as attempt. - Instigation punished under Article 30 of the CC with the same sanction as the author of the offence. ### Liability of Legal Persons and Administrative Sanctions - Paraguayan criminal law does not extend criminal liability to legal persons. - Accessory criminal sanctions may be applied to legal persons, e.g., “special forfeiture” under Article 90, Paragraph 2, which may target the entity that obtained the benefit; no evidence this has been applied in ML cases. - No indication that fundamental domestic law principles bar criminal liability for legal persons. - Article 24 under Law 1,015/96 allows administrative sanctions against legal persons for noncompliance with Chapter 3 administrative obligations: - a warning; - a public reprimand; - a fine between 50 Percent and 100 Percent of the amount of the transaction through which the obligation was infringed; - a temporary suspension ranging from 30 to 180 days. - These administrative provisions remain in effect despite derogation of criminal provisions under Chapter 2 of Law No. 1,015/96, but they are administrative sanctions for failure to comply with obligations, not for committing ML; no evidence of application to legal persons in ML cases. ### Sanctions for ML - Paragraphs 1 and 2 under Article 196: natural persons who commit ML are subject to sanctions that range from six (6) months to five (5) years in prison or the payment of a fine. - The CC permits “imprisonment” or “fines” but does not allow concurrent imposition of both. - Paragraph 4 (aggravated ML) increases prison sanction up to ten (10) years when: - the author acts commercially; or - as a member of a band established for continuous conduct of money laundering. - If prison sanction applied is more than two (2) years, the Court may apply a “complementary patrimonial sanction” considering the net worth of the author and may order an “extended special forfeiture” if property is inferred to be obtained through an unlawful act. - Paragraph 5 (negligent ML) sets maximum punishment to up to two (2) years in prison or a fine. - Paraguay has shown little use of the negligent offence; none of the fifteen (15) convictions described were obtained through Paragraph 5. - Article 44: if offender is convicted to up to two (2) years, the Court typically suspends the conviction and grants “probation” except in specified circumstances. - Article 52: a fine is calculated in “days of fine” with range from a minimum of five (5) “days of fine” to, unless otherwise provided, a maximum of three hundred and sixty (360) “days of fine”. - ML offence does not provide a lower maximum; three hundred and sixty (360) “days of fine” apply. - A “day of fine” is determined at least 20 Percent of a minimum daily work day for unspecified diverse activities and a maximum of 510 daily work days for the same activities. - Article 53: when the author is enriched or attempts to be enriched, the Court may apply a “complementary fine” in addition to prison; no evidence this has been applied in ML cases. - Comparative sanctions: - Murder: 5 to 15 years in prison - Grievous bodily injury: up to 10 years in prison - Kidnapping: up to 8 years in prison - Hostage taking: 2 to 12 years in prison - Robbery: 1 to 15 years in prison - Most GAFISUD-member countries contemplate maximum ML sanctions of up to 15 years in prison; Paraguay’s sanctions are at the lower end of the regional range. - In six convictions for ML with confirmed final rulings, the highest sanction imposed was 3 years and 2 months in prison. - No sanctions for ML have been imposed on legal persons. - Mission conclusion: ML offence in Paraguay is not subject to effective, proportionate and dissuasive sanctions. Recommendation: amend the CC to re-categorize ML as a crime and raise sanction ranges to be effective, proportional and dissuasive relative to other serious offences in the CC and relative to ML sanctions in the GAFISUD region. ### Assessment of Effectiveness and Operational Findings - Authorities reported approximately 100 cases for ML currently opened. - Conviction statistics: - fifteen (15) convictions for ML obtained since enactment of Article 196 in 1997; - six (6) out of the fifteen (15) convictions are confirmed with final rulings; - nine (9) convictions are still on appeal. - Observations: - The total of fifteen (15) convictions is respectable relative to other GAFISUD countries but appears low given Paraguay’s exposure to drug production and transit and other serious predicate offences. - Implementation of the ML offence has remained minimally effective since 1996 due to: - obstacles in Article 196 itself; - lack of sufficient capacity in key law enforcement agencies and among many prosecutors and judges; - lack of adequate resources to prevent, detect, investigate and prosecute financial crimes; - lack of trust and ineffective coordination and cooperation among agencies; - lack of real independence of the judiciary; - indications of deeply rooted levels of corruption among public officials at all ranks. - Weak preventive controls in the financial sector, open and poorly controlled borders, and minimal law enforcement activity for financial crimes and predicate offences may allow money launderers to exploit Paraguay’s financial system. - The misdemeanor classification of ML prevents effective, proportional and dissuasive sanctions and signals ML is not considered a serious offence. - Lack of clarity about whether a prior conviction for the predicate offence is necessary to prove property is proceeds of crime creates prosecutorial reluctance. - Narrow range of predicate offences (vis à vis FATF recommendations) restricts capacity to prosecute ML and may restrict ability to provide mutual legal assistance and extradition for ML-related matters—specifically corruption, bribery, smuggling, piracy of products and tax evasion are not predicate offences to ML under Article 196 unless committed by a criminal organization. - Despite drug trafficking being covered, little targeting of serious drug trafficking organizations is evident; most drug cases in courts involve small traffickers (“mules”). - Paraguay is described as the biggest marijuana producer in South America and a transit country for Bolivian, Peruvian and Colombian cocaine destined for Brazil, Argentina, Chile and Europe; major Brazilian traffickers are noted to operate and hide in regions such as Pedro Juan Caballero, Capitán Bado, Ciudad del Este and Saltos del Guairá, often in partnership with local traffickers. There does not appear to be a strategic and coordinated approach to tackling this, including use of the ML offense to prosecute laundering of such proceeds. *Source: _cr09235 - 137. The ML offence under Article 196 of the CC limits the coverage of predicate offences to* ### 179. The absence of criminal liability for legal persons and the lack of administrative sanctions ### The absence of criminal liability for legal persons and the lack of administrative sanctions ### Absence of criminal liability and operational weaknesses - "The absence of criminal liability for legal persons and the lack of administrative sanctions effectively applied to legal persons for failure to comply with administrative regulations are contributing to the poor levels of compliance and the unlawful use of legal persons by money launderers." (Paragraph 179) - Law enforcement authorities are "poorly staffed and resourced, receive very little training, are very badly compensated, and have minimal trust among each other," resulting in "an extremely narrow level of cooperation and coordination among them," which significantly affects detection and pursuit of serious offences committed by organized crime, such as drug trafficking. (Paragraph 180) - Authorities have not emphasized prosecuting serious predicate offences or pursuing money laundering as a way to tackle serious crime; awareness raising on the value of ML investigations and convictions for fighting organized crime is needed. (Paragraph 181) - Structural elements required for effective anti-money laundering (AML) enforcement are weak or missing: transparency and good governance, measures to prevent and combat corruption, an efficient and independent court system, and high ethical and professional requirements for law enforcement officers, prosecutors and judges. (Paragraph 182) - "Addressing the problem of corruption should therefore be a number one priority for Paraguay." Corruption is an obstacle to effective implementation of the ML offence and serious predicate offences and has generated distrust among agencies, impairing coordination and cooperation. (Paragraph 183) - There is "little policy cooperation and coordination across relevant competent authorities and little operational cooperation and coordination between authorities at the law enforcement/FIU level (including Customs)." (Paragraph 183) ### Recommendations and Comments (mission recommendations) - Amend the CC to incorporate the conducts of "conversion", "transfer", "acquisition", "concealment or disguisement", "possession" of property, and "assisting a person involved in the commission of the predicate offense evade the legal consequences of his or her actions" into the money laundering offence of Article 196. (Paragraph 185, bullet 1) - Amend the CC to allow proving that property is the proceeds of crime without the need for a conviction of a predicate offence. (Paragraph 185, bullet 2) - Amend the CC to expand the list of predicate offences for ML to cover a range of offences in each of the designated categories of offences. (Paragraph 185, bullet 3) - Amend the CC to criminalize "conspiracy", "facilitation" and "counseling" to commit ML. (Paragraph 185, bullet 4) - Amend the CC to make legal persons criminally liable for the commission of ML offences. (Paragraph 185, bullet 5) - Amend its CC to re-categorize the offence of ML as a crime (as opposed to a misdemeanor), to allow for the concurrent imposition of "imprisonment" and "fines" and to raise the range of sanctions to make them effective, proportional and dissuasive, relative to other serious offences in the CC, and relative to the sanctions for ML applied by other countries in the GAFISUD region. (Paragraph 185, bullet 6) - Continue to place more efforts at generating awareness on the opportunity that ML investigations and convictions represent to the general fight against crime, and particularly organized crime. (Paragraph 185, bullet 7) - Strengthen the fight against corruption as an important pre-condition for the implementation of an effective anti-money laundering framework. (Paragraph 185, bullet 8) - Develop a national AML strategy to build consensus and commitment and to improve the coordination and cooperation among relevant competent authorities in the development of policies and their effective implementation. (Paragraph 185, bullet 9) - The mission highlights that "the development of a national strategy comprising all of the AML stakeholders as well as representatives of the financial sector and designated non-financial businesses and professions (DNFBPs) has helped to build consensus and commitment and provide a forum to coordinate the formulation of policies, laws and regulations, and their effective implementation." (Paragraph 184) ### Compliance with Recommendations 1 & 2 — Ratings and factors - R.1: PC - The transfer, conversion, acquisition and possession of property are not criminalized in the ML offence. - A conviction for a predicate offence is required when proving that property is the proceeds of crime. - The ML offence fails to criminalize the "hiding" or "disguising" the true nature, location, disposition, movement or ownership of or rights with respect to property, and the "assisting a person involved in the commission of the predicate offense evade the legal consequences of his or her actions". - The list of predicate offences does not cover a range of offences in each of the designated categories of offences. - Conspiracy, facilitation and counseling are not criminalized as ancillary offences. - R.2: PC - Legal persons are not criminally liable for the commission of ML offences. - ML is not categorized as a serious offence and sanctions for ML are not effective, proportional or dissuasive. - No administrative sanctions have been applied to legal persons. ### Criminalization of Terrorist Financing (SR.II) — description and analysis - Paraguay is a Party to the UN International Convention for the Suppression of the Financing of Terrorism (the SFT Convention), but "its legislation does not include provisions that criminalize FT." (Paragraph 186) - Authorities indicate that the CC provides for the legal capacity to prosecute and apply criminal sanctions to persons that finance terrorism, under the different modalities of participation in an offense; Paraguay lacks specific counter-terrorism legislation but has prosecuted suspected terrorist financiers under tax evasion and other statutes. However, criminalization on this basis "does not comply with the requirements of SR.II." (Paragraph 187) - Law enforcement agencies in Paraguay have "no found evidence of terrorist or FT activities" and continue to monitor and share pertinent information. (Paragraph 188) - A bill reforming the CC that included provisions criminalizing terrorism, terrorist association and FT was rejected by the Senate on 15 November 2007; terrorism-related amendments were excluded. The failure to criminalize FT triggered the suspension of Paraguay’s membership in the Egmont Group in May 2007. Draft FT legislation was expected to be submitted as a separate bill ahead of August 15, 2008; SEPRELAD has been coordinating the elaboration of draft counter-terrorism legislation. (Paragraph 189) - The financing of terrorism is not yet a predicate offence in money laundering. Article 4 (h) of the proposed amendment to Law No. 1,015/97 pending approval by the National Congress would provide for designation of FT as a money-laundering predicate offence. (Paragraph 190) ### Criminalization of Terrorist Financing — recommendations and compliance - Recommendations: - "The offence of FT should be criminalized in keeping with the requirements of the offence as set out in the SFT Convention." - "Provide training for judges, prosecutors, law enforcement agencies, and UAF staff on the understanding of the offence of FT and CFT measures." (Paragraphs 2.2.2 bullets) - SR.II: NC - FT is not criminalized. - FT is not designated a predicate offence for ML. (Paragraph 2.2.3) ### Confiscation, freezing and seizing of proceeds of crime (R.3) — legal framework and analysis - Forfeiture (Comiso) is set out in the CC; Paraguayan law uses "forfeiture (Comiso)". The term "confiscation" may be interpreted as contrary to Paraguay’s Constitution. (Paragraph 191) - The Code of Criminal Procedures and the Anti-Money Laundering Act (Law No. 1,015/96) contain provisions related to provisional measures in connection with property subject to forfeiture. (Paragraph 192) - Provisions related to forfeiture under Chapter 2 of Law No. 1,015/96 were tacitly repealed with enactment of amendments to the CC through Law No. 1,160/97. (Paragraph 193) - The CC covers forfeiture of proceeds from, instrumentalities used in, and those intended for use in, commission of an intentional unlawful act, including ML and other predicate offences. (Paragraph 194) - The CC provides for "special forfeiture" covering benefits that the author or participant of an unlawful act may have obtained; special forfeiture may be applied against legal persons when the author acted on its behalf. (Paragraph 195) - When expressly provided (e.g., aggravated ML) and circumstances allow inference that property was obtained through an unlawful act, the Court may order an "extended special forfeiture" of property. (Paragraph 196) ### Confiscation (specific c.3.1 and related provisions) - Article 86 of the CC covers forfeiture from intentional unlawful acts but "this provision does not cover the forfeiture of property of corresponding value," though such property can be forfeited under "special forfeiture provisions." (Paragraph 197) - Section 86 also provides that forfeiture shall be ordered only when the property "is considered dangerous to the community or when there is a danger in its use for the commission of other unlawful acts," a serious limitation for forfeiture of laundered proceeds or proceeds from ML/FT or other predicate offences. (Paragraph 198) - Article 88: ownership of forfeited property is transferred to the State once the ruling becomes final; until then, the order to forfeit restrains encumbering or selling the property. (Paragraph 199) - Article 90: "special forfeiture" of benefits that the author or participant may have obtained; special forfeiture applicable except if it could damage a victim’s right to reparation or if the property's value is irrelevant; CC does not define "benefits"; may cover "usufruct" and "other benefits derived from the proceeds of crime." (Paragraph 200) - Article 90, Paragraph 4: special forfeiture does not cover benefits held by a third party not the author/participant/beneficiary; Article 91 enables ordering a payment of money of corresponding value from the defendant in such cases. (Paragraph 201) - Sections 94 and 196, Paragraph 4: when the author acts commercially or as a member of a band established for continuous ML (aggravated ML), and circumstances allow inference that property was obtained through an unlawful act, the Court may order an "extended special forfeiture." (Paragraph 202) - Article 94's extended special forfeiture applies only when expressly authorized by a specific law; if special forfeiture of particular property cannot be carried out, a payment of money of corresponding value can be ordered. (Paragraph 203) ### Provisional measures and identification/tracing (c.3.2–c.3.4) - Provisional measures under the "Final Chapter" of Law No. 1,015/96 remain in effect despite tacit derogation of Chapter 2 provisions. (Paragraph 204) - Paraguayan law does not explicitly provide for freezing of property; Article 36 (Final Chapter of Law No. 1,015/96) enables Judges to "attach, seize, or dictate any other precautionary measure aimed at preserving the property subject to forfeiture." (Paragraph 205) - Article 88: ownership transfers to State when ruling is final; prior to finality, order to forfeit restrains attachment or sale. (Paragraph 206) - Article 36 provides that provisional measures may be dictated ex officio or at the request of a party and "may be taken at the beginning or at any stage of the criminal process." The provision is silent on ex parte or without prior notice. Authorities have not invoked domestic law principles that would prohibit introduction of such a measure. (Paragraph 207) - In practice the FIU identifies and traces property subject to forfeiture or suspected proceeds of crime, but powers have a weak legal basis; prosecutors have adequate powers under the Code of Criminal Procedures. (Paragraph 208) - Article 28 of Law No. 1,015/96 entitles SEPRELAD to "request and obtain from reporting entities all information that could be related with money laundering," covering powers to identify and trace property. (Paragraph 209) - The law's grant of this function to SEPRELAD is deficient because SEPRELAD may only act when all high-ranking members (including a Minister) are gathered; in practice the FIU exercises this function but legal basis is weak as Article 30 only empowers the FIU to "evaluate and analyze the information received by the SEPRELAD" not to request such information. (Paragraph 210) - Code of Criminal Procedures grants powers to search (Article 183), compel presentation and delivery, seize (Article 193), and take into custody (Article 297). (Paragraph 211) - Article 316 of the Code of Criminal Procedures: the OAG is entitled to "practice all of the diligences and acts of the preparatory stage that do not require judicial authorization." (Paragraph 212) *Source: _cr09235 - 179. The absence of criminal liability for legal persons and the lack of administrative sanctions* ### 213. Moreover, in accordance with Article 322 of the Code of Criminal Procedures, the OAG may ### _cr09235 - 213. Moreover, in accordance with Article 322 of the Code of Criminal Procedures, the OAG may ### Protection of Bona Fide Third Parties (c. 3.5) - Article 88 of the CC: "when the order to forfeit becomes final, all of the rights that third parties may have over the property are thereby extinguished." Article 88 also requires bona fide third parties to be adequately compensated in cash by the State. - Article 90 (special forfeiture of benefits) and Article 94 (extended special forfeiture of property) do not cover benefits or property held or owned by a third party that is not the author, participant, or beneficiary of the unlawful act; third parties could never be affected by these types of forfeitures. Payment of money of corresponding value can be ordered in exchange, and rights of bona fide third parties are explicitly protected. ### Power to Void Actions (c. 3.6) - There is no authority to take steps to prevent or void actions, whether contractual or otherwise, where the persons involved knew or should have known that as a result of those actions the authorities would be prejudiced in their ability to recover property subject to forfeiture. (Paragraph 217) ### Additional Elements (Rec. 3) — a) Confiscation from organizations principally criminal in nature; b) Civil forfeiture; c) Confiscation reversing burden of proof (c. 3.7) - The laws do not provide for forfeiture of assets from organizations principally criminal in nature, civil forfeiture, or forfeiture of property which reverses the burden of proof. (Paragraph 218) ### Assessment of Effectiveness - Statistics provided only for forfeitures connected with the seven cases where the fifteen convictions for money laundering were obtained. (Paragraph 219) - Property was forfeited in relation with eight of these convictions. - Four of those forfeitures have final and confirmed rulings. - No accurate statistics provided on the total amount of property forfeited; in some cases only the type of property forfeited is indicated but not its value. - Effective implementation of forfeiture provisions is very much affected by problems identified under Recommendations 1 and 2. (Paragraph 220) - Key thematic findings: - Accumulation of wealth increases criminal organizations' capacity to cause harm; recovering proceeds is essential to disrupt, dismantle, deter, and prevent criminal activity. (Paragraph 221) - Corruption may affect ability to identify and trace property subject to forfeiture; reports indicate senior level authorities in a number of districts may be preventing competent authorities from identifying and seizing property suspected of being proceeds of crime. Strengthening fight against corruption is reiterated as an important pre-condition for effective forfeitures. (Paragraphs 222–223) - Main challenge: locating proceeds. Competent authorities may have adequate powers to identify and trace property, but poor conditions of national registries make timely access to adequate, accurate and current information virtually impossible. (Paragraphs 224–225) - Registries status and deficiencies: - National Direction of Public Registries holds registries of real estate properties, automobiles, boats, pledges, legal persons and associations, commerce, powers of attorney, and bankruptcies, among others; with the exception of the merchant’s registry, the automobile registry, and a minor part of the real estate registry, remaining registries are handled manually. (Paragraph 225) - Only the data base at the Merchant’s Registry, the Registry of Automobiles and one third of the data base at the Registry of Real Estate Properties is currently uploaded electronically. Many merchants, automobiles and real estate properties have never been registered or have not updated ownership changes for a long time. (Paragraph 226) - Inconsistency example: Registry of Real Estate Properties reports 1.5 million properties registered versus National Direction of Cadastre reporting 2.4 million properties registered. (Paragraph 227) - Registries for legal persons and trusts are manual and only record information from 1986 onwards for legal persons and 2000 onwards for trusts. Only incorporation or bylaw amendment information is recorded; no reliable information on ownership and control of companies, trusts and other legal arrangements. Changes in ownership are often not required to be registered; corporations must hold stock ledgers but there are no sanctions for failing to keep them up to date or for losing them; many books reported lost; significant amount of corporations have issued bearer shares with no measures to prevent misuse for ML. (Paragraph 228) - Authorities cite high costs of registration, low public awareness on benefits of registration, and lack of sanctions as reasons for non-registration; mission adds lack of confidence in public institutions and high informality in the economy. (Paragraph 229) - Recommended institutional and operational priorities: - Allocate more resources to improving registries: speed up informatization of databases, improve facilities, reduce registration costs, increase public awareness, and amend laws to sanction failures to register relevant acts and information. (Paragraph 230) - Improve cross-border cooperation and Customs controls for cross-border transportation of currency and bearer negotiable instruments; Customs should develop effective and feasible procedures to detect, stop or restrain, and where appropriate seize such currency and bearer negotiable instruments, in coordination with law enforcement, carriers and counterparts in bordering countries (Argentina and Brazil). Prosecutors should work with Customs and law enforcement to establish guidelines for stopping/restraining currency and bearer negotiable instruments, and for arrest and prosecution of individuals. (Paragraphs 231–232) ### Recommendations and Comments (2.3.2) - Amend the CC to allow for the forfeiture of property of corresponding value. - Amend the CC to explicitly provide that initial applications for provisional measures and to seize property subject to forfeiture may be made ex-parte or without prior notice. - Amend Law No. 1,015/97 to explicitly transfer to the FIU the powers to request and obtain information that could be related with money laundering. - Enact provisions permitting Paraguayan authorities to take steps to prevent or void actions, whether contractual or otherwise, where the persons involved knew or should have known that those actions would prejudice authorities' ability to recover property subject to forfeiture. - Strengthen the fight against corruption as an important pre-condition for the implementation of an effective system of forfeitures. - Allocate more resources to improving the conditions of the registries of property: speed up informatization of databases, improve record facilities, reduce registration costs, increase public awareness, and amend laws to sanction failures to register relevant acts and information. - Develop effective and feasible procedures at Customs to detect, stop or restrain, and seize the cross border transportation of currency and bearer negotiable instruments. ### Compliance with Recommendation 3 (2.3.3) - Rating: R.3 — PC - Summary of factors underlying rating: - The laws do not provide for the initial applications to seize property subject to forfeiture to be made ex-parte or without prior notice. - There is no authority to take steps to prevent or void actions, whether contractual or otherwise, where the persons involved knew or should have known that as a result of those actions the authorities would be prejudiced in their ability to recover property subject to forfeiture. - "[Legal provisions on provisional measures and confiscation have not been implemented effectively with respect to serious crime.]" (text bracketed as in source) ### Freezing of funds used for terrorist financing (SR.III) — Legal framework and analysis (2.4.1) - Paraguay does not have specific provisions to allow freezing terrorist funds or other assets of persons and legal entities designated pursuant to UNSCR 1267 (1999) or UNSCR 1373 (2001). Only a criminal process to seize and confiscate assets in connection with a criminal proceeding applies. (Paragraph 233) - No legislation provides for immediate freezing of property of persons and entities designated under UNSCR 1267, nor provisions compelling financial institutions to freeze without delay funds or other assets of persons who commit or attempt to commit terrorist acts. (Paragraph 234) - Authorities state freezing of property is prohibited by the Constitution, but assets suspected of being related to terrorism may in theory be seized via judicial order in the context of a prosecution; seizure would require a judge's order and apply elements of provisional measures and confiscation. Because FT is not a criminal offense under Paraguayan law and absent specific cases, extent of courts' authority to seize/confiscate funds related to financing of terrorism is unclear. (Paragraph 235) - No special dissemination procedure for UNSCR 1267 or 1373; MFA's General Directorate for Special Affairs circulates the UNSCR 1267 Sanctions Committee list to relevant law enforcement and administrative agencies (including SEPRINTE, SENAD, the Central Bank, SEPRELAD, the OAG and the Ministry of National Defense). (Paragraph 236) - Inter-Agency Commission established by Executive Decree No. 15,125 of 24 October 2001 for compliance with UNSCR 1373; comprised representatives from multiple ministries and agencies. (Paragraph 237) - Financial institutions have not identified accounts used by designated persons/entities; Paraguay has not designated terrorist entities domestically. (Paragraph 238) - Communication and guidance deficits: - UNSCR 1267 Sanctions Committee list is circulated to banks by the Central Bank, but no written procedure governs what banks should do on a match; in practice banks inform the Central Bank which informs the Ministry of the Interior and requests the Minister request a court order to seize assets; legal basis for that court order is not clear. (Paragraph 239) - No guidance provided to financial institutions regarding obligations in relation to targeted funds or other assets. (Paragraph 240) - No specific de-listing or unfreezing procedures in place. (Paragraph 241) - No monitoring of compliance as no rules exist. (Paragraph 242) - Best Practices Paper for SR III measures have not been implemented; no laws or procedures to consider requests for release of funds to cover basic expenses for seized funds. (Paragraph 243) ### Recommendations and Comments (2.4.2) - Put in place a legal framework for freezing of terrorist assets ex parte and without delay, including: - A mechanism for examining and giving effect to, if appropriate, actions initiated under freezing mechanisms of other countries; recognizing and reviewing terrorist lists of other countries and giving effect to those lists if appropriate; - An effective procedure for disseminating the UNSCR 1267 Sanctions Committee list and lists under UNSCR 1373 to the financial sector; - Clear guidance on implementation to financial institutions and other persons or entities that may hold targeted funds or other assets concerning their obligations in taking action under freezing mechanisms; - Procedures for unfreezing and for allowing access to funds for basic expenses; - Protection of bona fide third party rights; - A mechanism for monitoring compliance and imposing sanction in cases of failure to comply. - Put in place procedures to examine and give effect to actions initiated under freezing mechanisms of other jurisdictions. - Put in place procedures for persons or entities whose funds or other assets have been frozen to challenge that measure with a view to having it reviewed by a court. ### Compliance with Special Recommendation III (2.4.3) - Rating: SR.III — NC - Summary of factors underlying rating: - No mechanism in place to give effect to UNSCRs 1267 and 1373. - No mechanism to examine and give effect as appropriate to actions initiated under freezing mechanisms of other jurisdictions. - No mechanism for communicating actions to the financial sector. *Source: _cr09235 - 213. Moreover, in accordance with Article 322 of the Code of Criminal Procedures, the OAG may* ### 245. The UAF-SEPRELAD does not have at the moment an official organizational chart, because ### UAF-SEPRELAD: organization, STR processing, regulations, and outcomes ### Organizational status and mandate - The UAF-SEPRELAD does not have at the moment an official organizational chart, because it has not yet been approved by a decree of the Presidency of the Republic. - SEPRELAD is a council of six high level authorities: the Ministry of Industry and Trade, a member of the board of directors of the Central Bank of Paraguay, a member of the National Securities Commission, the Executive Secretary of the SENAD, the Superintendent of Banks and the Commander of the National Police Force. - The UAF is a technical body charged with the operational aspects that Article 28 of Law No. 1,015/97 defines for SEPRELAD, including the functions listed below. ### Statutory functions and operational duties (Article 28 of Law No. 1,015/97) - to issue administrative regulations to be observed by the reporting bodies with a view to preventing, detecting and reporting operations to launder money or property; - to obtain from public institutions and the reporting bodies all information that may be related to money laundering; - to examine information received in order to establish suspicious transactions and operations or patterns of money or property laundering; - to keep statistical records of the movement of property connected with money or property laundering; - to order the investigation of any transactions that give rise to a reasonable presumption of an offence of money or property laundering; - to refer to the Office of the Public Prosecutor any cases in which circumstantial evidence arises of the commission of an offence of money or property laundering so that the appropriate judicial investigation may be initiated; - To report to the bodies and institutions responsible for supervising the reporting bodies any detected case of administrative infringements of the law or the regulations, for the purposes of their investigation and punishment, as appropriate. ### Role as the Financial Intelligence Unit (FIU) - The UAF operates within SEPRELAD as the country’s financial intelligence unit. - Responsibilities: - assess and analyze information received by SEPRELAD at national level; - process financial information and forward analysis to the OAG, as appropriate; - act de facto as the SEPRELAD secretariat, administer and safe keep all reports and documents dealt by SEPRELAD; - coordinate joint work with national and international agencies responsible for enforcing AML laws. - The UAF also undertakes financial analysis and data searches at the request of Prosecutors, the Judiciary and the CBP, and receives foreign requests through the Egmont Group secure web. ### STR definition, receipt, and submission methods - STR definition (Article 19 of Law 1015): “any act or operation, regardless of the sums involved, if there is an indication or a suspicion that such act or operation is connected with an offence of money or property laundering. The following in particular shall be considered suspicious transactions: 1. Operations which are complex, unusual or large, or do not follow the pattern of habitual transactions; 2. Operations which, although not large, occur periodically and with no reasonable legal or economic basis; 3. Operations which by their nature or volume are not consistent with the credit or debit operations conducted by the clients in the light of their activities or previous business practice; and 4. Operations which, with no justifiable cause, involve cash payments by a large number of persons.” - De facto STRs are received directly by the UAF for processing. - Current remittance system: manual, paper format, remitted directly by reporting bodies to the UAF headquarters; no electronic or computerized submission system in operation. - STR forms are standardized according to Article 16 of Resolution No. 233 (10/11/2005). - Reporting entities must send a STR to SEPRELAD “immediately, when the institution detected the suspicious act.” - Wire Transfer Report (WTR) obligation (Article 15 of Resolution No. 233): WTRs must be sent monthly and within the ten first days of the calendar month; information is a consolidated summary by geographical area and currencies, without detailed identification of operations. ### STR processing workflow and timing - The UAF operative administrative process for STR receipt and analysis is regulated by a manual derived from SEPRELAD Resolutions No. 292 (11/30/2007), No. 284 (11/20/2007), and No. 291 (11/29/2007). - Process phases (prescribed process and assessor comments): - Phase 1 Reception of the STR: - Receipt of the sealed STR by UAF-SEPRELAD; - STR is assigned a number of entrance table; - STR is registered in the computerized Pursuit STR Database; - STR is sent to the Secretariat of the UAF Director. - Phase 2 Secretariat of the UAF Director: - Receipt of the STR form; - It is given to the Director for processing approval; - Once processing approval obtained, sent to financial analyzing department. - Phase 3 Coordination of the Unit of Financial Analysis: - Receipt of the STR form; - Examines degree of priority and assigns case to a financial analyst; - Validation process based on three levels of priority (High, Average, Low) using criteria: geographic place, amount, type of instrument, amount of STR by reporting entity, time of suspicious operation; - STRs below minimum priority are registered only in the Database and not analyzed; only STRs with minimum validation are assigned to an analyst. - Phase 4 Financial analyst: - Registers STR in analyst’s database; processes case according to Coordinator’s advice; analyzes case per established procedure; establishes Executive Report at end of analysis; sends Executive Report to Coordination for validation; - Financial analysis follows a detailed step by step procedural manual; - Requests for supplementary information/documentation made by notes/letter; - Executive Report emphasizes financial inconsistencies over possible underlying criminal aspect. - Phase 5 Coordination of the Unit of Financial Analysis: - Receives and controls the Executive Report; sends it to the Legal Adviser for revision. - Phase 6 Legal adviser: - Revises the Executive Report with the legal aspect; sends it to the Secretariat of the UAF director. - Phase 7 Secretariat of the UAF Director: - Registers the Executive Report; sends it to the Director for final revision and approval; the Executive Report is sent directly to the office of the prosecutor. - Timeliness: - Phases 1, 2, 3, 5, 6 and 7 typically take one to three days. - Phase 4 (analysis) is highly variable and can go from a minimum of two months to several months, depending on the importance of the case and response time of requested bodies. - UAF present policy: give a term of 72 hours to answer information requests, but some administrations like customs sometimes require extension until two weeks. ### Resources, staffing, and analytical capacity - Prior to August 2007, analyzed cases were minimal and operative resources were focused on processing information and responding to requests from Prosecutors, Judges and the CBP. - Since the new UAF management took over (August 2007), STR analysis has been progressively strengthened. - Staffing changes: - increase of analysts from 3 to 11 at the date of the mission; - financial analysis relies on a core of 3 analysts, with the most senior analyst having five years experience; - two of the core analysts are now coordinators of the analysts. - Because of earlier resource constraints, analysts concentrated on answering external requests, especially from Prosecutors, at the expense of STR analysis. ### Regulations issued to reporting entities (SEPRELAD resolutions) - Resolution No. 233 (10/11/2005) governs procedures for banks, financial institutions, bureaux de change and other organizations subject to AML/CFT supervision. - Resolution No. 312 (12/6/2006) modifies Articles 4, 5, 6, 11, 15, 18 and the Annexed C of Resolution No. 233. - Resolution No. 262 (11/07/2007) governs procedures for cooperatives. - Resolution No. 263 (11/07/2007) governs procedures for insurance companies. - Resolution No. 264 (11/07/2007) governs procedures for real estate agencies. - Resolution No. 265 (11/07/2007) governs procedures for pawn shops created by the Law No. 2,283/03. - Resolution No. 266 (11/07/2007) modifies Articles 8, 10, 15 of Resolution No. 264. - Resolution No. 267 (11/07/2007) modifies Articles 8, 10, 11 and 16 of Resolution No. 265. - Resolution No. 059 (03/13/2008) - Regulation for stock broking companies and securities dealers (stock exchanges). - Resolution No. 060 (03/13/2008) - Regulation for money remittances sector. - Resolution No. 061 (03/13/2008) - Regulation for people who make cross-border physical transport of cash currency or negotiable instruments payable to bearer. - Resolution No. 062 (03/13/2008) - Regulation for gambling establishments. - Resolution No. 063 (03/13/2008) requires reporting entities to maintain policies of prevention of money laundering and to report unusual or suspicious operations. - Noted regulatory coverage gaps: investment societies, trust companies, administrators of mutual investment and pension funds, non-governmental organizations, foundations, and persons/entities engaged in financial broking, trading in precious metals, stones and jewelry, works of art or antiques, or investing in stamps or coins. ### Access to and requests for additional information - Article 28(2) of Law No. 1,015 authorizes SEPRELAD to request and obtain from governmental institutions and reporting entities all information that can be linked with money laundering. - SEPRELAD/UAF does not have direct computerized connection with administrative, financial and law enforcement databases from its headquarters; requests are made by notes/letters and response times range from some days to some weeks. - Upon receiving an STR, the UAF analyst systematically requests all supporting documents from the reporting institution; banking secrecy is not opposable and a copy of documentation is sent to UAF-SEPRELAD. - The UAF can request other reporting bodies for complementary information and supporting documentation during analysis. - The mission is not aware of cases of rejecting a SEPRELAD request by reporting entities. ### Statistics, outcomes, and prosecutorial feedback - According to UAF-SEPRELAD, 90 Percent of the STRs concern the financial activities of legal entities. - The mission notes absence of corresponding statistics to specify ML typology underlying STRs. - UAF-SEPRELAD had analyzed a small number of cases transmitted to the OAG until 2007 due to insufficient analysts, deficient management, and lack of regulations for reporting bodies; new administration from August 2007 prioritized reconstructing and strengthening technical analysis capacity. - DECC reception/result statistics for SEPRELAD referrals: - On a total of 26 cases coming from SEPRELAD in the Directorate of Economic Crimes and Corruption (DECC) of the OAG, a percentage of 42.3 percent becomes an investigation, and 57.7 percent does not give rise to any investigative action. - Eleven cases are opened for investigation, and 15 did not develop into criminal investigations. - DECC reported that cases received from SEPRELAD do not indicate the underlying criminal activity; majority of opened investigations refer to the tax evasion offense. - Convictions and investigations: - Paraguay has provided evidence of fifteen (15) individual convictions for ML, in the context of seven (7) separate cases. - Only six (6) out of the fifteen convictions are confirmed with final rulings, as the remaining nine (9) convictions are still on appeal. - On these seven separate cases for ML, any one proceeds from a ROS analysis transmitted by the UAF, according to the OAG. - A hundred of investigative cases of ML would be currently opened in the specialized unit of the Prosecutors. - Feedback loop: the UAF-SEPRELAD does not receive any feedback regarding the results of its analyses sent to the OAG. ### Prevention outreach - UAF-SEPRELAD has very recently initiated a program of prevention of money laundering through posters and spot publicity; the program is in its initial phase and it is too early to assess impact within Paraguayan civil society. *Source: _cr09235 - 245.* ### 279. In addition to the function of financial analysis, Article 28.5 of Law No. 1,015/97 provides ### _cr09235 - 279. In addition to the function of financial analysis, Article 28.5 of Law No. 1,015/97 provides ### Operational independence and institutional roles - Legal framework: - Article 28.5 of Law No. 1,015/97 attributes to SEPRELAD the power of “ordering the investigation of any transactions that give rise to a reasonable presumption of an offense of money or property laundering.” - Article 31 of Law No. 1,015/97: such investigations shall be carried out by the SENAD’s Economic Crimes Investigation Unit (ECIU). - Decree No. 16,570/97: Article 10 specifies that “the Financial Analysis Unit will work into the Ministry of Industry and Trade, and will be an organ of SEPRELAD under its exclusive dependence...” - Decree No. 16,570/97: Article 3 requires SEPRELAD members to meet at least once monthly. - Decree No. 16,570/97: Article 11 assigns the UAF SEPRELAD receipt, administration and safekeeping of all information and documentation that SEPRELAD receives. - Decree No. 16,570/97: Article 9 requires decisions relative to Articles 28.5 and 28.6 of Law No. 1,015/97 to be taken by a majority of 4 votes at least of the SEPRELAD members. - Practical issues and findings: - The ECIU has not received information from UAF-SEPRELAD to carry out investigations ordered under Article 28.5; in practice ECIU financial investigations are limited to drug trafficking cases opened by SENAD antidrug officers. - SEPRELAD meetings are rarely held because of difficulty assembling six high level authorities. - In practice the UAF director undertakes all functions and duties attributed by law to the SEPRELAD Secretary, including requesting information from reporting entities and submitting financial analysis final reports to the Prosecutor; Law No. 1,015/97 and Decree No. 16,570/97 do not provide such a delegation of authority. - The UAF supplied only a written delegation of authority from SEPRELAD to the UAF Director regarding administration, preparation and execution of the budget (SEPRELAD Resolution No. 1 (10/15/2003)), broadly indicating the director may carry out “any other (resolution) that can guarantee the regular working of the Institution, without prejudice of those that SEPRELAD can or have to issue.” - The practice of UAF director substituting for SEPRELAD Secretary “apparently doesn’t cause an operative problem” for staff and reporting bodies, but may cause a legal problem. ### Protection of information and premises security - Physical premises: - SEPRELAD premises are leased on two levels in a city-center building; one level is below street level. - Concerns: lack of security against fire or floods (example: rupture of water pipes), insufficient protection against unlawful intrusion, entrance directly on the street compromising confidentiality, inadequate visitor control procedures. - Secure entrance exists only in the lower level where technical and operative parts are located (analysis and computer system areas), with personal code and fingerprint, and registers of personnel entry/exit. - IT and data security gaps: - Server capacity is insufficient to install programs other than the STR database. - Visual Link and DIG software acquired but not used due to insufficient budget for annual licenses. - Absence of backup of computerized system; no copy of database exists in case of electronic crash. ### Reporting, publications, outreach, and typologies - Reporting outputs: - SEPRELAD generates quarterly an Administrative Report and yearly an “Institutional Memory” including statistical data on: - Number of STRs - Number of analysis of STRs - Number of Requests by the Prosecutor - Number of Requests by the Judges - Number of Requests by the CBP - Number of exchanged requests of information with the UAF members of the Egmont Group - Trainings - Meetings - Official Representations - Institutional objectives at short, medium and long term - SEPRELAD maintains a public Web portal at http://www.seprelad.gov.py/ accessible without restrictions; STR forms are downloadable. - SEPRELAD has developed an AML awareness campaign (spots and posters) with related documentation accessible on the Web portal. - Typologies and risk analysis: - SEPRELAD has not prepared money laundering typologies derived from its own analyzed cases. - There has been no money laundering risks analysis by economic, professional and financial sectors in the country. ### International cooperation and Egmont membership - Membership and principles: - UAF-SEPRELAD has been a member of the Egmont Group since 1998. - UAF-SEPRELAD adheres to the Egmont Group’s Principles of Exchange of Information. - MOUs and planned agreements: - Since adhesion UAF-SEPRELAD has signed 23 Memorandums of Understanding (MOUs) with FIUs of: Colombia (07/31/97 and 12/26/2007), Brazil (02/28/2001), Panama (06/01/2001), Bolivia (03/12/2002), Korea (04/05/2004), Peru (10/29/2004), Chile (11/05/2004), Argentina (12/17/2004), FINCEN - USA. (03/09/2005), Mexico (06/29/2005), Guatemala (06/31/2007), Aruba (06/30/2007), Israel (06/29/2007), Lebanon (06/29/2007), Sweden (06/30/2007), Czech Republic (08/03/2007), Netherland Antilles (10/10/2007), China (Taiwan, 10/11/2007), Bosnia-Herzegovina (10/29/2007), Portugal (12/13/2007), Croatia (04/21/2008), Albania (06/13/2008) and Ecuador (07/29/2008). - Other MOUs are to be signed with the FIUs of Canada, Monaco, Rumania, Russia, Japan and Bahamas. - Use of Egmont network: - UAF-SEPRELAD receives or sends requests through the secure Egmont web. - The mission notes very limited use of the Egmont network despite 23 agreements, indicating underuse of this international intelligence source. ### Adequacy of resources, staffing, and remuneration - Staff categories and numbers: - Employees classified as permanent, commissioned and contracted. - Permanent employees are civil service officials under law 1626/2000. - Commissioned employees are permanent civil servants seconded from other institutions. - Contracted employees have six-month renewable contracts, paid after monthly invoices, without civil service benefits. - Analyst staffing and turnover: - In 2007 number of analysts lowered to only three members for several months. - From August 2007 administration hired new professionals; at mission time there were 11 persons assigned to financial analysis, corresponding to a third of UAF employees. - Twelve (12) employees have six-month contracts not systematically renewable, especially in analysis area; an analyst had been on such a contract for five years. - Honorary wages for financial analysis personnel are less than 1,000 USD per month. - In 2007 two analysts left for AML compliance officer positions in private financial institutions for better salaries. - Budget and expenditures: - The UAF has a budget conceded by the Presidency of the Republic; budget figures and use for 2007 are reported in the source (tables not reproduced here). - Permanent civil employee costs represent almost 65 percent of the budget for 2007. - Remuneration of commissioned employees is not included within the UAF budget; it is charged to their home administrations. ### Integrity, training, and analyst capacity - Recruitment and ethics: - Administrative and professional employees recruited on basis of suitability and capability. - Analysts undergo a selection process including use of the polygraph. - No internal code of ethics exists yet; new management from August 2007 established internal manuals for STR management procedures and analysis. - Article 32 of Law 1015 imposes duty of professional secrecy on SEPRELAD personnel; sanctions for infringement provided in Public Function Law No. 1,626/2000 (Articles 57(f) and 64). - Mission not aware of violations of secrecy or undue influence. - Training needs: - UAF financial analysis staff have received specialized AML training, but training should be extended to more technical aspects related to analyzing ML investigating cases and money laundering and terrorist financing typologies. ### Statistics, STR processing, and effectiveness - Databases and reporting: - UAF-SEPRELAD maintains a continuous database on STRs received, including origin and those analyzed and transmitted to the OAG; database permits establishment of annual statistics. - Annual report covers activities and budget management and includes number of STRs received per month and per reporting entity, but annual reports do not contain analysis of STR patterns. - Despite strengthened statistics management since August 2007, the unit lacks means for statistical presentation on ML typologies and trends; analysis of cases to develop ML/FT typologies is nonexistent. - Specific reporting gaps: - No registry or statistics on Wire Transfers Reports (WTR) from or towards abroad that supervised financial institutions must send monthly to SEPRELAD per Resolution No. 233 of 11/10/2005; WTRs are accumulated without being processed or registered and have not been mentioned in UAF annual report since 2005. - SEPRELAD does not receive feedback from judicial authorities on outcomes of STR analysis transmitted to the OAG; no statistics on criminal investigations or convictions resulting from STRs. - Effectiveness observations: - Almost 60 percent of cases forwarded by SEPRELAD to the OAG do not result in opening a criminal investigation. - Majority of consecutive investigations are only for tax evasion offense. - None of the seven sentenced cases by Paraguayan courts proceeds from a previous STR. - Mission considers STR analysis by UAF-SEPRELAD does not reflect “vehemence” of link with money laundering and adds little value beyond documenting financial inconsistency reported by reporting entity. - Mission suggests better coordination between UAF-SEPRELAD and UIDF could facilitate determination of “vehement” money laundering indications and evolve STR process into useful financial intelligence. - Many high-risk sectors (Gambling Establishments, financial cooperatives, foundations and nongovernmental organizations) have never reported suspicious transactions; suspicious transaction reporting largely done by banks. - SEPRELAD lacks an ongoing policy of information, guidance or training for higher risk sectors. ### Recommendations (as provided by the mission) - Legal and institutional: - To adopt a new law to clarify the duties of the Financial Analysis Unit, and to give it a real autonomy. - To reconsider the present structure of the SEPRELAD and UAF. - Systems and tools: - To implement a secure computerized system of STRs sending between reporting authorities y SEPRELAD. - To give SEPRELAD sufficient financial resources to equip it with computerized tools, and to give the sufficient financial remuneration to the personnel. - To consider the moving of the UAF headquarters toward more suitable premises with a better general security. - Investigations and coordination: - To develop and apply the investigative function that Law No. 1,015 gives to the SEPRELAD, and coordinate better the relation with the specialized unit of the SENAD, to strengthen the money laundering detection that permit the Prosecutor opens more proactive judiciary investigations. - To strengthen the operative coordination with the national police, the SENAD, the Customs and the OAG. - Capacity, outreach, and analysis: - To reinforce the role of the UAF in the matter of information and training of the financial and non financial institutions and professionals obliged with the AML law. - To establish a monitoring tool to measure the risks of money laundering and terrorism financing, with the corresponding typologies. - To develop the statistics on typologies and their trends. - To strengthen the area of the financial analysis and the treatment of the suspicious transactions reports. - To develop training adapted for the analysts. - To develop the systematical use of Egmont Group with respect to international cooperation. - To develop a national strategy of prevention and in fighting the money laundering, in relation with the corruption and organized crime fighting. ### Compliance with Recommendation 26 — Summary of factors underlying rating - R.26: PC - Factors: - Lack of specific operational autonomy of the UAF - Confusion between SEPRELAD and the UAF about respective functions and duties - Insufficient operative budget for the UAF - Insufficient capacity of STR analysis to determine ML/FT activities - Absence of statistic and description of ML/FT typologies - Lack of coordination with the investigative authorities - Lack of regulations to some non financial reporting entities - Insufficient protective measures into the SEPRELAD headquarters - Lack of computerized analytical tools - Insufficient use of Egmont Group for exchanging information - Insufficient remuneration for the UAF employees *Source: _cr09235 - 279.* ### 320. Legal Framework: Law No. 1,340/88; Law No. 1,015/97; Decree No. 15,975/97; Law No. ### 320. Legal Framework: Law No. 1,340/88; Law No. 1,015/97; Decree No. 15,975/97; Law No. 222/93; Law No. 1,881/2002 ### Designation of Authorities — ML/FT Investigations (c. 27.1) - SENAD created by Law No. 1,340/88 (1988) to coordinate governmental and non-governmental anti-drug actions; SENAD reports directly to the Presidency. - Decree No. 15,975/97 created the Financial Crimes Investigations Unit – FCIU – within SENAD (Article 23) to prevent, recover and control money laundering from drug trafficking and connected crimes. - Article 31 of Law No. 1,015/97 designates the FCIU to investigate money laundering; Art 28.5 gives SEPRELAD duty to “order the investigation of any transactions that give rise to a reasonable presumption of an offense of money or property laundering”. - FCIU: 6 officers, headquarters in Asunción. - OAG Directorate against Economic Crimes and Corruption (DECC), created in 2005, has competency over public property offenses; tax evasion; smuggling; money laundering; bankruptcy fraud; illegal enrichment; influence peddling; extortion; corruption. DECC: 11 prosecutors, headquarters in Asuncion. - National Police (Law No. 222/93) has Department of Economic and Financial Crime (DEFC) within Directorate of Tactical Support, General Directorate for Order and Security. - DEFC: 125 police officers across Asuncion headquarters and regional “commissariats”; organized in 6 departments: economic offenses; financial offenses; offenses against intellectual property; intelligence; planning and operations; legal assessment. - Customs officers participate in combating ML/TF, particularly illicit cross-border cash transport and international trade. ### Ability to Postpone/Waive Arrest or Seizure (c. 27.2) - Law No. 1,015 does not mention the possibility to postpone/waive arrest or seizure; mission informed the technique is not applied. ### Use of Special Investigative Techniques (c. 27.3 — Additional Element) - Law No. 1,881/2002 (amending Law No. 1,340/88) since 2002 permits controlled deliveries only in drug trafficking cases (Articles 84–85); controlled deliveries can be ordered by a judge at the request of SENAD or a prosecutor. - Articles 82–83 of Law No. 1,881/2002 permit SENAD special agents to conduct under-cover operations, infiltrations, and the use of informants (Article 97). - No system of witness protection in Paraguay. - Article 200 of the Penal Process Code authorizes communications interception by judicial decision; application is exceptional. - Mission reported lack of financial resources and training to apply special techniques. ### Use of Special Investigative Techniques for ML/FT (c. 27.4 — Additional Element) - Law No. 1,015/97 does not provide for special investigative techniques; by extension Law No. 1,881 appears to authorize such techniques only for AML investigations linked to drug trafficking, not for other predicate offenses. - Operational constraints: - FCIU/SENAD has only 6 special agents and very limited financial resources. - FCIU/SENAD and special units of National Police and OAG lack technical tools to intercept communications and do not practice agent infiltration. - Consequently, special techniques are not applied in AML investigations (except as limited by drug trafficking provisions). ### Specialized Investigation Groups & Multi-National Cooperation (c. 27.5 — Additional Element) - No formal specialized inter-institutional investigative Group. - Organic cooperation occurs among special financial units of OAG, SENAD, and Paraguay Police within legal attributions. - SEPRINTE exchanges information with MERCOSUR countries and the 3+1 Counterterrorism Group; SEPRELAD/UAF participates in MERCOSUR regional AML working groups. - Paraguayan Customs exchanges information with bordering countries and uses the Trade Transparency Unit system in relation with US customs. ### Review of ML & FT Trends by Law Enforcement (c. 27.6 — Additional Element) - Authorities have not carried out any analysis or review of money laundering and terrorist financing trends. ### Ability to Compel Production of and Searches for Documents and Information (c. 28.1) - Article 193 of the Criminal Procedure Code (CPC) obliges any person or institution in possession of objects/documents related to a punishable act to deliver them when compelled; interpreted that a public prosecutor (OAG) request is sufficient. - If refused, OAG can seek a judicial order; court order can authorize searches. Provisions extend to financial and commercial institutions and physical persons. ### Power to Take Witnesses’ Statements (c. 28.2) - Paraguayan criminal system is accusatory; Articles 202–213 CPC permit law enforcement to take witness statements. - Witness obligations and procedures: - Testify is obligatory (Article 203) except for persons listed in Articles 204, 205, 206. - OEA can order detention for maximum six hours to administer a judicial order (Article 212). - If refusal persists, OEA can order detention for 24 hours and initiate a penal cause (Article 210). - Witness statement is made with lawyer present. - Credibility of evidence assessed by court at judgment. - Mission received no information on compliance problems with requests for documentation/information by reporting financial bodies in AML investigations; existence of sentences in various ML investigations supports compliance with Recommendation 28. ### Adequacy of Resources to Law Enforcement and Prosecutorial Agencies (c. 30.1) - Resource disparities: - SENAD’s FCIU: 6 special agents; SENAD total budget: $1.5 million; only $150,000 allocated to counter narcotics operations. - DEFC of National Police: negligible financial resources; specialized police unit lacks its own budget and depends on general Police National administration budget. - Prosecutors better resourced than operational units but still limited; three financial crimes prosecutors added in 2007, bringing total to 11 staff. - Operational tools lacking; insufficient budgets limit investigation and prosecution capacities. ### Integrity of Competent Authorities (c. 30.2) - National Police and Customs administration perceived by public as very vulnerable to corruption; mission informed of several corruption cases pursued against civil servants. - Low wages: - Specialized police officers’ salaries around USD 200.00 per month for low ranked police officer to USD 800.00 per month at the commissioner’s level. - Justice perceived as influenced by politics, nepotism and influence peddling despite more transparent selection criteria adopted in 2005. ### Training for Competent Authorities (c. 30.3) - SENAD and specialized prosecutors invited to UAF SEPRELAD seminars and workshops; DECC specialized prosecutors in Asuncion have received training and display good professionalism. - Important need for AML/CFT training for national police, SENAD, and customs, particularly on operational investigations, inter-agency coordination (very poor), and special investigative techniques. ### Special Training for Judges (c. 30.4 — Additional Element) - Training activities: - Simulated trial on money laundering developed in Asuncion by the Inter-American Drug Abuse Control Commission with judge participation. - Judges received AML/CFT training from US Embassy and a UNODC workshop on collecting evidence in ML cases. - Many provincial judges have not received training; inconsistency has produced disagreement among judges on the autonomy of the money laundering offense. ### Statistics (applying R.32) - No centralized national statistics concerning ML cases. - Existing ML statistical data are few, not centralized, and differ between services. - Mission considers low interagency coordination, lack of human/financial resources, and insufficient training and operational capacities inhibit prosecution and punishment of ML offenses. ### Recommendations and Comments (2.6.2) - Recommended to Paraguayan authorities: - Increase operative budget of specialized units against financial crime of SENAD and National Police. - Develop an adapted training program focused on operative investigations and coordination of law enforcement agencies. - Develop a national program of special training for judges on interpretation of evidence in money laundering offenses, including terrorist financing aspect, and on the autonomy of these offenses. - Consider creating a permanent interagency Task Force especially in charge of fighting money laundering and terrorist financing activities that could depend on the Ministry public. - Consider creating a specialized jurisdiction of judgment against financial criminality, including money laundering and terrorist financing offenses, with national competence. ### Compliance with Recommendations 27 & 28 (2.6.3) - R.27: NC - Lack of legislation about special investigative techniques in ML and FT cases. - Absence of application of special investigative techniques in ML investigations. - R.28: C --- ### 2.7. Cross Border Declaration or Disclosure (SR.IX) ### Legal Framework - SEPRELAD Resolution No. 61 (03/11/2008) regulates money laundering prevention and repression of cross-border cash couriers. - Article 28.1 of Law No. 1,015 provides SEPRELAD regulatory authority regarding administrative rules for reporting entities to avoid, detect and report money laundering activities. - CBP Resolution No. 9 (12/26/2007) governs minimum exigencies and procedures for supervised financial institutions remitting currencies domestically; not linked to cross-border cash movement. ### Mechanisms to Monitor Cross-border Physical Transportation of Currency (c. IX.1) - SEPRELAD Resolution No. 61 obliges declaration of amounts surpassing the threshold of 10.000 USD or its equivalent in other negotiable currencies or instruments to bearer (includes traveler’s checks, promissory notes and monetary orders that are bearer or endorsed without restriction, fictitious beneficiary instruments, incomplete instruments signed with omitted beneficiary). - “Transport” covers physical transport by person (luggage/vehicle), shipment through a container, or postal shipment; applies to entry and exit of Paraguay. - Implementation gaps: - SEPRELAD Resolution No. 61 not yet applied by customs; form not applied for travelers leaving the country. - No public information for travelers about obligatory declaration or risks of non-declaration at least in airports of Asuncion and Ciudad del Este. - In Ciudad del Este, no control on individuals crossing bridge linking Brazil and Paraguay daily by the thousands on foot, vehicles, or motorbikes. - Customs reports for persons transporting $10,000 or more into/out of Paraguay are often not actually collected or checked. - Customs operations at airports and land ports provide no control of cross-border movement of cash. - Border control deficits and risks: - Country has high levels of drug production/trafficking, trafficking in persons, smuggling, and suspected arms trafficking; lack of adequate border controls increases ML/TF risk. - Customs conducts minimal inspection at borders; prosecutors and judges signal Customs as obstacle to detection and effective prosecution. - Example: Ciudad del Este Customs conducts minimal random inspections of personal vehicles/motorcycles crossing border; less than 5 Percent of the three hundred trucks that on average enter the country every week are effectively inspected; minimal random inspections on trucks leaving the country. - River crossings and dry land border crossings have hundreds of illegal ports used nightly to transport merchandise with no surveillance. - Prosecutors concerned Customs may fail to report unlawful activity detections; Customs sometimes closes administrative proceedings upon tax collection without reporting possible offenses to prosecutors. - Some judges refuse prosecutions pending administrative tax determinations (“prejudicialidad”), or following closure of administrative proceedings if no fiscal damage remained, leaving criminal offenses unpunished (example: region of Alto Paraná where no smuggling cases reached courts in past five years). ### Request Information on Origin and Use of Currency (c. IX.2) - Control based on a disclosure system: travelers must declare to Customs at entry whether they carry more than USS 10.000 in cash or equivalent, answering yes/no in Spanish and English. - Declaration obligation does not mention any criminal punishment for bringing more than such amount in cash or for making a false declaration. *Source: IMF staff report text unit _cr09235 - 320.* ### 361. By virtue of this declaration of entrance, except the case of not bringing such amount, two ### _cr09235 - 361. By virtue of this declaration of entrance, except the case of not bringing such amount, two ### Cross-border physical transportation of currency — Restraint of Currency and Controls (paras. 361–381) - Two possibilities arising from the declaration of entrance (para. 361): - (a) The traveler declares to bring an amount in cash superior to 10,000 USD - (b) The traveler responds not to the question, although he in fact brings such amounts. - Declaration form elements (para. 362): - His name, identity and identity documents references - Amount, currency of the funds, or financial instruments - Origen and destiny of the funds - Way of transport - Where false declaration or illicit origin is suspected (para. 363): - Customs officers must inform SEPRELAD within 48 hours. - Sanction for false declaration is undetermined; SEPRELAD Resolution No. 6 is silent regarding retention period. - Authorities indicate such a case would have to be forwarded by customs services to the OAG. - Information handling (para. 364): - Information reported on the form is not collected or verified and is not recorded in a database. - Information sharing and cooperation (paras. 365–367): - Collaboration exists between the UAF-SEPRELAD and Customs, but appears primarily UAF → Customs. - No centralized system exists to track declarations; principle of declaration described as "very vague" (para. 366). - Customs report mechanisms of exchange of information in Mercosur and with the United States of America but no statistics on volume of cross-border cash transport exist (para. 367). - No evidence of a regional integrated policy on cross-border cash control (para. 367). - International and regional arrangements (paras. 368–369): - Paraguay is member of the "3+1" Counterterrorism Group on Tri Border Security (Argentina, Brazil, Paraguay, United States of America), which includes money laundering and terrorist financing exchange. - Paraguayan authorities have signed law enforcement agreements with Brazil, Argentina, Chile, Venezuela and Colombia in drug fighting matters. ### Sanctions, confiscation, and enforcement gaps (paras. 370–376, 374–375) - Sanctions and criminalization (paras. 370–373): - The declaration obligation does not mention any criminal punishment for bringing more than the threshold and making a false declaration (para. 370). - Article 13 of the Resolution indicates false declaration will be object of sanction by the National Direction of Customs, with possible elevation of antecedents to the OAG (para. 371). - No criminal definition exists to sanction cross-border cash transport in relation with money laundering and terrorism activities (para. 372). - Sanctions and retention procedures appear to derive from custom law and criminal code about contraband (para. 372). - Paraguayan Penal Code doesn’t include transportation of currency in Article 196 against money laundering, and Paraguay has not yet a terrorist financing legislation (para. 373). - Confiscation and application of UN SCRs (paras. 374–377): - Lack of legislation prevents clarity on confiscation process and whether it is administrative or criminal (para. 374). - Resolution forms are not applied in practice for travelers leaving the country; no public information exists at airports of Asuncion and Ciudad del Este on obligatory declaration or risks of not declaring (para. 375). - No control observed in Ciudad del Este at the land border bridge with Brazil; thousands cross daily by foot, vehicles or motorbikes without control (para. 376). - For air travelers, despite obligation to inform on Customs Declaration Form about possession of amounts of more than 10.000 U.S., there is in fact no control by customs officers (para. 377). ### Information sharing, safeguards, and databases (paras. 378–382) - No measures reported for notification of foreign agencies of unusual movement of precious metals and stones (para. 378). - Safeguards and data availability (para. 379): - Mission did not receive data necessary to estimate the safeguard system in use in Customs administration, especially for Customs Declaration form information. - Implementation and reporting (paras. 380–382): - No cases under SEPRELAD’s recent measure have been discovered; no registered reports about cross border transportation cases (para. 380). - Paraguayan Customs and UAF-SEPRELAD participate in the "Trade Transparency Unit" US program; mission does not know if it has led to money laundering investigations (para. 381). - No special database on cross-border cash transportation exists in Customs administration; UAF-SEPRELAD registers STRs into its own computerized database, but to date no STRs have been established by Customs under Regulation 61 of SEPRELAD (para. 382). ### Recommendations and SR.IX compliance summary (paras. 382, 2.7.2–2.7.3) - Recommendations (para. 2.7.2): - Authorities should take measures to apply an effective control on the cross-border cash transport. - SEPRELAD should coordinate with customs and police authorities for an effective implementation of the measures of its Resolution No. 61. - Compliance with Special Recommendation IX (para. 2.7.3 and SR.IX rating summary): - SR.IX: NC - Factors underlying rating: - Lack of implementation of a national control policy against cross-border cash couriers. - Inexistence of cash transport control in the land frontier check points. - Inefficiency of cash transport control in the international airports. - Absence of results on the control of the cross-border cash transportation. ### Preventive measures — Financial institutions: institutional framework and AML law scope (paras. 383–393, 394–395) - Supervisory authorities (para. 383): - Four competent authorities supervise the financial system: - Superintendency of Banks (SIB) — technical supervisory body within the CBP - Superintendency of Insurance (SIS) — technical supervisory body within the CBP - National Securities Commission (CNV) - National Institute of Cooperatives (INCOOP) - SIB oversight: banks, finance companies, exchange bureaus, and other entities taking deposits, granting credits, and financing government projects. - SIS oversight: insurance companies, brokers and agents; reinsurance companies, casualty liquidators. - CNV oversight: exchanges, brokerage houses, mutual funds firms, risk rating companies, external auditors, securitization firms. - INCOOP oversight: all cooperatives operating in Paraguay. - AML Law coverage and limitations (paras. 384–386): - Preventive measures imposed by Law No. 1,015/97 ("AML Law"). - AML Law provides a list of entities subject to obligations rather than a definition of "financial institutions" aligned with the FATF Glossary. - Entities listed include banks; finance companies; insurance companies; exchange bureaus; stock exchange, securities brokers and dealers; investment companies; trust companies; administrators of mutual investment and pension funds; credit and consumer cooperatives; gambling establishments; real estate agencies; non-governmental organizations and foundations; pawn shops; and any other natural person or legal entity regularly engaged in financial intermediation, trading in precious metals, stones and jewelry, works of art or antiques, or investing in stamps or coins (para. 384). - AML Law does not cover the full range of FATF-listed financial institutions; missing coverage for financial leasing, transfer of money or value, trading in transferable securities and commodity futures, safekeeping and administration of cash or liquid securities on behalf of other persons, insurance agents and brokers, securities brokers, other types of cooperatives (para. 384). - Chapter 3 of AML Law sets preventive measures application conditions (para. 385): - Obligations apply to: 1) all transactions in excess of ten thousand US dollars or the equivalent in other currencies, subject to exceptions provided in the law; and 2) any transactions for less than ten thousand US dollars or the equivalent in other currencies if it may be inferred such transactions were structured to evade identification, recording, and reporting obligations. - These conditions appear inadequate with respect to addressing preventive measures for establishing a business relationship. - Chapter 3 duties include: customer identification (including for persons acting on behalf of the customer); record keeping; reporting of suspicious transactions; prohibition of tipping off; internal audit procedures; cooperation; administrative penalties for legal entities; and range of sanctions (para. 386). - Chapter 4 covers supervisory responsibilities, including duties of SEPRELAD to issue regulations for effective implementation (para. 386). - SEPRELAD role and issued resolutions (paras. 389–393): - SEPRELAD authority to issue resolutions/regulations under Article 28 of the AML Law (para. 389). - SEPRELAD resolutions include: - Resolution No. 233 (issued October 2005; modified December 2006 by Resolution No. 312) — applicable to financial institutions under SIB. - Resolution No. 262 (issued November 2007) — applicable to financial institutions under INCOOP. - Resolution No. 263 (issued November 2007) — applicable to financial institutions under SIS. - Resolution No. 59 (issued March 2008) — applicable to financial institutions under CNV. - Resolution No. 60 (issued March 2008) — applicable to persons performing remittances. - Resolution No. 63 (issued March 2008) — obligations to establish and maintain AML policies and to report to the UAF unusual or suspicious transactions. - Money remitters have no designated competent authority for supervision; they operate through agency relationships with two banks and two finance companies under SIB supervision (para. 389). - CBP Directorate issued Resolution No. 11 (SIB issued October 2005) and Resolution No. 155 (SIS issued May 2005 and modifications) adopting preventive measures of SEPRELAD (para. 390). - CNV issued Resolution No. 1,103 adopting SEPRELAD preventive measures and Resolution No. 1,114 (June 2008) to modify two Articles (para. 391). - INCOOP did not issue a binding resolution adopting SEPRELAD measures; issued Circular 06/08 reminding cooperatives of requirements in Resolution No. 262, but circular does not have force of law (para. 392). - Resolutions by SEPRELAD and supervisory authorities are considered "other enforceable means" for this assessment but are not directly legislative; a key condition is evidence of enforcement actions (para. 393). - As of visit date, none of the competent supervisory authorities had imposed a sanction or enforcement action under their own resolutions or those issued by SEPRELAD (para. 393). ### Implementation analysis and supervisory effectiveness (paras. 394–395) - Overall assessment (paras. 394–395): - Level of compliance with FATF Recommendations is low. - Specific requirements under the recommendations are often not established by laws, regulations, and other enforceable means. - Some private sector financial institutions, particularly subsidiaries of foreign banking organizations, appear to follow recommendation requirements and in some cases exceed local requirements. - Contributing factors to low implementation: - Lack of ongoing and effective supervision by competent authorities, especially in securities, insurance, and cooperatives sectors where limited or no supervision takes place. - Lack of supervisory resources. - Lack of effective and dissuasive sanctions for non-compliance. ### Customer due diligence legal framework (paras. 396 onward) - Reporting entities defined (para. 396): - Article 13 of Law No. 1,015/97 lists reporting entities: banks; financial institutions; insurance companies; bureaux de change; stock broking companies and securities dealers (stock exchanges); investment companies; trust companies; administrators of mutual investments and pension funds; credit and consumer cooperatives; gambling establishments; real estate agencies; non-governmental organizations and foundations; pawn shops; and any other natural person or legal entity regularly engaged in financial broking, trading in precious metals, stones and jewelry, works of art or antiques, or investing in stamps or coins. - Identification obligations (paras. 396–397): - Article 14: reporting entities must register and verify, through reliable means, identity of clients, whether permanent or occasional, before establishing a business relationship, and identify persons purporting to conduct transactions. - Article 15: identification includes verification of customer’s identity; identification and verification of the person acting on behalf of the customer; customer’s address; customer’s occupation; or the legal status of the legal person. - Article 16: where doubts exist that customers are not acting on their own, reporting entities must obtain necessary information to identify persons on whose behalf customers are acting. - Prohibition of anonymous accounts (c. 5.1) is addressed under these provisions (para. 396). *Source: _cr09235 - 361. By virtue of this declaration of entrance, except the case of not bringing such amount, two (PDF chapter content)* ### 397. There is no obligation in primary or secondary legislation prohibiting anonymous or ### _cr09235 - 397. There is no obligation in primary or secondary legislation prohibiting anonymous or ### Anonymous accounts and enforceable measures - There is no obligation in primary or secondary legislation prohibiting anonymous accounts or accounts in fictitious names. - The obligation is established by resolutions issued by SEPRELAD and are considered other enforceable means for purposes of this assessment. - Article 8 of Resolution of the Central Bank of Paraguay – No. 2 (Act No. 84/97) prohibits financial institutions under CBP supervision from maintaining anonymous accounts or accounts in fictitious names. - SEPRELAD resolutions addressing financial institutions under SIB, SIS, CNV, and INCOOP: - Article 6(4)(c) of Resolution No. 233 - Article 6.4.2(c) of Resolution No. 263 - Article 6(3)(c) of Resolution No. 59 - Article 6(2)(a) of Resolution No. 262 - These state that financial institutions should implement measures and internal controls to avoid opening anonymous accounts or accounts in fictitious names. - Authorities stated that there are none of these accounts in the system. ### When Customer Due Diligence (CDD) is required (c. 5.2) - Article 14 of Law No. 1,015/96 (“AML Law”) requires reporting entities to register and verify, through reliable means, the identity of their clients, whether permanent or occasional, at the time the business relationship is established and to identify persons purporting to conduct transactions. - There is no threshold in place or a requirement to conduct CDD when the occasional transaction is carried out in a single operation or in several operations that appear to be linked. - There are no specific legal/regulatory requirements to undertake CDD when: - occasional transactions are wire transfers; - there is suspicion of money laundering or terrorist financing; - financial institutions have doubts about the veracity or adequacy of previously obtained customer identification data. - Financial institutions visited indicated natural and legal persons are identified before the relationship is established. ### Identification measures and verification sources (c. 5.3) - Articles 14, 15, and 16 of the AML Law establish customer identification obligations and due diligence measures: - Article 14: register and verify identity of clients at relationship establishment and identify persons conducting transactions. - Article 15: identification includes verification of: - customer’s identity; - identification and verification of the person acting on behalf of the customer; - customer’s address; - customer’s occupation; - legal status of the legal person. - Article 16: if doubts exist that customers are not acting on their own, reporting entities must obtain necessary information to identify the persons on whose behalf the customers are acting. - Obligations do not explicitly require identification and verification of legal arrangements. - In practice, private sector officials indicated CDD for natural and legal persons occurs at relationship start and accounts are not used until verification and CDD are completed. - Documentation used includes government-issued documents, authenticated and/or notarized, or legalized by a ministry. ### Identification of Legal Persons or Other Arrangements (c. 5.4) - Article 15 requires identification and verification of provisions regulating the power to bind the legal person, occupation, or legal status. - Article 16 requires obtaining necessary information when doubts exist about persons acting on their own. - Existing requirements cover legal persons but do not explicitly cover legal arrangements (including trust arrangements – “fideicomisos”). - SEPRELAD issued sector-specific resolutions addressing customer identification and due diligence for each supervisory authority. ### SIB (banks, finance companies, exchange houses, others) requirements - Under Article 5(1)(a) of Resolution No. 312 (modified Resolution No. 233), documentation required when identifying established customers, particularly legal persons: a) Tax identification number b) Articles of incorporation and modifications/updates c) Owners and/or main shareholders and board of directors d) Legal representatives e) Authenticated copy of power(s) of attorney f) Commercial registry g) Information on capital position, financial condition of the company supported with financial statements prepared in line with the country’s accounting standards in place h) Confidential reports i) Banking and commercial references, to be verified by the financial institution pursuant to its policies j) Other documents, as determined by the financial institution and its policies k) for foreign legal persons, in addition to documents validating legal status, documentation must be legalized by the Ministry of Foreign Affairs of Paraguay or by the Consulate of Paraguay in the jurisdiction. ### SIS (insurance) requirements - Article 6.2 of Resolution No. 263 requires reporting entities to obtain from legal persons the articles of incorporation or other document evidencing incorporation and legal existence. - Customer identification file must record: a) name, denomination or trade name and copy of the tax identification number b) address, including street number, town, country, and telephone number c) name(s) of the administrator(s), director(s), general manager and/or legal representative d) copy of the legal document (properly authenticated) evidencing the authority and power of those listed on c) to bind the legal person e) original or authenticated copy (notarized copy) of the articles of incorporation f) any other document that establishes the existence of the legal person (tax documents, leasing contract, utilities receipts) and maintaining copies of such documents g) other documents that the financial institution determines necessary, pursuant to its policies. - For foreign legal persons: present original documents establishing existence, corresponding visa by the consulate, evidence of legal representative’s powers, and if legal representative is a foreigner, original passport with respective visa; copies must be maintained. - Article 6.3: for transactions conducted by legal representatives, require original power of attorney (through public notary) and identification documentation which may include: a) certificate of incorporation of the legal person b) name(s) and address(es) of the beneficiary(ies) and/or person(s) granting the powers to trustees/legal representatives to act on their behalf c) articles of incorporation of the legal person d) authenticated copies of any legal power granted by the institution, if a legal person e) documentation properly signed that explains the nature of the institution, if a legal person f) other documents that the reporting entity determines, pursuant to its policies. ### CNV & INCOOP requirements - Article 5 of Resolution No. 59 and Article 5 of Resolution No. 262 require original documents and copies for legal persons including: a) tax identification number b) articles of incorporation and related modifications, if any c) detailed and updated information on partners and/or main shareholders and board of directors d) detailed and updated information on legal representatives e) authenticated copy of the special powers granted to carry out any type of transactions f) company registry information and/or economic activity g) information on the company’s solvency, economic, and financial situation, supported by financial statements prepared in accordance with the country’s accounting standards h) confidential information and judicial orders (the judicial order is not a requirement for cooperatives) i) banking and commercial references, to be verified by the financial institution, pursuant to its policies j) other documents that the financial institution determines, pursuant to its policies k) for foreign legal persons, equivalent documentation to evidence legal existence and/or authorization to conduct operations, acknowledged and authorized by the Consulate of the Republic of Paraguay and legalized by the Ministry of Foreign Affairs. ### Money remitters - Resolution No. 60, Article 13 defines permanent and occasional customers and persons acting on behalf, beneficiaries or owner. - Article 14 requires client identification be maintained in a register/file with the following documents: 1. Full name of the customer 2. Identification number or passport number 3. Full address (street, number, city, country) 4. Telephone number 5. Occupation - Beneficiaries are required to meet the same identification requirements. - These requirements fall short regarding verification of the legal status of legal persons or legal arrangements. ### Application forms and practice - Application forms used by financial institutions during account opening capture the majority of resolution requirements for both natural and legal persons. ### Identification of Beneficial Owners (c. 5.5; 5.5.1 & 5.5.2) - There is currently no requirement in primary or secondary legislation for FIs to identify beneficial owner(s). - Private sector meetings revealed beneficial owner identification is not addressed due to absence of explicit requirement; criterion is not met. - SIS imposes the requirement through Resolution No. 263, Article 3 for insurance companies and Resolution No. 60, Article 13(3) for money remitters. - Resolutions No. 312 (modified No. 233) and Resolution No. 59 are silent on beneficial ownership for banks, finance companies, exchange houses, and brokerage and mutual funds firms. - Elements of c.5.5.1 and c.5.5.2 (identification when customer acts on behalf of another and understanding ownership of legal persons) are included in c.5.4 description, but: - the term “control” is not defined; - documentation under c.5.4 is insufficient to clearly understand control structure and ultimate effective control of legal persons or arrangements; - “legal arrangements” are not addressed by law or regulations. - No specific requirement in primary or secondary legislation to oblige FIs to determine the natural persons that ultimately own or control the customer, including those who exercise ultimate effective control over a legal person or arrangement. ### Information on purpose and nature of business relationship (c. 5.6) - Article 4 of Resolution No. 312 (modified Resolution No. 233), No. 263, No. 59, and No. 262 requires FIs to establish verification procedures for customer due diligence. - Article 4(b) requires at a minimum reasonable measures to verify the purpose and the nature of the business relationship with the established customer. - Private sector officials indicated specific questions are asked and written evidence of the interview is documented in application forms for both individuals and company/corporate customers. ### Ongoing due diligence on business relationship (c. 5.7; 5.7.1 & 5.7.2) - There is no requirement in primary or secondary legislation or other enforceable means to require FIs to conduct ongoing due diligence on the business relationship. - Resolutions (No. 233, No. 263, No. 59, No. 262) require FIs to establish verification procedures and: - Article 4(c) requires reasonable measures and controls to monitor all transactions by customers to ensure consistency with FI’s knowledge of the customer. - Banks typically conduct ongoing due diligence using specialized software to detect unusual transactions, flag expiring documentation, and generate customized reports. - For money remitters: - No requirement addressing ongoing due diligence generally. - Article 20 of Resolution No. 60 requires daily monitoring of transactions on a consolidated basis and focuses on monitoring unusual transactions that exceed US$10,000 and those that exceed this threshold during a calendar month that must be reported; this does not comply with the essential criteria. - Article 7 of Resolution No. 233, Resolution No. 59, and Resolution No. 262 require FIs to establish a customer profile including at minimum the information in Annexes A & B to determine type, volume, and frequency of services expected. ### Customer profile elements - Annex A (natural persons) requires consideration of: 1. name of the customer/account holder 2. type of transactions 3. personal information 4. identification documents 5. financial activity information 6. banking/commercial references 7. account information 8. anticipated account activity/transactions 9. signatures and approvals - Annex B (legal persons) requires consideration of: 1. name of the customer/account holder 2. type of transactions 3. company information 4. financial activity information 5. references 6. account information 7. capital (net) and income 8. anticipated account activity/transactions 9. signatures and approvals ### Monitoring and recordkeeping - Article 4(c) of Resolution No. 263 requires insurance sector FIs to establish measures and controls to monitor all transactions to ensure consistency with customer profile. - No requirement for insurance companies and money remitters to conduct ongoing due diligence. - Article 4(d) of the SEPRELAD resolutions requires reasonable measures to keep up-to-date and relevant customer records; Resolution No. 233 extends requirement to both permanent and occasional customers. - Resolution No. 233 requires FIs to maintain a computerized (IT) system capable of recording all transactions from: 1) occasional customers 2) permanent customers 3) non face-to-face transactions 4) foreign FIs 5) wire transfers (incoming/outgoing) 6) remittances abroad 7) equal or greater than US$10,000 or the equivalent in local currency - Resolution No. 263, Article 5 requires FIs to ensure customer identification file is reviewed and updated at a minimum once a year while the business relationship remains active, with evidence documented and dated; requirement is general and does not extend to higher risk categories. *Source: _cr09235 - 397.* ### 424. There is no specific requirement in place for money remitters to keep up-to-date and relevant ### 424. There is no specific requirement in place for money remitters to keep up-to-date and relevant ### Customer Due Diligence (CDD) — general findings - "There is no specific requirement in place for money remitters to keep up-to-date and relevant the CDD process and records, particularly for higher risk categories of customers or business relationships." - Article 14 of Law No. 1,015/96 requires reporting entities to document and verify through reliable means the identity of their clients, whether permanent or occasional, before establishing a business relationship, as well as the identification of the persons purporting to conduct transactions. The obligation "falls short of including beneficial owners." - Under Article 3 of Resolution No. 233, Resolution No. 263, Resolution No. 59, Resolution No. 262, FIs are obliged to identify their customers, permanent or occasional when establishing a business relationship, and when the business relationship is already established, the FIs should update the customer identification records/information in accordance with the requirements of the resolution. - Resolution No. 60 (covering money remitters) "does not have a similar requirement" to update customer identification records, but "the obligation established by law is sufficient." ### Enhanced / Simplified CDD measures and risk-based application - "There are no specific requirements in place for financial institutions to perform enhanced CDD for higher risk categories of customer, business relationship or transaction." - The authorities "have not undertaken a formal and comprehensive assessment of money laundering and terrorist financing risks within the financial system in Paraguay. Therefore, application of reduced or simplified CDD measures is not permitted." - The authorities indicated that "financial institutions are required to apply the obligations imposed by law and regulations without exceptions." As such several Recommendation 5 criteria are considered "not applicable" for purposes of this recommendation. ### Timing and handling of verification and incomplete CDD - Timing of Verification (general rule): Article 14 of Law No. 1,015/96 requires identification "before establishing a business relationship." - Treatment of Exceptional Circumstances (c. 5.14 & 5.14.1): This criterion is considered "not applicable" given the legal obligation to identify the customer when establishing the business relationship. - Failure to Complete CDD before commencing the Business Relationship (c. 5.15): "There are no specific requirements in the resolutions for financial institutions to address situations where the FIs are unable to comply with the CDD procedures. There is also no requirement to consider making a suspicious transaction report." - Failure to Complete CDD after commencing the Business Relationship (c. 5.16): "There are no specific requirements in the resolutions for financial institutions to address situations where the business relationship has already commenced and the institutions are unable to comply with the CDD procedures. There is also no requirement to consider making a suspicious transaction report." ### Existing customers and anonymous accounts - Existing Customers — SIB: Article 18(a) of Resolution No. 233 grants financial institutions "one year, starting from the publication of this resolution, to update information on existing customers." If institutions have not obtained such information, "senior management should authorize maintaining the business relationship until the information is obtained and the CDD process completed." - Existing Customers — SIS: "There is no specific requirement in place for insurance companies to comply with this criterion." - Existing Customers — CNV/INCOOP: Articles 14 of Resolutions No. 59 and No. 262 grant "one year to brokerage and mutual funds firms and cooperatives to apply the necessary CDD requirements to existing customers." If not obtained within one year, "the accounts should be place in an 'inactive status' until the information is obtain and the CDD process completed." - Existing Customers — Money remitters: Article 25 of Resolution No. 60 grants "one year to these institutions to obtain the necessary information to identify the existing customers." Failure within the timeframe leads to sanction "in accordance with the law and regulations." - Overall assessment: The existing requirements "fall short of requiring financial institutions to apply CDD requirements to existing customers on the basis of materiality and risk and to conduct due diligence on such existing relationships at appropriate times." - Existing Anonymous-account Customers (c. 5.18): "There is no obligation in primary or secondary legislation prohibiting anonymous or accounts in fictitious names." The obligation exists by SEPRELAD resolutions (considered other enforceable means). Authorities and FIs stated "there are no known existing customers in the system that could be considered anonymous or fictitious." ### Politically Exposed Persons (PEPs) - General: Article 14 of Law No. 1,015/96 establishes general customer identification obligations "when establishing business relationships including for persons which intend to conduct transactions through the customer’s account." SEPRELAD issued sectoral resolutions addressing PEPs; however, "with the exception of the measures established by the SIS resolution, the obligations ... do not establish a requirement for financial institutions to identify the beneficial owners, and in particular those that could be identified as PEPs." SEPRELAD's resolution for money remitters "does not address the issue of PEPs." - SIB (Resolutions No. 312 and No. 11): - Article 6(1)(a) defines "Politically Exposed Persons (PEPs)" as individuals who are or have been entrusted with prominent public functions in a foreign country, as well as persons and companies related to them. - Banks, finance companies, and exchange bureaus "are required to adopt and establish adequate customer due diligence measures for the identification and verification of PEPs" and "establish adequate risk management systems to determine whether the customer is considered a foreign PEP." Requirements are "not clear enough as to how far the relationships with PEPs are to be established with respect to family and business relationships." - Article 6(1)(b) requires obtaining the approval of the highest authority/senior management legally constituted in the country in order to establish a business relationship with PEPs. - Article 6(1)(c) requires taking "reasonable measures to establish the source of wealth and the source of funds of the PEPs." - Article 6(1)(d) establishes that banks, finance companies, and exchange bureaus "must carry out enhanced ongoing monitoring of the business relationship with customers identified as PEPs." - SIS (Resolution No. 263): - Resolution No. 263 defines PEPs in line with the Methodology and "provides that ... insurance companies should, in addition to implementing the customer due diligence procedures ... establish adequate risk management systems to determine whether the customer is PEP." - Article 6(4)(1)(b) requires approval of the highest authority/senior management to establish a business relationship with PEPs. - Article 6(4)(1)(c) requires insurance companies to take "reasonable measures to establish the source of the funds of the customers identified as PEPs," but "falls short of imposing an obligation ... to also establish the source of the wealth." - Article 6(4)(1)(d) requires insurance companies to "carry out enhanced ongoing monitoring of the business relationship with customers identified as PEPs." - CNV (Resolution No. 59): - Article 6(1)(a) defines PEPs in line with the Methodology and "goes further to include domestic PEPs." Brokerage and mutual funds firms "are required to adopt and establish measures for the identification and verification of PEPs both domestic and foreign." - Article 6(1)(b) requires highest authority/senior management approval to establish business relationships with PEPs. - Article 6(1)(c) requires taking "reasonable measures to determine the source of wealth and the source of funds of the customers identified as PEPs." - Article 6(1)(d) requires brokerage and mutual funds firms to "carry out enhanced ongoing monitoring of the business relationship with customers identified as PEPs." - INCOOP (Resolution No. 262): - Article 6(1)(a) defines PEPs in line with the Methodology. Cooperatives "are required to adopt and establish measures for the identification and verification of PEPs." - Article 6(1)(b) requires administrative council/senior management approval to establish a business relationship with PEPs. - Article 6(1)(c) requires cooperatives to take "reasonable measures to establish the source of the funds of the customers identified as PEPs," but "falls short of imposing an obligation ... to also establish the source of the wealth." - Article 6(1)(d) "establishes that cooperatives must carry out enhanced monitoring of the business relationship with customers identified as PEPs. However, the requirement falls short of imposing an obligation on cooperatives to conduct ongoing monitoring." - Additional elements: - Resolution No. 59 is "the only resolution that extends the customer due diligence measures to domestic PEPs." - The 2003 United Nations Convention against Corruption "was signed in December 9, 2003 and ratified in June 1, 2005." Paraguay also "adopted and ratified the Inter-American Convention Against Corruption (IACAC) in 1996." ### Cross-border correspondent banking and payable-through accounts - Requirement to Obtain Information on Correspondent Institution (c. 7.1): - Articles 6 of Resolution No. 312 and Resolution No. 11 require banks, finance companies and exchange bureaus to gather sufficient information about the respondent institution (management, core commercial activities, location, and status of regulation and supervision in the country where the institution is established). - Annex C lists questions about i) information about the financial institution; ii) information about the country where the financial institution operates; and iii) information about the money laundering prevention policies, "none of which addresses the specific requirement of this criterion." - Authorities consider documentation gathered on "status of regulation and supervision in the country..." sufficient to assess supervision quality and reputation; however, the information required in Annex C and the current requirement "fall short of establishing an explicit obligation for financial institutions to understand the reputation and the quality of supervision, including whether the institution has been subject to a money laundering or terrorist financing investigation or regulatory action." - Financial institutions visited indicated "current practice for establishing correspondent banking relationships does not include evaluation the reputation and quality of supervision." - Assessment of AML/CFT Controls in Correspondent Institution (c. 7.2): - Articles 6(2)(b) require banks, finance companies, and exchange bureaus "to obtain and maintain the necessary documentation to support that the respondent institutions have established policies and procedures to prevent money laundering." There is "no explicit requirement ... to assess and ascertain the adequacy and effectiveness of the respondents’ AML/CFT controls in place." - Officials from banks visited indicated they use information/documentation received to make such determinations in practice. - Approval of Establishing Correspondent Relationships (c. 7.3): - Articles 6(2)(c) require approval of the highest authority/senior management in order to establish and initiate the cross border correspondent relationship. "The highest authority is defined ... as the board of directors, executive committee, senior management or equivalent body within the institution." - Documentation of AML/CFT Responsibilities for Each Institution (c. 7.4): - "There are no specific legal or regulatory requirements for banks, finance companies, and exchange bureaus to document the respective AML/CFT responsibilities of each institution." - Payable-Through Accounts (c. 7.5): - Articles 6(2)(d) address requirements to ensure the respondent institution has verified identity and performed due diligence on their customers with access to the institution’s cross-border correspondent accounts and can provide data and transaction information. - Banks visited indicated they "do not have customers with access to accounts of their correspondent banks, therefore, no payable-through accounts in effect." - "There was no evidence that other financial institutions like insurance companies, brokerage and mutual funds firms, and cooperatives maintained cross border correspondent accounts." ### Misuse of New Technology (c. 8.1) - Resolutions No. 312 and No. 11 (banks, finance companies, exchange bureaus), Resolution No. 263 (insurance companies), and Resolution No. 59 (brokerage and mutual funds firms) under Article 6(6), Article 6(4)(4), and Article 6(4), respectively, "require these financial institutions to develop policies or adopt the necessary measures to prevent the misuse of technological developments in money laundering schemes, in compliance with the laws and local regulations/resolutions, as well as international best practices." *Source: _cr09235 - 424. There is no specific requirement in place for money remitters to keep up-to-date and relevant* ### 466. Article 6(3) of Resolution No. 262 requires cooperatives to develop the necessary policies to ### _cr09235 - 466. Article 6(3) of Resolution No. 262 requires cooperatives to develop the necessary policies to ### Non-Face-to-Face Transactions and New Technologies (Money remitters, SIB, SIS, CNV, INCOOP) - 467. Resolution No. 60 applicable to money remitters does not have specific measures to address the issue of non face-to-face transactions and new technologies. - 468. Article 6(4)(4) of Resolution No. 263 requires insurance companies to develop policies or adopt the necessary measures to comply with laws and regulations, as well as with international practices. Article 6(4)(5) further requires that for transactions that take place without the physical presence of the customer, insurance companies are required to develop internal policies and procedures deal with any specific risk related to these transactions when establishing customer relationships and when conducting ongoing due diligence. Examples of non-face to face transactions include: - a) business relationships concluded over the Internet or by other means such as through the post office; - b) services and transactions over the Internet including trading in securities by retail investors over the Internet or other interactive computer services; and - c) transmission of instructions or applications via facsimile or similar means. - 469. Article 8(2) of the same resolution requires insurance companies to establish procedures that apply to non-face to face customers, which at a minimum should include: - a) certification of documents presented; - b) additional control documents, as determined by the institution, in line with existing policies; - c) develop independent contact with the customer; and - d) request that the first payment be conducted through an established account in the customer’s name with another bank or finance company which is subject to similar customer due diligence requirements in line with and international best practices. - 470–471. SIS: Article 6(4)(4) of Resolution No. 263 and Article 8(2) of the same resolution impose analogous requirements and examples for non-face to face transactions and minimum procedural elements (certification of documents; additional control documents; independent contact; first payment via established account subject to similar CDD). - 472–473. CNV: Article 6(5) of Resolution No. 59 requires brokerage and mutual funds firms to develop policies and internal procedures to prevent risks in establishing customer relationships and conducting ongoing due diligence. Examples of non-face to face transactions include: - a) business relationships concluded over the Internet or by other means such as through the post office; - b) services and transactions over the Internet including trading in securities by retail investors over the Internet or other interactive computer services; - c) use of ATM machines; - d) telephone banking; - e) transmission of instructions or applications via facsimile or similar means; and - f) making payments and receiving cash withdrawals as part of electronic point of sale transaction using prepaid or reloadable or account-linked. - 473. Article 9(3) requires brokerage and mutual funds firms to establish procedures for non-face to face customers that at a minimum include: - a) certification of documents presented; - b) additional control documents, as determined by the institution, in line with existing policies; - c) develop independent contact with the customer; and - d) payment to be conducted through an established account in the customer’s name with another institution which is subject to similar customer due diligence requirements in line with international best practices. - 474. INCOOP/Money remitters: There are no specific legal or regulatory requirements for cooperatives and money remitters that address any of the essential criteria (c.8.2 and c.8.2.1). ### Recommendations and Comments (R.5 to R.8) - R.5 (paragraphs 475–477) - 475. Shortcomings in the Paraguay AML framework; a number of requirements that should be set out in primary or secondary legislation are addressed through OEMs. Measures are often too general and lack required detail under the standard. - 476. Recommended legal/regulatory actions for financial sector: - prohibit, through law or regulation, anonymous accounts or accounts in fictitious names - establish, through law or regulation, clear requirements for financial institutions to: - Undertake customer due diligence (CDD) measures when: - carrying out occasional transactions above the applicable designated threshold. This also includes situations where the transaction is carried out in a single operation or in several operations that appear to be linked; - carrying out occasional transactions that are wire transfers in the circumstances covered by the Interpretative Note to SR VII; - there is a suspicion of money laundering or terrorist financing, regardless of any exemptions or thresholds; and - the financial institution has doubts about the veracity or adequacy of previously obtained customer identification data. - identify the customer (legal arrangements) and verify that customer’s identity using reliable, independent source documents, data or information (identification data) following the examples set out in the paper entitled General Guide to Account Opening and Customer Identification issued by the Basel Committee’s Working Group on Cross Border Banking. - verify, for customers that are legal arrangements, that any person purporting to act on behalf of the customer is so authorized, and identify and verify the identity of that person. - identify the beneficial owner, and take reasonable measures to verify the identity of the beneficial owner using relevant information or data obtained from a reliable source such that the financial institution is satisfied that it knows who the beneficial owner is. - determine the identity of the natural persons that ultimately own or control the customer. This includes those persons who exercise ultimate effective control over a legal person or legal arrangement. - establish requirements for financial institutions to conduct ongoing due diligence on the business relationship, particularly for higher risk categories of customer or business relationships, and maintain up-to-date customers records. - 477. Further recommended obligations/enforceable means: - understand the ownership and control structure of the customer who is a legal arrangement; - conduct ongoing due diligence on the business relationship with money remitters; - perform enhanced due diligence for higher risk categories of customer, business relationships or transactions; - verify the identity of the beneficial owner before or during the course of establishing a business relationship or conducting transactions for occasional customers; - reject opening an account when unable to comply with CDD requirements and to consider making a suspicious report; - consider terminating the business relationship and making a suspicious transaction report when the business relationship has commenced and the financial institution is unable to comply with CDD requirements; - establish requirements for insurance companies to apply CDD measures on existing customers on the basis of materiality and risk and to conduct due diligence on such relationships at appropriate times. - R.6 (paragraph 478) - Authorities are recommending amending the Law to impose an obligation on financial institutions to identify the beneficial owners, including those that could be identified as PEPs. - SIB, CNV, and INCOOP authorities are recommended to establish, through law, resolution/regulation, or other enforceable means, clear obligations/requirements for financial institutions to have appropriate risk management systems that consider obtaining senior management approval to continue a business relationship with a customer or beneficial owner who is subsequently found to be a PEP. - SIS and INCOOP are recommended to establish an obligation/requirements for financial institutions to establish the source of wealth of customers and beneficial owners identified as PEPs. - INCOOP is further recommended to extend the current obligation to carry out enhanced monitoring of business relationships with customers (which should also extend to beneficial owners) identified as PEPs to make this monitoring ongoing. - Authorities are encouraged to fully implement the 2003 United Nations Convention against Corruption, as well as the 1996 OAS IACAC Convention. - R.7 (paragraph 479) - SIB authorities need to modify the resolutions to comply with essential elements of this recommendation, particularly: - establishing measures for obtaining information to understand the reputation and the quality of supervision, including whether the institution has been subject to a money laundering or terrorist financing investigation or regulatory action; - establishing measures for assessing and ascertaining the adequacy and effectiveness of the respondent’s AML/CFT controls in place; and - establishing requirements for documenting the respective AML/CFT responsibilities of each institution. - R.8 (paragraph 480) - There are requirements in place for financial institutions to develop policies or adopt the necessary measures for handling non face-to-face transactions and new technologies; however, there is no specific obligation for financial institutions under the supervision of the INCOOP with respect to applying these policies and/or measures when establishing customer relationships and when conducting ongoing due diligence; and in requiring the certification of documentation. - Recommendation: modify the resolutions to establish these additional requirements in line with the elements of this recommendation and extend the requirements to money remitters. ### Compliance with Recommendations 5 to 8 — Ratings and Underlying Factors - R.5: NC - Lack of explicit obligations imposed by law (primary or secondary legislation) for: - explicitly prohibiting anonymous accounts or accounts in fictitious names - customer identification and due diligence (CDD) process when: - carrying out occasional transactions above the applicable designated threshold. This also includes situations where the transaction is carried out in a single operation or in several operations that appear to be linked; - carrying out occasional transactions that are wire transfers in the circumstances covered by the Interpretative Note to SR VII; - there is a suspicion of money laundering or terrorist financing, regardless of any exemptions or thresholds; and - the financial institution has doubts about the veracity or adequacy of previously obtained customer identification data. - identifying the customer (whether permanent or occasional, and whether natural or legal persons or legal arrangements) and verifying that customer’s identity using reliable, independent source documents, data or information (identification data). - verifying, for customers that are legal arrangements, that any person purporting to act on behalf of the customer is so authorized, and identify and verify the identity of that person. - identifying the beneficial owner, and take reasonable measures to verify the identity of the beneficial owner using relevant information or data obtained from a reliable source such that the financial institution is satisfied that it knows who the beneficial owner is. - determining the identity of the natural persons that ultimately own or control the customer. This includes those persons who exercise ultimate effective control over a legal person or legal arrangement. - establishing requirements for financial institutions to conduct ongoing due diligence on the business relationship, particularly for higher risk categories of customer or business relationships, and maintain up-to-date customers records. - Lack of measures in law, regulation, or other enforceable means that require financial institutions to: - understand the ownership and control structure of the customer who is a legal arrangement; - conduct ongoing due diligence on the business relationship with money remitters; - perform enhanced due diligence for higher risk categories of customer, business relationships or transactions; - verify the identity of the beneficial owner before or during the course of establishing a business relationship or conducting transactions for occasional customers; - reject opening an account when unable to comply with CDD requirements and to consider making a suspicious report; - consider terminating the business relationship and making a suspicious transaction report when the business relationship has commenced and the financial institution is unable to comply with CDD requirements; - establish requirements for insurance companies to apply CDD measures on existing customers on the basis of materiality and risk and to conduct due diligence on such relationships at appropriate times. - R.6: NC - Lack of legal obligation to identify beneficial owners, in particular those that could be identified as PEPs. - Lack of requirements by SIB, SIS, CNV, and INCOOP to obtain management approval when the customer or beneficial owners is subsequently found to be a PEP. - Lack of requirements by SIS and INCOOP to establish the source of wealth of PEPs. - Lack of requirements by INCOOP to conduct enhanced ongoing monitoring of relationships. - R.7: NC - Lack of requirements to gather sufficient information about the respondent to understand the reputation and quality of supervision, including whether it has been subject to a ML or TF investigation or regulatory action. - Lack of requirements to assess and ascertain the adequacy and effectiveness of the respondent institution’s AML/CFT controls. - Lack of requirements to document the respective AML/CFT responsibilities of each institution. - R.8: PC - Lack of requirements for cooperatives and money remitters to apply policies and measures when establishing the relationship and conducting CDD. ### Third Parties and Introduced Business (R.9) - 481–483. Legal Framework: - Articles 4 of Resolution No. 312, Resolution No. 263, Resolution No. 59, and Resolution No. 262 provide that financial institutions are not permitted to delegate to intermediaries or third parties the elements of the CDD process. The language and prohibition is similar in all four resolutions. Authorities indicated the same prohibition applies to customers introduced by foreign institutions. - 482. Resolution No. 60 addressing money remitters: criterion considered “not applicable” due to the fact that these entities only exist through agency relationships with other financial intermediaries who are subject to supervision by the SIB. - 484. Recommendation: This criterion is considered “not applicable” for the reasons stated above. - 3.3.3. Compliance with Recommendation 9 — R.9: NA - The requirement does not apply due to prohibitions in place. ### Financial Institution Secrecy or Confidentiality (R.4) - 485–487. Legal Framework: - 485. Chapter II of Law No. 861/96, General Law for Banks, Finance Companies and Other Credit Granting Institutions addresses the duty to confidentiality. - 486. Article 84 of Law No. 861/96 deals with secrecy of transactions where FIs, their directors, supervision and control authorities, and employees of FIs and the relevant authorities are prohibited from disclosing any information on their customers’ transactions, unless through written customer authorization. This prohibition does not apply when the information is disclosed for purposes of liquidating a banking or financial institution. - 487. Under the duty to secrecy of Article 85, the prohibition mentioned in Article 84 also applies to: - a) Managers and officials of the Superintendency of Banks, unless it relates to information with respect to account holders of demand deposit accounts that are closed due to insufficient funds; - b) Directors and employees of the CBP; and - c) Partners, representatives, and employees of auditing firms responsible for auditing the financial statements of the FIs in the system. *Italic: Content extracted from the supplied PDF chapter/section.* ### 488. Furthermore, Article 86 establishes that the banking secrecy does not apply if the information ### _cr09235 - 488. ### Banking secrecy and permitted disclosures - Article 86 establishes that the banking secrecy does not apply if the information is required by: - a) the CBP and the Superintendency of Banks in exercising their legal powers; - b) the competent judicial authority, by virtue of resolution dictated in judgment, in which the affected one is part; in such case, appropriate measures should be taken to guarantee the secrecy; - c) the Comptroller Generals Office and the tax and revenue authorities within their powers on the basis of the following conditions: - i. should refer to a specific person - ii. must be in the course of an ongoing tax verification related to the specific person - iii. must have been made through a formal and previous request - d) credit granting (banks) institutions that exchange information between them in accordance with reciprocity agreements and banking practices, while protecting the banking information. - The duty to confidentiality is applicable to the persons and institutions mentioned above. - During judicial or administrative processes where information safeguarded by the banking secrecy has been used, this protection is automatically lifted if culpability of those benefiting from these activities/actions is determined. - Parties whose charges are dismissed in judicial proceedings remain covered by secrecy protection with regard to their transactions. ### SEPRELAD powers and information access - Under Article 22 of Law No. 1,015/97, reporting entities are obliged to provide all information related to this law when requested by the competent authority, which is SEPRELAD; in such case provisions concerning bank secrecy shall not apply. - The duty of bank secrecy shall be observed by the enforcement authorities, unless the criminal court judge requests such information, and only in relation to a specific pre-trial investigation or lawsuit. - Article 28 and paragraph 2 of Law No. 1,015/97 establishes that SEPRELAD has the power to obtain/request from public institutions and reporting entities all the information necessary that could be linked to money laundering. - Article 33 establishes that within the framework of international agreements, SEPRELAD could assist with the exchange of information, directly or through international bodies, with counterpart/competent authorities from other states, which will be subject to confidentiality obligation. - When replying to requests for information from other states, particular consideration should be given to sovereign aspects and the protection of domestic interests. ### Inter-agency and supervisory information exchange practices and gaps - SIB indicated inability to supply information to other supervision and control authorities (SIS, CNV, and INCOOP) unless through a court order. - SIS, CNV, and INCOOP indicated that in practice they do comply with requests for information received from the SIB without the need to obtain a court order. - SIB indicated sharing of information with foreign counterparts takes place only through a judicial warrant. - Authorities reported arrangements in place for sharing of information among themselves and with international counterpart authorities, but were unable to provide documents for review to ensure these agreements included money laundering matters. - SEPRELAD usually has access to all the information requested, but has experienced delays in obtaining information, particularly when requesting such from the Customs Division and the Public Records. - SEPRELAD has signed agreements of mutual inter-agency cooperation in the prevention and repression of money laundering and has formalized bilateral effective exchange of confidential information related to money laundering with counterparts at the international level; copies of those agreements were not provided to the mission. ### Compliance with FATF Recommendations and identified shortcomings - There is no impediment for financial institutions to share the information as required by Recommendation 7. - With respect to Recommendation 9, financial institutions under the supervision of the SIB, the SIS, the CNV, and the INCOOP are not permitted to rely on intermediaries or other third parties to perform some of the elements of the CDD process. - There are no specific legal or regulatory requirements addressing all of the elements of Special Recommendation VI; therefore, the requirements for sharing information under this recommendation are not met. - Meetings with private sector officials confirmed no impediments for competent supervisory authorities and the FIU to obtain and/or have access to information. ### Recommendation (authorities) - The authorities are recommended to establish formal mechanisms and/or effective measures to enable information sharing and cooperation between the SIB and other competent supervisory authorities, without the need of a court order. ### Compliance rating summary for Recommendation 4 - R.4: PC - Underlying factor: - Lack of formal mechanisms or measures through which the regulatory authorities, particularly the SIB, may provide and exchange confidential information with domestic authorities and foreign counterparts, as needed and in line with SR.VII. ### Record-keeping framework and analysis (Law No. 1,015/97) - Article 17 requires reporting entities to accurately identify and register the transactions performed by their clients. - Article 18 obliges reporting entities to maintain for a period of at least five years documents, records, and correspondence that verify or that adequately identify the transactions; the retention period should be computed from the completion of the transaction or from the time when the account was closed. - Neither Article 17 nor Article 18 explicitly requires financial institutions to retain records on the identification data obtained through the customer due diligence process, account files, and business correspondence for at least five years after the business relationship is ended. - Authorities and financial institutions visited indicated records and information maintained, which also includes customer identification information, is sufficient to permit reconstruction of individual transactions for prosecution purposes. - Article 22 establishes duty to cooperate: reporting entities required to provide all information relating to matters covered by this law to SEPRELAD; bank secrecy provisions shall not apply to such requests, but enforcement authorities must observe bank secrecy unless a criminal court judge requests the information for a specific case or investigation. - Article 80 of Law No. 489 (Central Bank Law) obliges public institutions, banks, finance companies and other entities involved in financial intermediation, and enterprises or entities from the private sector, to provide to the CBP data and information when requested in the conduct of its functions, observing confidentiality. - Shortcoming: existing record keeping obligation falls short of requiring retention of identification data obtained through the CDD process, account files, and business correspondence for at least five years after the business relationship is ended, or for a longer period if requested by the competent enforcement authority in specific cases; and that such records be available on a timely basis to the competent enforcement authority upon appropriate authority. ### Sector-specific resolutions on record keeping - SIB: - Articles 19 and 11 of Resolution No. 233 establish obligation on banks, finance companies, exchange houses and other entities under SIB supervision to maintain or retain all records, reports, and supporting documentation in accordance with the retention period established by the AML Law. - SIS: - Article 12 of Resolution No. 263 requires insurance companies to maintain for a minimum of five (5) years, after the transaction is performed, all necessary documents supporting transactions, domestic and international, sufficient to make this information available on a timely basis to competent authorities; documents should permit reconstruction of different transactions (including the amount and type of currency used). - Requires adequate archive system and back-up copies. - Requires reporting entities to communicate to SEPRELAD and the SIS their intention to destroy records exceeding the established retention period by providing at least one (1) month notice. - CNV/INCOOP/Money remitters: - Articles 15 of Resolution No. 59, Resolution No. 262, and Article 26 of Resolution No. 60 require maintenance of records/registries, reports, and supporting documentation in accordance with the period established by the AML Law. - None of these sector-specific resolutions establishes a requirement to maintain records for a longer period if requested by competent authorities in specific cases and upon proper authority. - The resolutions do not impose a specific requirement to ensure transaction records permit reconstruction of individual transactions, but Article 18 of Law No. 1,015/97 is considered by institutions visited sufficient to permit reconstruction. ### Originator information for wire transfers and gaps (SIB Resolutions) - Articles 11 of Resolutions No. 312 (modified Resolution No. 233) and No. 11 require financial institutions to maintain a special registry for funds transfers. - Within Paraguay financial sector, banks and exchange houses are the only financial institutions authorized to perform wire transfers. - The resolutions do not distinguish between domestic and international wire transfers; nor is there a monetary threshold; therefore, FIs are required to register each incoming and outgoing transfer irrespective of the amount, obtaining the following information: - For outgoing funds transfer or payment order: - a) name, address, telephone, identity card number or passport number of the person requesting and of the person that conducts the transfer or payment order; - b) account number, if the funds are debited to an existing account at the FI originating the transfer; - c) amount of the transfer or payment order; - d) date in which the transfer or payment order was executed/performed; - e) instructions included in the transfer or payment order by the person requesting the transaction; - f) identification of the beneficiary FI; and - g) name, address, and account number of the beneficiary. - For incoming funds transfer or payment order: - a) name of the originator; - b) identification of the FI originating the transfer or payment order; - c) amount of the transfer or payment order; - d) date in which the transfer or payment order was executed/performed; - e) instructions included in the transfer or payment order by the originator; - f) name, address, telephone, identity card number or passport number of the beneficiary; - g) account number, if the funds received are credited to an existing account at the receiving FI; - h) if the funds are paid in cash, official check or through any other monetary instrument, the receiving FI should identify the manner in which payment is made; and - i) if the beneficiary is not an existing customer of the receiving FI, the FI should identify the person by requesting an identity card or passport (requirement established under Article 5(2) for occasional customers). - Shortfalls in the resolutions: - i) handling batched and domestic transfers; - ii) ensuring intermediary and beneficiary financial institution in the payment chain is required to provide all originator information that accompanies a wire transfer; - iii) adopting effective risk-based procedures for identifying and handling wire transfers not accompanied by complete originator information; - iv) having measures in place to effectively monitor compliance of financial institutions with rules and regulations implementing this recommendation; - v) applying sanctions in relation to non-compliance with the requirements of this recommendation. ### Money remitters, Western Union agency structure, and operational gaps - Two banks and two finance companies serve as agents for Western Union and Money Gram and perform wire transfer activities; finance companies have established sub-agency agreements with exchange houses and other non-financial companies. - Money remitters: - Chapter IV, Article 17 of Resolution No. 60 requires money remitters to register all individual, structured or multiple transactions that are equal or exceed US$10,000 or its equivalent in local currency, which is carried out by the customer during the business relationship. - At a minimum, money remitters should record: 1. name, address, and document number of the person originating the transaction; 2. transaction date; 3. transaction amount; 4. type of currency; 5. beneficiary’s name; 6. origin of the transaction; and 7. destination of the transaction. - However, under the existing AML regime, money remitters are not covered by the AML Law nor supervised by a competent authority. - Effectiveness observations: - Financial institutions visited appeared knowledgeable of recordkeeping obligations and records on customers, transactions, and accounts are maintained for the required minimum period and available to competent authorities. - Financial institutions indicated wire transfers are performed following SEPRELAD (Res. No. 312) and SIB (Res. No. 11) requirements, and also comply with SWIFT documentation procedures. - Western Union operates through an agency relationship with four financial institutions; approximately 250 sub-agents operate in the country under this arrangement. - Some sub-agents are subject to SIB supervision, while others (e.g., grocery and drug stores) are not subject to supervision or oversight by a competent authority. - SIB officials lacked awareness of the sub-agency relationship, the number of operators in the system, and which entity was responsible for performing CDD. - Western Union system handles approximately 90 Percent of the incoming remittances, where the institution handling the transactions has established a business relationship with the recipient/beneficiary. - Shortcoming identified: customer identification and the due diligence process is often performed by the sub-agent (many not subject to AML obligations) and not by the agent who is the reporting entity and subject to supervision; original documentation obtained by the sub-agent during CDD is not available to the agent because information is entered into the Western Union system in electronic form. - Identified supervisory/coverage gap: - Some sub-agents performing CDD are not subject to AML obligations and supervision; the agent effectively delegates CDD to third parties, creating evidence and documentation access gaps. *Source: _cr09235 - 488.* ### 526. The SIB was not able to describe the CDD measures established by Western Union to ensure ### _cr09235 - 526. The SIB was not able to describe the CDD measures established by Western Union to ensure ### Customer Due Diligence Record-Retention and Wire Transfer Rules (R.10 / SR.VII) - Finding: The SIB was not able to describe the CDD measures established by Western Union to ensure compliance with the requirements of the AML law and regulations. - Recommendation R.10: - Authorities are recommended to establish a legal obligation on financial institutions to maintain/retain records on the identification data obtained through the customer due diligence process, account files, and business correspondence for at least five years after the business relationship is ended, or longer period, if requested by the competent enforcement authority in specific cases. - Ensure such customer data are available on a timely basis to the domestic competent enforcement authority upon appropriate authority. - Recommendation SR.VII: - Authorities should modify existing resolutions to establish requirements for financial institutions to handle batched and domestic transfers, ensuring that intermediary and beneficiary financial institution in the payment chain is required to provide all originator information that accompanies a wire transfer. - Compliance summary for R.10 and SR.VII: - R.10: PC - Lack of legal obligation for financial institutions to maintain/retain identification data obtained through the customer due diligence process, account files, and business correspondence for at least five years after the business relationship is ended, or longer period, if requested by the competent enforcement authority in specific cases. - Lack of legal obligation for financial institutions to make customer identification data available on a timely basis to domestic competent enforcement authority upon appropriate authority. - SR.VII: NC - Lack of specific measures in place to address a majority of the criteria in this recommendation, including for: i) handling batched and domestic transfers; ii) ensuring that intermediary and beneficiary financial institution in the payment chain is required to provide all originator information that accompanies a wire transfer; iii) adopting affective risk-based procedures for identifying and handling wire transfers that are not accompanied by complete originator information; iv) having measures in place to effectively monitor the compliance of financial institutions with rules and regulations implementing this recommendation; and v) applying sanctions in relation to noncompliance with the requirements of this recommendation. ### Monitoring of Transactions and Relationships (R.11 & R.21) - Legal framework and gaps: - No direct or explicit requirement in law, regulation or any other enforceable means for reporting entities to pay special attention to all complex, unusual large transactions, and all unusual patterns of transactions, which have no apparent economic, or visible lawful purpose. - Article 19 of AML Law No. 1,015/97 only indirectly touches on complex, unusual or large transactions by way of example when establishing the obligation to report suspicious transactions. - Resolution No. 63 (March 2008) requires reporting entities to report to SEPRELAD using a “Suspicious Transaction Report” for transactions unusual or suspicious with respect to the customer’s profile, but this is implicit and insufficient for the recommendation’s requirements. - Sector-specific observations: - SIB/CNV/INCOOP/Money remitters: - No direct regulatory requirements to: pay special attention to all complex, unusual large transactions and unusual patterns; examine background and purpose and set forth findings in writing; keep such findings available for competent authorities and auditors for at least five years. Existing measures focus on identifying suspicious transactions rather than fulfilling the recommendation. - Articles 16(2)(a) of Resolutions No. 312 and 11 mirror Article 19 of AML Law No. 1,015/97 and are insufficient. - For money remitters, Article 21 of Resolution No. 60 addresses suspicious transactions by example but focuses on identification rather than the recommendation’s requirements. - SIS: - Resolution No. 263 defines “unusual transactions” and Article 7 requires insurance companies to pay special attention, examine background and purpose, and set forth findings in writing and make them available to the Superintendency of Insurance and SEPRELAD; but it does not require findings to be available to auditors for at least five years. - Effectiveness (R.11): - General misunderstanding among financial institutions about the distinction between unusual transactions and suspicious transactions. - Practice: many institutions identify and report unusual transactions to SEPRELAD without analysis to determine whether they are unusual or suspicious, influenced by SEPRELAD’s resolution. - Banks generally assess, record findings, and only report those with no apparent economic or lawful purpose; other sectors need consistent guidance and revised resolution text. - Special attention to high-risk jurisdictions (R.21 / c.21.1 & c.21.1.1): - SIB: Articles 4(e) of Resolutions No. 312 and 11 require verification procedures and reasonable measures to verify business relationships and transactions with persons from countries that do not or insufficiently apply AML prevention systems; references OFAC list. - SIS/CNV: Article 4(e) of Resolutions No. 263 and No. 59 require similar verification procedures. - INCOOP/Money remitters: No legal or regulatory requirements for cooperatives or money remitters to give special attention to business relationships and transactions with persons from or in countries which do not or insufficiently apply the FATF Recommendations. - None of the competent supervisory authorities (SIB, SIS, CNV, INCOOP) have measures to ensure financial institutions are advised of concerns about weaknesses in other countries’ AML/CFT systems. - No measures to require examination as far as possible of transactions with no apparent economic or lawful purpose originating from such countries, nor to set forth and preserve findings. - No appropriate counter-measures provided where a country continues not to apply or insufficiently applies the FATF Recommendations. - Recommendations: - R.11: - SEPRELAD authorities should modify Resolution No. 63 and sector-specific resolutions (Resolution No. 321, Resolution No. 59, Resolution No. 262, and Resolution No. 60) to establish a direct legal or regulatory requirement for reporting entities to: 1) pay special attention to all complex, unusual large transactions, and all unusual patterns of transactions, which have no apparent economic, or visible lawful purpose; 2) examine as far as possible the background and purpose of such transactions and set forth their findings in writing; and 3) keep such findings available for competent authorities and auditors for at least five years. - Revise Resolution No. 263 to require findings to be available to auditors for at least five years. - R.21: - INCOOP authorities are recommended to establish a regulatory obligation on reporting entities to give special attention to businesses and transactions with persons from or in countries which do not or insufficiently apply the FATF Recommendations. - SIS, CNV, and INCOOP authorities are recommended to establish regulatory obligations for financial institutions to examine as far as possible the background of transactions that have no apparent economic or visible lawful purpose, set forth findings in writing, and make findings available to competent authorities and auditors. - SIB, SIS, CNV, and INCOOP should have measures to advise financial institutions of concerns about weaknesses in AML/CFT systems of other countries and the authority to apply appropriate counter-measures. - Compliance summary for R.11 & R.21: - R.11: NC - Lack of requirements imposed by the competent supervisory authorities on financial institutions to pay special attention to all complex, unusual large transactions or unusual patterns of transactions that have no apparent or visible economic or lawful purpose; to examine as far as possible the background and purpose of such transactions and set forth their findings in writing and available to competent authorities and auditors for at least five years. - R.21: NC - Lack of requirements imposed by the INCOOP on financial institutions to pay special attention to business relationships and transactions with persons from or in countries which do not or insufficiently apply the FATF Recommendations. - Lack of requirements imposed by the SIS, the SIS, the CNV, and the INCOOP (competent supervisory) authorities to require financial institutions to examine as far as possible the background of transactions that have no apparent economic or visible lawful purpose and set forth in writing the findings of such transactions and make the findings available to the competent authorities and auditors. - Lack of apparent measures and authority at the SIB, the SIS, the CNV, and the INCOOP to advise their financial institutions of concerns about weaknesses in the AML/CFT systems of other countries and to apply appropriate counter-measures to address instances where a country continues not to apply or insufficiently applies the FATF Recommendations, respectively. ### Suspicious Transaction Reports and Other Reporting (R.13-14, 19, 25 & SR.IV) - Legal framework: - Law No. 1,015/96 referenced; obligation to report suspicious transactions under Article 19 of AML Law No. 1,015/97. - Requirement to make STRs on ML and TF to FIU (c.13.1 & IV.1) / No reporting threshold for STRs (c.13.3): - Article 19 requires reporting entities to report any act or operation/transaction, regardless of the amount, if there is an indication or suspicion it is connected to a money laundering offence. “Act” includes an attempted transaction. - Article 19 lists examples of suspicious transactions: 1) Operations/transactions which are complex, unusual or large, or do not follow the profile of ordinary transactions; 2) Operations/transactions which, although not large, occur periodically and with no reasonable legal or economic purpose; 3) Operations/transactions which by their nature or volume are not consistent with the credit or debit operations conducted by the clients in accordance with their activities or previous business practice; and 4) Operations/transactions which, without justifiable cause, involve cash payments by a large number of persons. - Legal obligation falls short because there is no explicit requirement to which agency the reports should be sent; specifically, no explicit requirement to report suspicious transactions to the FIU (UAF in Paraguay). - AML Law does not define “financial institutions”; obligation does not extend to brokers, agents, and some types of cooperatives. - It is implied by authorities and financial institutions that Article 19 imposes an obligation to report directly to SEPRELAD, which forwards STRs to the FIU for analysis. - STRs related to Terrorism Financing (c.13.2): - Terrorist financing has not yet been criminalized in Paraguay. Therefore, there is no legal or regulatory obligation to report suspicious transactions suspected to be linked to terrorism, terrorist acts or by terrorist organizations or those who finance terrorism. - Sector references: - SIB: - Articles 16 of Resolution No. 233 and No. 11 mirror Article 19 but explicitly require financial institutions to report suspicious transactions directly to SEPRELAD. Use of approved “Suspicious Transaction Report” form attached to resolutions. - SIS: - Article 10 of Resolution No. 263 mirrors AML Law obligation; requires reporting to SEPRELAD through compliance officers using “Unusual and Suspicious Transaction Report”; requires monthly reporting on whether unusual/suspicious transactions were detected; requires immediate reporting of rejected operations/transactions including reasons for rejection. - CNV/INCOOP: - Articles 12 of Resolutions No. 59 and No. 262 mirror SIB obligations including listing potential suspicious transactions. - Money remitters: - Article 18 of Resolution No. 60 requires money remitters to report to SEPRELAD any act or transaction, regardless of the amount, that could be considered or is suspected of being linked to money laundering per Article 21; Article 22 requires use of the approved Suspicious Transaction Report form. - Reporting obligations and limitations: - No legal/regulatory obligation to report STRs for TF due to absence of TF criminalization. - No explicit statutory designation of the FIU as STR recipient in Article 19; reliance on practice and implied procedures through SEPRELAD. *Source: _cr09235 - 526. The SIB was not able to describe the CDD measures established by Western Union to ensure* ### 554. There is no indication that would support that the suspicious transaction reporting obligations ### _cr09235 - 554. There is no indication that would support that the suspicious transaction reporting obligations ### Reporting obligations and scope - "There is no indication that would support that the suspicious transaction reporting obligations are limited when the transactions are also thought to involve tax matters." - Law No. 1,015/97 and Resolutions issued by the SEPRELAD, the SIB, the SIS, the CNV, and the INCOOP require financial institutions to notify the SEPRELAD of any suspicious transaction, including attempted which could be linked or related to money laundering. (Paragraphs 554–555) - Law No. 1,015/97 limits the obligation to report suspicious transactions to those entities listed under its Article; other financial intermediaries, including insurance agents, insurance brokers, some types of cooperatives, are not obliged to report suspicious transactions to the SEPRELAD. (Paragraph 556) ### Analysis of effectiveness (R.13) — gaps and practice - Lack of uniform approach among reporting entities when making suspicious transaction reports, including for attempted transactions. (Paragraph 557) - Most reports are generated by banking institutions and exchange houses; "No reports have been received from insurance companies, securities’ firms, and cooperatives since 2006." (Paragraph 557) - Competent supervisory authorities for insurance, securities, and cooperatives were not able to explain the lack of reporting from financial institutions under their responsibilities. (Paragraph 557) - Need to provide further guidance to ensure reporting entities report all suspicious transactions, including attempted and those involving tax matters. (Paragraph 558) - Law No. 1,015/97 limits reporting entities and therefore authorities need to expand the list of reporting entities "in line with the list provided in the glossary of the Methodology to ensure that all entities fall under the same obligation." (Paragraph 556) ### Protections and confidentiality - Protection for Making STRs (c. 14.1): Article 34 of Law No. 1,015/97 establishes the responsibility exemption: information provided to SEPRELAD "should not be considered a violation to the secrecy or confidentiality obligation" and reporting entities, directors, administrators and officials "should be exempt from civil, criminal or administrative liability, regardless of the outcome of the investigation, except in the case of their complicity with the case under investigation." (Paragraph 559) - Prohibition Against Tipping-Off (c. 14.2): Article 20 of Law No. 1,015/97 establishes the confidentiality obligation: reporting entities "should not reveal, either to the customer or to third parties, any steps taken or communications effected by them in compliance with the obligations set out in the AML Law and its regulations." (Paragraph 560) - Reporting entities visited were aware of the protection under the law and their obligation not to tip customers. (Paragraph 561) - Additional Element—Confidentiality of Reporting Staff (c. 14.3): "There are no specific requirements in law or regulations or any other measures to ensure that the names and personal details of staff of financial institutions that make a STR are kept confidential by the SEPRELAD." (Paragraph 562) ### Currency transaction reporting (R.19) and recordkeeping - "The authorities have not given any consideration to implementing a cash reporting system within the financial sector." (Paragraph 563) - SEPRELAD resolutions require financial institutions under SIB, SIS, CNV, and INCOOP supervision to register and maintain records of certain cash transactions, but "this information is not reported to a national central agency. The requirement only extends to make this information available to the supervisors." (Paragraph 564) ### Guidelines for reporting and feedback (R.25) - Resolutions issued by SEPRELAD (Resolutions No. 233, No. 263, No. 59, No. 262) provide financial institutions with a list of examples to assist in identifying suspicious behavior and require consultation of the list OFAC when detecting suspicious transactions. Resolution No. 11 issued by SIB contains the same list. (Paragraph 565) - Neither SEPRELAD nor competent supervisory authorities have established sector specific guidelines describing ML and FT techniques and methods or recent international developments (FATF, UN Security Council). (Paragraph 566) - Feedback from competent authorities is minimal and limited to: i) acknowledgment of receipt of a STR; ii) notification when STR information is missing; and iii) meetings and training conferences hosted by the FIU and/or supervisory authorities. (Paragraph 567) ### Recommendations and policy actions (3.7.2) - R.13 & SR.IV — Authorities are recommended to: - Modify the existing legal obligation to establish the requirement for financial institutions to report directly to the SEPRELAD. - Define the term "financial institutions" in line with the definition provided in the Methodology. - Expand the list of financial institutions to include those listed in the definition provided in the Methodology. (Paragraph 568) - R.19 — Recommendation: - "We recommend the authorities consider the feasibility and utility of a system where financial institutions and intermediaries would report all domestic and international currency transactions above a fixed amount, to a national central agency with a computerized data base, available to competent authorities for use in money laundering cases, subject to strict safeguards to ensure proper use of the information." (Paragraph 569) - SR.IV — Recommendation: - "The authorities are further recommended to criminalize the financing of terrorism to establish the legal obligation for financial institutions to report to the competent authorities’ transactions when they suspect or have reasonable grounds to suspect that funds are linked or related to, or are to be used for terrorism, terrorist acts or by terrorist organizations." (Paragraph 570) - R.25 — Authorities, particularly the SEPRELAD, are recommended to: - Provide guidance to assist financial institutions on AML/CFT issues covered under the FATF Recommendations, including, at a minimum, a description of ML and FT techniques and methods, and any additional measures these institutions could take to ensure their AML/CFT procedures are effective. - Establish communication standards and a mechanism for providing feedback to reporting institutions including general and specific or case-by-case feedback. - Consider reviewing the guidance provided by the FATF Best Practice Guidelines on Providing Feedback to Reporting Financial Institutions and Other Persons. (Paragraph 571) ### Compliance ratings (3.7.3) — summary of factors underlying ratings - R.13: PC - Lack of direct obligation in law or regulation to report suspicious transactions to SEPRELAD. - Reporting obligation does not cover all financial institutions. - Financing of terrorism not criminalized. - Lack of obligation in law or regulation to report suspicions related to terrorist financing. - Low volume of suspicious transaction reports (majority of reports received from the banking institutions). - R.14: C - R.19: NC - "No consideration given to implementing a cash reporting system as suggested by this recommendation." - R.25: NC - Lack of guidelines established by the competent supervisory authorities. - Lack of adequate and appropriate feedback from competent authorities. - SR.IV: NC - "Terrorist financing has not been criminalized." (Rating summary, Paragraphs 3.7.3 / 568–571) ### Internal controls, compliance, audit and related requirements (R.15 & 22) — description and analysis - Legal framework: Law No. 1,015/97. (Paragraph 572) - Internal Controls to Prevent ML and TF (c. 15.1, 15.1.1 & 15.1.2): - Article 21 of Law No. 1,015/97 establishes the general obligation for reporting entities "to establish adequate procedures to internally control information with the objective of detecting and preventing money laundering transactions from taking place." The obligation focuses on safeguarding information and does not fully require development of internal control procedures, policies, and controls as essential elements of a sound and effective AML/CFT compliance program; it also falls short on aspects related to combating the financing of terrorism because financing of terrorism has not been criminalized. (Paragraph 573) - SEPRELAD issued sector specific resolutions to financial institutions under SIB, SIS, CNV, and INCOOP supervision; a resolution was also issued for money remitters. (Paragraph 574) - SIB/CNV/INCOOP — Articles 2 of Resolutions No. 233, No. 59, and No. 262 establish AML program criteria: policies and procedures; individuals holding prominent positions; appointment of a compliance officer responsible for implementation, training and monitoring; staff training programs; code of conduct; and audits. (Paragraph 575) - Required minimum content of procedures (SIB/CNV/INCOOP): - a) policies and internal procedures to ensure compliance with the requirements, legal and regulatory that govern the prevention of money laundering; - b) policies and internal procedures approved by senior management or the highest authority in the country where the institution is established; - c) policies and internal procedures available to all officials from the institution, the respective supervision and control authority, and SEPRELAD; - d) policies and internal procedures reviewed and updated in line with regulatory changes and new trends/typologies as identified by the institutions or communicated by the respective supervision and control authority and SEPRELAD. (Paragraph 576) - SIS — Resolution No. 263 requirements for insurance companies: - Article 2(d): requirement to implement policies, procedures and training programs for prevention of money laundering. - Article 13: Board to appoint Compliance Officer within 30 calendar days after enactment and provide appropriate administrative support. - Article 15: AML procedures manual elements: AML programs, norms, and internal control procedures; manual must be approved by board and available to employees, SIS, and SEPRELAD. - Article 14: Compliance Officer functions include ensuring compliance, recommending programs/norms/procedures/internal controls, coordinating implementation, preparing information for SEPRELAD, presenting quarterly reports to board, recommending updates, participating in training, and liaising with insurance adjusters. (Paragraphs 577–579) - Article 16: responsibility for AML program development, implementation, monitoring and maintenance rests on board of directors or highest administrative levels. (Paragraph 580) - Money remitters — Resolution No. 60: - Article 2: require administrative control measures via internal policies and procedures limited to four elements: 1) measures to ensure compliance with AML obligations; 2) internal policies and procedures approved by highest legal authority of the institution; 3) policies and procedures available to all employees and SEPRELAD; 4) internal policies and procedures in line with recent legal changes and new trends as communicated by SEPRELAD. (Paragraph 581) - Appointment and duties of Compliance Officers (SIB/CNV/INCOOP; SIS; Money remitters): - Resolutions require appointment of a compliance officer at senior management level; appointments must be communicated to supervision and SEPRELAD within 15 working days with certified minutes and CV; changes communicated within 3 working days with CV. (Paragraphs 582, 587) - Compliance officer functions specified, including reviewing/implementing procedures, liaising with supervisors, formulating account monitoring programs, coordinating training, collecting/analyzing/transmitting STRs, verifying adequate screening of officials, and other necessary measures. (Paragraph 583) - Institutions must appoint a compliance deputy-in-charge for each agency or branch to verify day-to-day compliance; deputy acts under authority of the compliance officer. (Paragraph 584) - SIS Article 13: Compliance Officer to be liaison between the FAU (attached to SEPRELAD) and reporting entity; changes to compliance officers should be communicated to SEPRELAD including CV. Meetings with INCOOP revealed some compliance officers are involved in operational or administrative activities, compromising independence. (Paragraph 585) - Money remitters: Article 4 of Resolution No. 60 requires designation of Compliance Officer; owner serves when single individual; for societies Compliance Officer should be management level or higher. Appointment/changes reporting requirements mirror above. (Paragraphs 586–587) - Access to information: "There are no specific requirements in the law or in the sector specific resolutions providing the Compliance Officer and his/her deputies/staff timely and unrestricted access to customer identification data and other CDD information, transaction records, and other relevant information as required under this criterion." Implicit access appears through duties but not explicitly guaranteed. (Paragraph 588) *Source: _cr09235 - 554. There is no indication that would support that the suspicious transaction reporting obligations* ### 589. Articles 2(6) of Resolutions No. 233 (SIB) and No. 59 (CNV), respectively, address the ### _cr09235 - 589. Articles 2(6) of Resolutions No. 233 (SIB) and No. 59 (CNV), respectively, address the ### Audit Function — Internal and External (financial institutions, insurance, cooperatives, money remitters) - Internal audit requirements: - Financial institutions: design and implement internal audit programs to verify semiannually the effectiveness of the AML system in place. - Internal audit must generate and present a report to SEPRELAD within 10 days following the closing of the period under review, in accordance with the requirements of the respective supervision and control authority. - Insurance companies (Article 16 of Resolution No. 263): internal audit semi-annually; audit report provided to the SIS and the SEPRELAD. Resolution falls short of providing specific requirements that the function be adequately resourced and independent. - Cooperatives (Resolution No. 89/modified No. 262, Article 2(g)(a)): design and implement internal audit programs to verify semiannually the effectiveness of AML prevention, detection, and reporting, and forward a report to the SEPRELAD 30 days following the closing of the semester. Resolution falls short of requiring the function be adequately resourced and independent. - Type “B” cooperatives: where INCOOP’s regulations do not require internal audit, auditing activities performed through their monitoring board and results forwarded to SEPRELAD 30 days after the closing of the semester. - Type “C” cooperatives: present an annual report, with monitoring board performing auditing activities and forwarding results to SEPRELAD 30 days after the closing of the semester. - Money remitters (Article 12 of Resolution No. 60): establish an internal audit function carrying out internal audit semi-annually; audit reports forwarded to the SEPRELAD 10 days after the closing of the period. Resolution falls short of providing specific requirements that this function be adequately resourced and independent. - External audit requirements: - External auditors required to examine, annually, the anti-money laundering preventive programs and issue a report to SEPRELAD within 60 days of the closing of the period under review (financial institutions). - For cooperatives where external auditors are required by INCOOP regulations: internal auditors should examine AML programs annually and generate a report to be sent to the SEPRELAD 120 days after the closing of the period indicating effectiveness and level of compliance. Authorities were not able to explain/support the basis for this treatment relative to SEPRELAD obligations. - Money remitters: required to contract external auditors, in line with Law No. 2,421/04, to examine AML programs annually and forward a report to the SEPRELAD 60 days after the closing of the period communicating adequacy and effectiveness of compliance. Resolution falls short of providing specific requirements that this function be adequately resourced and independent. - Cross-cutting observation: - Multiple resolutions require audits and reporting deadlines but consistently “fall short of providing specific requirements to include that this function be adequately resourced and independent.” ### Ongoing Employee Training on AML/CFT Matters (c. 15.3) - SIB/CNV/INCOOP: - Articles 2(4) of Resolutions No. 233 (SIB), No. 59 (CNV), and No. 262 (INCOOP) require financial institutions to develop programs to train and educate employees, officials, and authorized representatives on obligations and requirements imposed by the AML law and regulations. - Requirement lacks guidance on the type of training and topics (examples listed but not mandated). - SIS: - Resolution No. 263: Article 15(c) requires procedures manual to include an AML training component. Article 16(2) requires an ongoing training program for all employees, particularly personnel on AML controls and procedures. Article 17 requires development of training programs and distribution to personnel and new employees. - Requirement falls short of providing guidance on training topics (e.g., aspects of the AML Law including obligations and sanctions, ML and FT typologies, CDD, STR). - Money remitters: - Article 5 of Resolution No. 60 (functions of the Compliance Officer): Article 5(7) requires the Compliance Officer to develop programs to inform and train employees and authorized representatives on AML obligations. - Resolution lacks a specific requirement for money remitters to develop, adopt, and implement an ongoing AML training program and lacks guidance on training topics (e.g., AML Law obligations and sanctions, ML and FT typologies, CDD, STR). ### Employee Screening Procedures (c. 15.4) - SIB/CNV/INCOOP: - Articles 2(5) of Resolutions No. 233, No. 59, and No. 262 require code of conduct commitments for all employees, officials, owners/shareholders, directors, and authorized representatives. Policies should consider screening procedures including personal aspects, professional competency, and integrity. - SIS: - Resolution No. 263 Articles 16(1) and 16(3): obligations for insurance companies to develop, implement, monitor, and maintain AML programs addressing designation of individuals at management level, procedures for screening/selecting employees, and code of conduct including fit and proper criteria (personal aspects, professional competence, integrity). - Money remitters: - Article 6 of Resolution No. 60 requires owners, shareholders, directors, employees, and authorized representatives to commit to a code of conduct including AML policies and fit and proper criteria; policies should consider personal background, previous work experience, professional competence, and integrity. ### Independence of Compliance Officer (c. 15.5) - No specific requirements within the resolutions for the AML/CFT compliance officer to act independently and to report to senior management above the compliance officer’s next reporting level or the board of directors. - Resolutions require the compliance officer must be at the senior management level; in practice, Compliance Officers are designated at the manager level or above with unclear independence in some cases. - Observed practical concerns: - In sectors (insurance, securities, finance companies, exchange bureaus, cooperatives), Compliance Officers also perform operational and administrative activities. - Some cooperatives have not designated compliance officers. - Reporting lines vary: some Compliance Officers report to a Compliance Committee, others to general managers who report to or are part of the Compliance Committee. ### Application of AML/CFT Measures to Foreign Branches & Subsidiaries (c. 22.1, 22.1.1, 22.1.2, 22.2) - Legal and supervisory framework: - Article 6 of Law No. 861/96 (Central Bank Law): no institution subject to the law shall operate, close, relocate principal office, branch or representative agencies in the country or abroad, nor reduce capital; modify articles of incorporation, transform, merge, dilute or liquidate, or take over any other institution in the financial system, without consent and explicit authorization of the CBP, which shall decide within 30 days after receiving the application. - Article 15 of Law No. 861: regime for authorization of branches of foreign financial institutions. - Article 76 of Law No. 861: requirements applicable to branches of foreign financial institutions. - No specific requirements for establishing branches or subsidiaries of domestic institutions abroad. - Supervisory resolutions: - Articles 6(3) of Resolutions No. 233 and No. 11: banks, finance companies, exchange bureaus, and other entities under the SIB require branches and subsidiaries to comply with AML measures consistent with local laws and regulations, and international practices to the extent the host country’s legal framework permits. - Similar requirement for brokerage and mutual funds firms under Article 6(2) of Resolution No. 59 and Article 6(3) No. 1103. - Articles 6(3)(b) of Resolution No. 233 and No. 11 require banks, finance companies, exchange bureaus and other entities under the SIB to inform the home country supervisor when a foreign branch or subsidiary is unable to comply with AML measures because prohibited by the host country’s legal framework. Identical requirement under Articles 6(2) of Resolution No.59 and No. 1103 for brokerage and mutual funds. - Gaps identified: - No requirements/obligations established by SEPRELAD or regulatory authorities for financial institutions to pay particular attention to branches/subsidiaries in countries that do not or insufficiently apply the FATF Recommendations. - No requirement to apply the higher standard where home and host minimum AML/CFT requirements differ, to the extent local laws permit. - At time of mission, no subsidiaries of insurance companies, cooperatives, and money remitters operating abroad, but no prohibition on establishment abroad; therefore no requirements to ensure foreign branches/subsidiaries observe home-country AML/CFT measures or to inform home supervisor when prohibited by host-country laws. ### Consistency of CDD Measures at Group Level (c. 22.3) - Not applicable: authorities indicated that there are no financial groups established in Paraguay at this time. ### Recommendations and Comments (3.8.2) - R.15 — shortcomings to address: - Establish an explicit requirement in the resolutions for financial institutions to conduct a risk assessment exercise to determine their vulnerabilities to ML and FT (although financing of terrorism is not yet criminalized) to develop and adopt measures, controls, policies and procedures to identify, measure, control, and monitor money laundering risk within customers, transactions/operations, products & services, and geographical locations. - SIS and INCOOP should provide clear guidance to ensure compliance officers are not involved in operational or administrative activities; act independently and report directly to the highest authority. - Establish explicit requirements in the resolutions for financial institutions to maintain an adequately resourced and independent internal audit function to test compliance with AML policies, procedures, and controls. - Establish an explicit requirement to ensure the Compliance Officer and staff have authority and unrestricted access to both information and staff within the institution. - Provide guidance on the type of training and topics to be considered (examples: aspects of the AML Law including obligations and sanctions, ML and FT typologies, CDD, STR, etc.). - Extend the obligation to money remitters to develop, adopt, and implement an ongoing AML training program. - R.22 — recommendation: - Establish requirements for branches and subsidiaries of financial institutions abroad to pay particular attention to countries which do not or insufficiently apply the FATF Recommendations; where minimum AML/CFT requirements of home and host differ, require application of the higher standard to the extent that local (i.e. host country) laws and regulations permit. ### Compliance Ratings (3.8.3) - R.15: NC - Factors underlying rating: - No requirement to conduct a risk analysis of potential ML and FT risks. - No guidance governing appointment, role, authority, reporting lines, resources need and independence for the compliance officer. - No requirement to maintain an adequately resourced and independent audit function. - No guidance on training topics to be considered by the institutions. - No requirements imposed on money remitters with respect to the training program. - R.22: NC - Factors underlying rating: - No specific requirements in place to comply with essential elements of this recommendation including paying particular attention that the principles are observed with respect to branches and subsidiaries and to require financial institutions to apply the higher standard to the extent local laws and regulations permit. ### Shell Banks / Licensing and Establishment Requirements (R.18; legal framework) - Legal Framework: Law No. 861. - Articles 10 through 23 of Law No. 861 (Central Bank Law) cover requirements for establishing financial institutions: minimum capital for banks, finance companies and savings and loans societies; company stock and type; promoters; application requirements; decisions on applications; authorization for foreign credit granting branches; minimum capital requirements for foreign credit granting branches; individuals responsible for managing branches and subsidiaries; limitations on subsidiaries; minimum capital for subsidiaries; shareholders’ records/registry; prohibitions on ownership; and sanctions. - Resolution No. 7 of the CBP (Act No. 2 of Jan/7/08) establishes specific requirements for licensing and establishment of new financial institutions subject to Law No. 861. - Article A (a)(7) covers requirements for establishment of foreign branches in Paraguay. - Application documentation required (certified/notarized and translated if not in Spanish): - a) Articles of incorporation from the holding company in the home country and resolution authorizing opening/establishment of the branch; - b) Directors’ resolution evidencing authorization to establish the branch in Paraguay; - c) Power of attorney evidencing the individual(s) authorized to manage the establishment/opening of the branch; - d) Balance sheets, income statements and annual statements of the entity for the last five years; - e) Capital assigned to the branch for its operations, which should be and remain in the host country in accordance with existing requirements; - f) Supervisory reports determining the liquidity and capital positions, as well as management and valuation of assets of the entity; - g) Statement from the holding/parent company authorizing the capital assigned and assuming responsibility for the operations of the institution in Paraguay. *Italic: Content derived from the supplied IMF chapter/section.* ### 615. Similar requirements apply to foreign entities when these consider establishing subsidiaries in ### _cr09235 - 615. Similar requirements apply to foreign entities when these consider establishing subsidiaries in ### Verification, registration, and authorization - Other sections within this resolution cover: - the verification of the information; - activities to be conducted by the CBP; - the registration of the articles of incorporation in the company registry; and - the authorization by the CBP to operate in accordance with the requirements of the Central Bank Law. ### Prohibition of correspondent banking with shell banks (c. 18.2) - Article 6(5) of Resolution No. 312: - “no institution shall establish or maintain cross border correspondent relationship with shell banks." - Under verification procedures for customer identification of Article 6(4)(b), financial institutions shall implement measures and internal controls to avoid entering into or continuing a cross border correspondent relationship with a financial institution incorporated in a jurisdiction in which it has no physical presence and which is not affiliated with a regulated financial group. - Article 6(5) of the Central Bank Resolution No. 11: no institution shall establish or maintain cross border correspondent relationship with shell banks. - Resolution N°. 2, Act N°. 42, (5/20/2002) issued by the CBP establishes: 1) all entities under the supervision of the SIB, shall suspend all cross border correspondent relationship with foreign financial institutions which have no physical presence in any country. 2) definition of physical presence as the address where the foreign bank is authorized to operate employs one or more individuals full time, maintain records of transactions related to its banking activities, and are subject to inspections by the supervisory authority that granted the license. 3) within 120 days of the effective date of this resolution, transactions with shell banks shall be cancelled. 4) relationships/contracts with shell banks should not be renewed. 5) measures should also be applicable to agencies, which should not promote financial products in shell banks. 6) these measures should be communicated to whom they may concern. ### Requirement to satisfy correspondent financial institutions prohibit use of accounts by shell banks (c. 18.3) - Articles 6(5) of Resolutions No. 312 and No. 11 require FIs to maintain evidence that respondent financial institutions in a foreign country do not allow their accounts to be used by shell banks. ### Recommendations and compliance with Recommendation 18 - Recommendation: - It is recommended that the SIB authorities establish measures for financial institutions to define and/or require physical presence in a way that would encompass the meaningful mind and management of the company. - Compliance with Recommendation 18: - R.18 LC - Factor underlying rating: - Lack of measures that define or require physical presence in a way that would encompass the meaningful mind and management of the company. ### Legal framework and supervisory responsibilities (R. 17, 23, 25 & 29) - Legal framework: - Law No. 489/95 – the Central Bank Law. - Law No. 861/96 – the General Law for Banks, Financial Institutions and Other Credit Institutions. - Article 4 of Law No. 489/95 provides the Central Bank with the powers to supervise financial institutions; BCP is the sole authority responsible for supervision. - Superintendency of Banks (SIB) pursuant to Article 102 of Law No. 861/96 supervises compliance; SIB is a technical institution within the BCP with functional, administrative, and financial autonomy. - Article 56 of Law No. 827/96 – Insurance Law: Superintendency of Insurance (SIS) supervises insurance and re-insurance institutions; SIB is an entity within the BCP that enjoys functional and administrative autonomy. - Law No. 1,284/98 – Securities Law (Articles 164 and 165): CNV supervises financial institutions operating in the securities market. - Law No. 438/94 – Cooperatives Law (Article 115): INCOOP is responsible for supervision of cooperatives; INCOOP functions as a specialized body within the Ministry of Agriculture and Livestock. - Financial institutions under supervisory responsibility (as given): - Banks: SIB - Finance companies: SIB - Exchange bureaus: SIB - Insurance companies: SIS - Re-insurance companies: SIS - Brokerage and Mutual Funds firms: CNV - Cooperatives: INCOOP ### Designation of competent authority for AML/CFT (c. 23.2) - No direct designation of competent authorities with responsibility for ensuring financial institutions adequately comply with AML/CFT requirements. - Article 29 of Law No. 1,015/97: administrative infringements relating to money laundering may be regulated, investigated and penalized only through institutions responsible for supervision and monitoring of reporting entities; appears procedural rather than a direct obligation. - Despite lack of direct designation, SIB, SIS, CNV, and INCOOP have assumed responsibility with respect to AML matters under their statutory powers. ### Fit and proper criteria and prevention of criminals from controlling institutions (c. 23.3, 23.3.1, 23.4) - Law No. 861/96 (Article 35 and Article 36): - Chairman and directors must be natural persons meeting conditions of integrity, competence and experience. - Incompatibilities: persons who may not serve as chairman, directors, managers or trustees include: a) those affected by disabilities and incompatibilities established in the Civil Code for the administration and representation of companies; b) those holding positions of directors, managers, trustees or employees of other entities subject to the control of the Superintendency of Banks; c) those working for the government, with the exception of teaching and consultative or technical advice; d) individuals that have been declared bankrupt; e) Individuals that are insolvent, past due with respect to debts in the financial system and/or facing collections; f) those convicted of crimes; and g) those directors and officers of the CBP and the Superintendency of Banks. - Exchange bureaus (Law No. 2,794/05): - Articles 5 and [unspecified] require express authorization of the CBP to operate an exchange bureau. - Article 7 requires CBP approval to relocate, reduce capital, modify articles, merge, liquidate, acquire other exchange bureaus. - Article 12 covers requirements for promoters, including fit and proper requirements and solvency. - Article 13 documentation for license applications includes: a) Articles of incorporation, accompanied by a favorable opinion from the legal department of the CBP; b) Legal address and location of the principal office; c) Capital amount to initiate operations; d) List of owners/shareholders, including addresses, nationality, civil status, profession/occupation, and the amount of capital contributed; e) Certification of good conduct; f) Curricula Vitae for senior management and representatives reflecting adequate experience and a signed affidavit attesting compliance with the law. - Observation: there are exchange bureaus operating without a license; SIB aware but has not closed or sanctioned these clandestine businesses. - SIS (Law No. 827, Article 74): lists persons who cannot exercise roles of agents or insurance brokers (includes officials/employees from SIS, government officials/employees, directors and inspectors from insurance companies, non-residents, adjustors and appraisers, and persons with legal disabilities or prior sanctions). - CNV (Law No. 1,284): - Article 89: incompatibilities for directors of a Stock Exchange related to convictions for crimes carrying imprisonment over two years (with traffic accident exception). - Article 109: persons convicted of crimes against property and the public faith may not be directors, agents, operators and trustees of a Brokerage House. - INCOOP (Law No. 438/94, Article 72; Decree No. 14,052/96 Article 77): persons who may not be designated as members of the Administration Council include relatives within specified degrees, persons in competing companies, bankrupt or fraud-convicted persons, and persons found guilty of crimes and condemned. - Money remitters: - No measures or requirements in place addressing money remitters. - Current requirements of SIB, SIS, CNV, and INCOOP fall short of providing specific detail on preventing criminals or associates from holding significant or controlling interests or management functions in a financial institution, including explicit fit and proper measures. ### Licensing, monitoring, and supervision of value transfer/exchange services (c. 23.5–23.7) - Exchange bureaus conducting money or value transfer services (MVTS) are licensed, supervised by the SIB, and subject to AML Law obligations. - These institutions are subject to SEPRELAD’s Resolution No. 233 and SIB’s No. 11 regarding AML. - Money remitters operate through agency relationships with four financial institutions regulated and supervised by the SIB; activities related to money remitters conducted by the financial institutions are regulated by the SIB. - Anecdotal evidence of informal MVTS operating in Paraguay; authorities indicated they were not aware and no measures established to monitor this informal sector. ### Guidelines for financial institutions (c. 25.1) - Resolutions issued by SEPRELAD (Resolutions No. 233, No. 263, No. 59, No. 262) provide reporting entities with examples to assist financial institutions in identifying, detecting, and monitoring suspicious behavior and business relationships. - All resolutions require financial institutions to consult the list OFAC when detecting suspicious transactions. - SIB Resolution No. 11 contains the same list of transactions that may be deemed suspicious. - Gap: neither SEPRELAD nor the competent supervisory authorities have established sector specific guidelines describing ML and FT techniques and methods or international recent developments (FATF, UN Security Council resolutions). ### Supervisory powers, inspections, and AML/CFT supervision (c. 29.1–29.4) - Article 29 of Law No. 1,015/97: administrative infringements may be regulated, investigated and penalized only through institutions responsible for supervision and monitoring; appears procedural rather than direct empowerment. - As of the assessment date: - SIB was the only supervisory authority conducting AML supervision of their respective financial institutions; coverage limited and scope of on-site inspections was compliance-based, not risk-driven. - SIS had conducted only one on-site visit prior to the mission; scope not risk-driven. - CNV and INCOOP had not conducted any AML supervision since the law came into effect. - AML/CFT inspections performed by authorities (SIB, SIS, CNV, INCOOP) over 2006 – June 2008 (Table 5): - Banks: 2006 — 6; 2007 — 12 (of which includes 6 follow-up visits to FIs inspected in 2006); As of June 2008 — 2 (follow-up visits) - Finance companies: 2006 — 1; 2007 — 5; As of June 2008 — 3 - Exchange bureaus: 2006 — 0; 2007 — 0; As of June 2008 — 0 - Insurance companies: 2006 — 0; 2007 — 0; As of June 2008 — 1 - Re-insurance companies: 2006 — 0; 2007 — 0; As of June 2008 — 0 - Brokerage and Mutual Funds firms: 2006 — 0; 2007 — 0; As of June 2008 — 0 - Cooperatives: 2006 — 0; 2007 — 0; As of June 2008 — 0 - Powers of enforcement and sanction: - Article 29 of Law No. 1,015/97: administrative infringements to be handled by competent supervisory authorities, but law does not provide authorities with direct powers to apply AML-related sanctions. - For the SIB, authority and power to sanction lies with the Monetary Board of the Central Bank, not within the SIB. - SIS (within the Central Bank) had the power to sanction without consent of the Monetary Board. - CNV and INCOOP had powers to sanction. - In practice: no sanction has been imposed by SIB, SIS, CNV, and INCOOP for non-compliance with AML requirements. ### Availability and scope of sanctions (c. 17.1–17.4) - AML Law No. 1,015/97: sanctioning procedures should be established within relevant sector-specific laws. - No sanction has ever been imposed for non-compliance with AML requirements. - SIB issued warnings to financial institutions regarding inadequate customer identification and due diligence, but cited institutions under prudential laws and regulations rather than under the AML law; warnings served more as notices than proportional or dissuasive sanctions. - Sanctions applicable by supervisory authorities (Table 3 summary): - Types of sanction and applicable authorities: - Limitation of activities or operations: - Banks, finance companies, exchange and other credit granting institutions and natural persons: Central Bank of Paraguay (CBP) Law No. 489 - Articles 94 and 95 - Insurance companies, re-insurance companies, directors, officers, employees, and legal representatives: Insurance Law No. 827 – Articles 109, 114, and 120 - Securities companies, issuers, stock market, intermediaries, external auditors, funds administrators, and adjusters: None - Cooperatives: None - Temporary ban: - Banks, finance companies, exchange and other credit granting institutions and natural persons: CBP Law Articles 94 and 95 (ban extends to distribution of dividends or opening new offices for a period of two years) - Insurance companies, re-insurance companies, directors, officers, employees, and legal representatives: None - Securities companies, issuers, stock market, intermediaries, external auditors, funds administrators, and adjusters: Securities Law No. 1,284 – Title VII – Chapter II Article 194 - Cooperatives: None - Warning: - Banks, finance companies, exchange and other credit granting institutions and natural persons: CBP Law Articles 94 and 95 (only for “minor offenses”) - Insurance companies, re-insurance companies, directors, officers, employees, and legal representatives: Insurance Law No. 827 – Articles 109, 114, and 120 - Securities companies, issuers, stock market, intermediaries, external auditors, funds administrators, and adjusters: Securities Law No. 1,284 – Title VII – Chapter II Article 194 - Cooperatives: Cooperatives Law No. 438 – [table continues beyond provided extract] *Source: _cr09235 - 615. Similar requirements apply to foreign entities when these consider establishing subsidiaries in* ### Section IV – ### Section IV – ### Adequacy of Resources for Competent Authorities (c. 30.1) - SEPRELAD and supervisors are not endowed with the structure, funding and adequate staff and technical resources and other resources to carry out fully and effectively their duties. - SEPRELAD indicated that it needs additional sufficient funds to carry out the functions contemplated under Law No. 1,015/97. - Superintendency of Insurance: AML supervisory resources currently consist of only one person devoted to all aspects of preventive measures, training, and supervision; additional resources are urgently needed. - Other supervision and control authorities (SIB, CNV, and INCOOP) expressed concerns with the lack of sufficient resources to carry out duties and responsibilities vested by Law No. 1,015/97. ### Integrity of Competent Authorities (c. 30.2) - Officials and employees of supervision and control authorities must observe a Code of Conduct and adhere to professional standards and conduct. - For SEPRELAD staff, Article 32 Law No. 1,015/97 establishes the obligation of professional secrecy. ### Training for Competent Authorities (c. 30.3) - Competent authorities reported conducting training programs for their officials. - Due to lack of adequate documentation, it was not possible to confirm the adequacy of such trainings. - Training programs do not sufficiently cover the aspects of Criterion 30.3. ### Statistics (applying R.32) - No statistics are compiled and maintained by the competent supervisory authorities. ### Recommendations and Comments — R.17, R.23, R.25, R.29 - R.17 - Ensure that effective, proportionate and dissuasive administrative sanctions are available to deal with reporting entities that fail to comply with the AML requirements. - R.23 - Establish a direct obligation that designates a competent supervisory authority to regulate and supervise money remitters in aspects related to AML. - Establish explicit and clear measures to prevent criminals or their associates from owning or controlling a financial institution. - Establish explicit fit and proper measures for directors and senior management of financial institutions. - R.25 - Establish sector specific guidelines and feedback mechanisms to assist financial institutions, including: - a description of ML and FT techniques and methods; and - international recent developments on ML and FT, particularly those issued by FATF and/or the UNSCR. - R.29 - Establish a direct obligation that empowers the SIB, the SIS, the CNV, and the INCOOP to monitor and inspect financial institutions for compliance with the AML obligations. - Conduct inspections of financial institutions to ensure compliance. - Sanction financial institutions for failure to comply with or properly implement the requirements to combat money laundering, consistent with the Recommendations. - Strengthen the overall AML/CFT supervisory process for the SIB, the SIS, the CNV, and the INCOOP to effectively address AML/CFT matters. ### Compliance with Recommendations 17, 23, 25 & 29 — Ratings and underlying factors - R.17 — NC - No penalties/sanctions imposed by the competent supervisory authorities related to AML/CFT. - R.23 — NC - Lack of direct obligation that designates a competent supervisory authority to regulate and supervise in aspects related to AML, including for money remitters. - Lack of explicit and clear measures to prevent criminals or their associates from owning or controlling a financial institution. - Lack of explicit fit and proper measures for directors and senior management of financial institutions. - R.25 — NC - Lack of adequate and appropriate feedback from competent authorities. - R.29 — NC - Lack of direct obligation to empower the SIB, the SIS, the CNV, and the INCOOP to monitor and inspect financial institutions for compliance with the AML obligations. - Lack of adequate and frequent inspections by SIB and SIS of financial institutions to ensure compliance. - Lack of direct obligation to sanction financial institutions for failure to comply with or properly implement the requirements to combat money laundering, consistent with the Recommendations. - Lack of supervision by the CNV, and the INCOOP to effectively address AML/CFT matters. ### Money or Value Transfer Services (SR.VI) — Description and Analysis - Legal Framework: SEPRELAD Resolution No. 60. - Designation of Registration or Licensing Authority (c. VI.1)/List of Agents (c. VI.4): - There is no supervisory body responsible for the licensing, regulation and supervision of money or value transfer (MVT) service operators in Paraguay. - Application of FATF Recommendations (c. VI.2 / c. VI.3): - Money or value transfer services are not covered by the obligations imposed by the AML Law No. 1,015/97. - Sanctions (c. VI.5): - Resolution No. 60, Article 24: the National Directorate of Customs is the competent authority for imposing sanctions for noncompliance with the requirements of this resolution. - The resolution appears difficult to apply in an environment where these entities are not licensed, regulated or supervised. - Informal MVTS: - Anecdotal evidence revealed an informal money or value transfer system appears to be operating within Paraguay, used by a large group of groups working throughout Paraguay. - Authorities indicated they are not aware of any informal money or value transfer system or similar activities taking place in Paraguay. - Best Practices (c. VI.6): - No indications the authorities had considered the measures set out in the Best Practices Paper for implementing SR.VI. ### Recommendations and Compliance — SR.VI - Recommendation: - Authorities should designate a supervisory body responsible for the licensing, regulation and supervision of money or value transfer (MVT) service operators, particularly those operating informal systems. - SR.VI — NC - No licensing/registration system or designated competent authority for informal MVTS. ### Designated Non-Financial Businesses and Professions (DNFBPs) — Customer Due Diligence and Record-keeping (R.12) - Legal Framework: Law 1015/97, Article 13, j), k) and n, Resolutions Nº 62, 264, and 266. - Reporting entities under Article 13, Law 1015/97: - Gambling Establishments (paragraph j) - Real Estate Agents (paragraph k) - Dealers in Precious Stones and Metals (paragraph n) Gambling Establishments - Law 1015/97, Article 13, paragraph j) establishes Gambling Establishments as entities forced to report suspicious transactions. - SEPRELAD issued Resolution N° 62 (Regulation of prevention and suppression of money laundering or property for companies engaged in the operation of games of chance or gambling). - Resolution N° 62, Article 10: individual bets, split or multiple reach an amount equal to or more than three thousand U.S. dollars (USD 3,000) or its equivalent in other coins will require the registration of these customers; such customers must be considered regular and subject to CDD. - Customer identification requirements: Articles 14, 15 and 16 of Law 1015/97 and Chapter III, Articles 10 and 11 of Resolution N° 62. - Resolution N° 62, Article 11: obligation to implement a record of customer identification winners of awards in excess of USD 10,000. - Gaps: - Criterion 5.1 (Anonymous accounts) not covered by Law 1015/97 or Resolution N° 62. - Resolution N° 62 does not contemplate occasional customers (C.5.2 paragraph b) and subsections c)-e)). - Identification of legal arrangements is not expressly required (C.5.3/C.5.4). - Beneficial owner identification not required (C.5.5). - Criteria 5.6, 5.7, 5.8-5.12, 5.13-5.14, 5.15-5.16, 5.17-5.18 not covered under Resolution N° 62. Real Estate Agents - Law No. 1015/97, Article 13, paragraph k), contemplates Real Estate Agents as reporting entities. - Customer identification requirements: Articles 14, 15 and 16 of Law 1015/97 and Chapter III, Articles 7 and 8 of Resolution No. 264 and its amendment Resolution N° 266. - Resolution No. 264 Article 7: Real Estate Agents should keep records of customers and constituents from the beginning of the trading relationship; records to be updated. - Resolution No. 266 Article 8: obligation to identify the customer (natural or legal); requires documentation for individuals and legal persons. - Resolution No. 266 Article 10: obligation to register all transactions of buying and selling that are not less than U$S 10,000 made by the client where the data should include the beneficiary of the transaction. - Gaps: - Criterion 5.1 not covered. - Resolutions do not contemplate occasional customers (C.5.2 paragraph b) and subsections c)-e)). - Identification of legal arrangements is not expressly required (C.5.3/C.5.4). - Beneficial owner identification not required (C.5.5); Article 8/Article 16 provide identification of principal but not explicit beneficial owner obligation. - Criterion 5.6 not expressly covered. - Ongoing due diligence: no AML Law requirement; Resolution No. 266 Article 8 requires maintaining updated customer identification but does not contemplate requisites under Criterion 5.7.2. - Criteria 5.8-5.12 (Risk) not covered under Resolutions Nos. 264 and 266. - Timing of verification (C.5.13-5.14): Article 14 requires verification when entering into business relations; does not include beneficial owner. - Failure to complete CDD (C.5.15-5.16) not covered. - Existing clients (C.5.17-5.18): Article 16 of Resolution No. 264 gives Real Estate Agents one year from publication to conclude requirements under Article 7 and Article 8. Dealers in Precious Metals and Stones - Article 13, paragraph n) obliges Dealers in Precious Metals and Dealers in Precious Stones to notify SEPRELAD of any act or transaction with indication or suspicion of money laundering. - SEPRELAD has not issued regulations related to these reporting entities. Other DNFBPs - Lawyers, notaries, other independent legal professionals and accountants when they prepare for or carry out transactions for a client concerning activities mentioned under Recommendation N 12, and Trust and Company Service Providers when they prepare for or carry out transactions listed in the Glossary, are not under a formal obligation to take identity information from clients under Article 13, Law 1015/97; no evidence authorities provided that they are doing so. Implementation Status - The obligations set out in the AML Law or the Resolutions enacted by SEPRELAD regarding the CDD process have not been implemented yet by the Gambling Establishments, the Real Estate Agents and the Dealers in precious metals and stones. *Source: _cr09235 - Section IV –* ### 706. Notaries do not perform ongoing monitoring, as the transactions they notarize are usually ### _cr09235 - 706. Notaries do not perform ongoing monitoring, as the transactions they notarize are usually ### Ongoing monitoring and DNFBP CDD scope - Notaries do not perform ongoing monitoring, as the transactions they notarize are usually one-off transactions. - It is unclear whether lawyers are carrying out any ongoing monitoring on existing clients. - Law 1015/97, Article 17: reporting entities shall identify and record clearly and precisely any transaction conducted by their clients. - Law 1015/97, Article 18: reporting entities shall keep for a minimum period of five years any documents, files and correspondence establishing or identifying the transactions. The five-year period shall be computed from completion of the transaction or from the time when the account was closed. - Resolution N° 62, Article 19 and Resolution N° 264, Article 17: companies must preserve all records and reports as the time period specified in the existing regulatory laws. ### Applying Recommendations 6, 8, 9, 10 and 11 to DNFBPs (findings) - Applying Recommendation 6: - There is no provision for PEPs within the categories of DNFBP mentioned under Criterion 12.1. - No evidence that competent authorities for DNFBPs issued additional guidance. Criterion not met. - Applying Recommendation 8: - Not contemplated under Resolution N° 62 for Internet Casinos (there are not known Internet Casinos operating from Paraguay). - Not contemplated under Resolutions N° 264 and 266 for Real Estate Agents. Criterion not met. - Applying Recommendation 9: - Resolution N° 62 does not contemplate reliance on intermediaries or third parties to perform elements of the CDD process or to introduce business. - Resolution N° 266, Article 8 prohibits Real Estate Agents from delegating responsibility to third parties to comply with customer identification. - The requirements in place do not fully comply with the standard. - Applying Recommendation 10: - Article 17 and Article 18 of Law 1015/97 establish identification, recording and five-year retention obligations (five years computed from completion of the transaction or account closure). - Resolutions require preservation of records per existing regulatory laws, but do not require keeping records for a longer period than five years upon request by a competent authority. - The required content of records is not specified. - Recordkeeping obligations for DNFBPs have not been implemented fully. The requirements do not fully comply with the standard. - Applying Recommendation 11: - Gambling Establishments, Real Estate Agents, and Dealers in precious metals and stones are not specifically required to pay attention to all complex, unusual or large transactions or to analyze background and objective and make results available. - Law 1015/97, Article 19: obligation to report suspicious transactions, irrespective of value, with a definition that includes complex, unusual, large or not meeting usual patterns. - Resolution No. 63 (March 2008), Article 2: obliges reporting entities to report unusual or suspicious transactions regardless of amount. - Resolution N° 62, Article 13 and Article 14: require reporting acts/operations regardless of size and define suspicious operations. - Resolution N° 264, Article 11 and Article 12: similar obligations for Real Estate Agents. - Measures focus more on identifying suspicious transactions than on paying attention to unusual transactions; requirements do not follow the standard. - CONAJZAR reported that SEPRELAD regulation (March, 2008) has not been implemented yet for Gambling Establishments; Resolutions N° 264 and 266 enacted in November 2007. ### Recommendations and required legal/regulatory actions (from source) - Incorporate lawyers, notaries, other independent legal professionals and accountants (when preparing for or carrying out transactions for clients concerning activities set out in FATF Methodology) and Trust and company service providers into reporting entities under Article 13, Law 1015-97. - Establish through law, resolution or other enforceable means all CDD requirements for DNFBP to comply with Recommendation 5. - Prohibit through law or regulation anonymous accounts or accounts in fictitious names. - Establish obligation to undertake customer due diligence measures according to Section b-e under Criteria 5.2 and mandatory measures under Section 5.3 (Identification measures and verification sources). - Establish requirements for customers that are legal persons or legal arrangements according to Criteria 5.4. - Establish requirements to verify the beneficial owner, information on Purpose and Nature of Business Relationship, Ongoing Due Diligence on Business Relationships (particularly for higher risk customers), Timing of verification for occasional customers, Risk, and failure to complete CDD before commencing business. - Require DNFBP to pay attention to PEPs in accordance with Recommendation 6 and to pay special attention to money laundering threats from new or developing technologies that might favor anonymity; adopt policies/procedures for non-face-to-face business relationships or transactions in accordance with Recommendation 8. - Authorities recommended to extend prohibition to Gambling Establishments to rely on intermediaries or other third parties to perform elements of the CDD process or to introduce business, or to expressly indicate requirements when such reliance is permitted. - Establish requirements to keep records for a period longer than five years if so requested by a competent authority in specific cases and upon proper authority, and ensure records are available on a timely basis to domestic competent authorities (Recommendation 10). - Establish obligation under Recommendation 11 concerning unusual transactions and requirement to examine background and purpose of transactions and document findings. - Authorities recommended to implement among DNFBP listed under Article 13 Law 1015 the requirements set out in the AML Law and SEPRELAD Resolutions regarding FATF Recommendations 5, 6 and 8-11. ### Compliance with Recommendation 12 — Rating and factors - R.12: NC - Summary of factors relevant to s.4.1 underlying overall rating: - Law 1015/97 does not cover Lawyers, notaries, other independent legal professionals and accountants when they prepare for or carry out transactions for their client concerning the activities set out in FATF Methodology and Trust and company service providers when they prepare for or carry out transactions for a client concerning the activities listed by GAFI. - Lack of regulation issued by SEPRELAD for Dealers in Precious Metals and Dealers in Precious Stones. - Recommendations 5, 8, 9, 10 and 11 are not properly covered; measures in place are general and do not contemplate required level of detail under Criteria. - Lack of explicit regulatory requirements covering: prohibition of anonymous accounts or accounts in fictitious names; all cases when CDD is required (Criterion 5.2 Sections c-e); identification measures; identification of legal persons and arrangements; risk, timing of verification, ongoing due diligence; information on purpose and nature of business relationships; failure to complete CDD. - Lack of regulation to pay attention to PEPs (Recommendation 6). - Lack of regulation to address new technologies that may favor anonymity and risks from non-face-to-face business relationships (Recommendation 8). - Lack of regulation to prohibit Gambling Establishments from relying on intermediaries or to specify requirements when reliance is permitted (Recommendation 9). - Lack of full compliance with recordkeeping provisions under Recommendation 10. - Lack of explicit obligation to pay attention to all complex, unusual or large transactions or unusual patterns and to examine and document their background as required under Recommendation 11. - CONAJZAR has not issued regulations for the Gambling Establishments. - FT is not criminalized in Paraguay, limiting fulfillment of Recommendations addressing financing of terrorism (e.g., R.8). - Lack of implementation by DNFBP listed under Article 13, Law 1015, of AML Law and SEPRELAD Resolutions regarding FATF Recommendations 5, 6, 8-11. ### Suspicious Transaction Reporting (R.16) — description and analysis - Legal framework: Law 1015/97, Article 13 paragraphs j), k), n), Article 19, Resolutions N° 62, 264 and 266. - Article 13, Law 1015/97: - Paragraphs j) and k): Gambling Establishments and Real Estate Agents obligated to notify SEPRELAD any act or transaction, regardless of size, where there is indication or suspicion of money laundering. - Paragraph n): Dealers in Metals and Precious Stones are reporting entities. - Article 19, Law 1015/97: reporting entities shall report any act or transaction, regardless of sums involved, if there is an indication or suspicion that it is connected with an offence of money or property laundering. Considered suspicious transactions include: - Operations which are complex, unusual or large, or do not follow the pattern of habitual transactions, - Operation which although not large, occur periodically and with no reasonable legal or economic basis. - Operations which, by their nature or volume, are not consistent with the credit or debit operations conducted by the clients in the light of their activities or previous business practice, - Operations which, with no justifiable cause, involve cash payments by a large number of persons. - DNFBP reporting entities under Article 13, Law 1015/97: Gambling Establishments, Real Estate Agents, Dealers in precious metals and precious stones. - SEPRELAD issued Resolution No. 62 for games of chance/gambling and Resolutions N° 264 and 266 for Real Estate Agents. - No designated threshold under the AML Law for Dealers in precious metals and dealers in precious stones for the report of suspicious transactions. - Article 12 of Law 1015/97: obligations apply to all transactions in excess of the ten thousand US dollars or the equivalent thereof in other currencies, subject to exceptions in the Law. - Other DNFBP mentioned under Criterion 16.1, paragraphs c) and d) are not covered by the Law. - Law No. 1,015/97, Article 23: provides Gambling Establishments a special scheme of obligations. - Gambling Establishments must comply with Article 19 if: - 1) payments are made to clients by cheques in exchange for gambling tokens; - 2) the transfer of funds to a bank account or any payment procedure not involving cash is authorized or ordered; and - certificates are issued of the client’s winnings. - Law and SEPRELAD regulations do not refer to Internet Casinos. - The obligation to inform SEPRELAD under Article 19 does not extend to terrorism, acts of terrorism, terrorist organizations or those who finance terrorism (SR.IV). - The obligation to submit STRs does not apply to funds suspected to be connected to terrorism or its financing because terrorism is not criminalized in Paraguay. - Article 19 imposes obligation to report any act or transaction, regardless of size, for which there is indication or suspicion it relates to money laundering, including attempted operations. - Special Recommendation IV.2 not satisfied because terrorism is not criminalized and no obligation to report suspicious transactions linked to terrorism. - No indication that STR obligations are limited when transactions involve tax matters. - AML Law and SEPRELAD Resolutions N° 62, 264, 266 require Gambling Establishments and Real Estate Agents to notify SEPRELAD of any suspicious transaction, including attempted transactions that could be linked to money laundering. - Requirements in place to address Recommendation 13 do not follow the standard and have not been implemented yet. - None of the DNFBP contemplated by Law have reported a suspicious transaction to the FIU. ### STR protections, tipping-off and internal controls - Protection for making STRs: - Law 1015/97, Article 34: information furnished to SEPRELAD in compliance with the Law and regulations shall not constitute breach of secrecy or confidentiality; obligors and their managers, directors and officers are exempt from civil, criminal and administrative liability, except in event of complicity. - Prohibition against tipping-off: - Law 1015/97, Article 20: obligors shall not reveal to the client or third parties any steps taken or communications effected in compliance with the Law and regulations. - Resolution No. 62, Article 16: Gambling Establishment personnel may not notify persons involved that they have been reported, nor divulge contents of STRs/supporting documents except when requested by SEPRELAD. Resolution No. 264, Article 14 mirrors this for Real Estate Agents. - Confidentiality of reporting staff: - Not contemplated under the Law or SEPRELAD Regulations. - Internal controls to prevent ML and TF: - Law 1015/97, Article 21: reporting entities must establish appropriate procedures for internal auditing of information to discover, forestall and prevent operations for the purpose of money or property laundering. - The obligation does not include aspects related to combating the financing of terrorism, given that this has not been criminalized. *Source: _cr09235 - 706. Notaries do not perform ongoing monitoring, as the transactions they notarize are usually* ### 745. Resolution No. 62, Article 2 requires that companies engaged in the exploitation of games of ### _cr09235 - 745. Resolution No. 62, Article 2 requires that companies engaged in the exploitation of games of chance or gambling to formulate policies and procedures to prevent money laundering. ### DNFBPs: Obligations and Implementation - Resolution No. 62, Article 2 requires companies engaged in the exploitation of games of chance or gambling to formulate policies and procedures to prevent money laundering; these must be available to all officials of the company engaged in the operation of games of chance or gambling and to SEPRELAD. - Resolution No. 264, Article 2 imposes the same obligation on Real Estate Agents. - SEPRELAD has not issued a regulation applicable to Dealers in Precious Stones and Metals. - Implementation status: - The requirements set out under the standard have not been implemented by Gambling Establishments, Real Estate Agents and Dealers in Precious metals and stones. - None of the designated non-financial businesses and professions listed under Article 13 has developed internal policies, procedures and controls to prevent ML and FT, or appointed a Compliance Officer. ### Internal Audit and Compliance Functions (Criterion 15.1, 15.2) - Resolution No. 62, Article 5: obligation to appoint a Compliance Officer for implementation, training and monitoring program. - Resolution No. 264, Article 4: same obligation for Real Estate Agents. - Resolution No. 62, Article 6: defines functions and powers of the Compliance Officer, including obligation to monitor records of operations and transactions, collect, analyze and refer STRs; does not expressly provide timely access to customer identification data and other CDD information, transaction records, and other relevant information as required by Criterion 15.1.2. - Resolution No. 264, Section 5: same obligations for Real Estate Agents. - Resolution No. 62, Article 8: internal audits every six months for companies operating games of chance and gambling to verify prevention/detection/reporting systems; requires an annual external audit; reports must be submitted to SEPRELAD and the Supervisory Board -CONAJZAR-. - Resolution No. 264, Article 6: same obligation for Real Estate Agents, but does not require submission of internal/external audit reports to a supervisory body (no supervisory body for Real Estate Agents identified). - The maintenance of an adequately resourced and independent audit function to test compliance is not expressly provided, as required under Criterion 15.1. - Implementation status: - None of the designated non-financial businesses and professions listed under Article 13 maintain an adequately resourced and independent audit function to test compliance with procedures, policies and controls. ### Ongoing Employee Training and Screening (Criteria 15.3 and 15.4) - Resolution No. 62, Article 6, paragraph f): Compliance Officer must coordinate development of training programs to instruct employees and authorized representatives in compliance with rules on prevention of money laundering; FT is not contemplated. - Resolution No. 264, Article 5, paragraph g): same obligation for Real Estate Agents. - Training deficiencies: - Training programs are not required to include, in accordance with Criterion 15.3, information on new developments, current ML and FT techniques, methods and trends, requirements concerning CDD and suspicious transaction reports. - The obligation to establish ongoing employee training programmes has not been implemented among DNFBPs. - Employee screening: - Resolution No. 62, Article 6, paragraph e): Compliance Officer must verify reasonable procedures to detect personal history, labor, criminal and property background of employees. - Article 7: obligation to have a Code of Conduct that considers personal history, labor, professional competence, probity and integrity. - Resolution No. 264, Article 5, paragraphs f) and i): same obligations for Real Estate Agents. - Implementation status: obligation to put in place screening procedures to ensure high standards when hiring employees has not been implemented among DNFBPs. ### Independence of Compliance Officer (Criterion 15.5) - Article 5: requires the Compliance Officer to be an officer with sufficient authority and to be accompanied by a copy of the minutes of meeting of the highest authority of the enterprise where designated; it is not clear whether the Compliance Officer could act independently. - Resolution No. 264, Article 4: same obligation for Real Estate Agents. - Recommendation: establish relevant regulation to ensure that the Compliance Officer position is at a level that guarantees independence. ### FATF Special Recommendations and Countermeasures (Recommendations 13, SR IV, 21) - Law 1015/97 does not foresee the need to pay attention to business relations and transactions with persons from countries that do not apply or insufficiently apply the FATF Recommendations; SEPRELAD resolutions for Gambling Establishments and Real Estate Agents do not foresee this Criterion (c. 21.1 & 21.1.1). - Requirements regarding examinations of transactions with no apparent economic or visible lawful purpose from countries not sufficiently applying FATF Recommendations (c. 21.2) are not in place and not contemplated in law or SEPRELAD resolutions. - Ability to apply counter-measures with regard to such countries (c. 21.3) is not in place and not contemplated in law or SEPRELAD resolutions. - Terrorism and STR coverage: - The obligation to submit STRs is confined to the crime of money laundering and not the financing of terrorism. - Special Recommendation IV and Criterion 13.2 are not met while terrorism is not criminalized under Law 1015/97. ### Recommendations and Comments (4.2.2 and 4.3.2 consolidated) - Incorporate all DNFBP as reporting entities under the AML Law and require SEPRELAD to elaborate relevant resolutions for Dealers in Precious Metals and Stones who are reporting entities under Article 13, Law 1015-97. - Supervisors over Gambling Establishments, Real Estate Agents and Dealers in precious metals and stones should issue relevant regulations and perform necessary supervision. - Criminalize terrorism and include obligation to inform SEPRELAD (Article 19, Law 1015/97) about acts linked to terrorism, Acts of terrorism, terrorist organizations or those who finance terrorism or be used for such purposes. - Establish requirements to comply with Special Recommendation IV and Recommendation 13, Criterion 13.2. - Incorporate Internet Casinos among the regulation. - Expressly require maintenance of an adequately resourced and independent audit function (Criterion 15.1) and require training programs independently of the Compliance Officer, incorporating all aspects under Criterion 15.3 (including new developments, current ML and FT techniques, methods and trends, requirements concerning CDD when hiring employees). - Establish requirement for Compliance Officer and appropriate staff to have timely access to customer identification data and other CDD information, transaction records, and other relevant information as stated under Criterion 15.1.2. - Ensure Compliance Officer independence via regulation. - Incorporate Recommendation 21 and its essential Criteria into existing rules to require attention to business relationships and transactions with persons from or in countries not sufficiently applying FATF Recommendations. - Authorities are recommended to implement among Designated DNFBPs (Article 13, Law 1015) the requirements set out in the AML Law and SEPRELAD Resolutions regarding FATF Recommendations 13, 14, 15 and 21: reporting of STRs, protection for STR reporting, development of internal policies/procedures/controls, appointment of a Compliance Officer, independent audit function, ongoing employee training programmes, screening procedures for hiring, and special attention to business relationships with persons in countries that do not or insufficiently apply FATF Recommendations. ### Regulatory and Supervisory Framework for Casinos and Other DNFBPs (R.24–25) - Legal framework: Law 1015/97, Law 1016/97 Articles 28, 29, Resolutions No. 62, 264 and 266. - CONAJZAR (National Commission on games of chance or gambling): - Role: planning body to control and monitor activities of natural and legal persons who exploit Gambling; dictates rules of permitted games. - Resource constraints: CONAJZAR has reported insufficient technical and other resources. - Staffing: CONAJZAR has only 6 people (including President, 1 General Counsel, 1 Secretary, 1 Technical Adviser, 1 Administrative Coordinator and a person in the Department of Enforcement). - Market scale: There are to date 5 Gambling Establishments authorized in Paraguay; only at the Casino of Asuncion there is an average of 3000 to 4000 customers per week. - Sanctions and supervision: - CONAJZAR does not have a sanctions regime in accordance with Law 1016/97; Article 15 provides the only option of immediate closure referring to illegal Gambling Establishments. - CONAJZAR should issue AML/CFT regulations under Article 29 of Law No.1,015/97 and monitor compliance, but to date there are no controls for prevention of money laundering in this sector. - SEPRELAD has issued Resolution No. 62 applicable to operators, but CONAJZAR has not issued a regulatory regime regarding AML/CFT. - Internet casinos: Neither Law 1015/97 nor Resolution N° 62 refers to Internet Casinos; concessions for national operation are for a Five year period per Law 1016, Article 7. - Beneficial ownership: Resolution N° 62, Article 3 prohibits certain convicted individuals from operating as owners/administrators/directors but does not contemplate prohibition on criminals and their associates from being beneficial owners of a significant or controlling interest. - Implementation status: None of the AML and SEPRELAD Resolution requirements for Gambling Establishments have been implemented by the reporting entities. - Real Estate Agents and Dealers in Precious Metals and Stones: - Real Estate Agents: authorized and controlled in taxation field by Undersecretary of State Tax Ministry of Finance under Law 125/91 and Law 2421/05; no information provided whether this includes AML/CFT supervision. - Two unions: Association Paraguayan Business Loteadoras (APEL) and Paraguayan Chamber of Real Estate Companies (CAPEI). - No evidence of control or supervision regarding Real Estate Agents for AML/CFT; oversight body under Article 29 should issue regulations but no evidence of control. - Dealers in metals and precious stones: SEPRELAD has not issued relevant regulations; authorities did not inform if subject to any oversight body; they must comply with trade and tax obligations but no evidence of AML/CFT control. - Guidelines: - Law 1015/97, Article 28: SEPRELAD functions include issuing administrative regulations for reporting entities to prevent/detect/report money-laundering operations or property. - SEPRELAD has issued regulations for financial institutions and certain DNFBP, and provides examples of unusual or suspicious transactions. - SEPRELAD, supervisors and control authorities have not established guidelines to assist DNFBPs on: i) description of ML and FT techniques and methods; ii) international recent developments on ML and FT, particularly those issued by FATF. ### Recommendations for Regulatory/Supervisory Improvement (4.3.2) - Define supervisory bodies for Real Estate Agents and Dealers in precious metals and stones in terms of AML/CFT and clarify their roles. - Explicitly assign responsibility for AML-CFT regulatory and supervisory regime to designated competent authorities. - SEPRELAD should dictate rules for Dealers in precious metals and stones per Article 28 of Law N° 1015/97 and ensure they have a supervisory body. - Provide Gambling Establishments with a regulatory and supervisory regime to ensure implementation of AML-CFT measures required under the FATF Recommendations. - Amend Law N 1016-97 or provide additional regulation to address requirements under Recommendation 24. - Grant CONAJZAR and supervisory bodies adequate powers to monitor and sanction AML-CFT violations, and provide adequate resources. - Include Internet Gambling Establishments within regulatory and supervisory regime. - Establish prohibition on criminals and their associates being the beneficial owner of a significant or controlling interest in a Casino. - Establish guidelines to assist DNFBPs to implement AML/CFT measures, including description of ML and FT techniques and methods and other FATF-relevant guidance. ### Compliance Ratings and Key Factors - R.16: NC - Factors: - Not all DNFBP are covered by Law 1015/97. - Law 1015/97 does not cover all categories of DNFBP; measures for those contemplated are too general and lack detail required under the standard. - Lack of SEPRELAD regulation for Dealers in Precious Stones and Metals. - Special Recommendation IV and Criterion 13.2 not met; terrorism not criminalized under Law 1015/97. - Obligation to submit STR confined to money laundering, not financing of terrorism. - Lack of requirements to fully address Recommendation 15, especially Criterion 15.1.2, 15.2 and 15.3. - Recommendation 21 not embodied in law or SEPRELAD regulations. - Lack of implementation by reporting entities listed under Article 13 of Law 1015 of AML Law and SEPRELAD Resolution requirements for FATF Recommendations 13, 14, 15 and 21. - R.24: NC - Factors: - DNFBP are not subject to an effective regulatory and supervisory regime to ensure compliance with AML/CFT requirements. - Real Estate Agents and Dealers in Precious Stones and Metals do not have a Supervisory Body for AML/CFT. - Lack of comprehensive regulatory regime among DNFBP. - CONAJZAR is not supervising Gambling Establishments in terms of AML and has not enacted relevant regulation. - CONAJZAR lacks adequate powers to monitor compliance and lacks a sanctions regime under Law 1016/97. - R.25: NC - Factor: - Lack of guidelines to help DNFBP implement and comply with AML/CFT requirements, including descriptions of ML and FT techniques and methods and additional measures. *Source: _cr09235 - 745. Resolution No. 62, Article 2 requires that companies engaged in the exploitation of games of chance or gambling to formulate policies and procedures to prevent money laundering.* ### 792. Legal Framework: Law 1015/97, Article 13, paragraph m), Law No. 1,015/97 contemplates ### _cr09235 - 792. Legal Framework: Law 1015/97, Article 13, paragraph m), Law No. 1,015/97 contemplates ### Legal framework and scope - Law 1015/97, Article 13, paragraph m) contemplates pawnbrokers as reporting entities. - SEPRELAD has issued for the pawnbrokers, Resolution N° 265/07 and amending Resolution N° 267/07. - Law 1015-97 does not contemplate dealers in high value and luxury goods, auction houses and investment advisers between the non-financial business and professions -other than DNFBP- that may be at risk of being misused for money laundering and terrorism financing as stated under Criterion 20.1. ### Customer due diligence (Recommendation 5 and related criteria) - Requirements for customers’ identification: Articles 14, 15 and 16 of Law 1015/97 and Chapter III, Articles 7 and 8 of Resolution No. 265 and Resolution No. 267. - Criterion 5.1 is not covered by Law 1015/97 or Resolution N° 265 and 267. - Criterion 5.2 (Moment in time when CDD is required): - Paragraph a), Article 14 of Law 1015/97 establishes the obligation to register clients as the same is for Gambling Establishments and Real Estate Agents. - Resolution N° 265, Article 7: pawnbrokers should keep records of customers and their constituents since the beginning of the trading relationship and records will be exposed to update processes. - Resolution N° 265 does not contemplate occasional customers; subsection c)-e) of Criterion C.5.2 is not covered. - Criterion 5.3 (Identification measures and verification sources): Articles 14, 15 and 16 of Law 1015/97 apply as detailed for Gambling Establishments and Real Estate Agents. - Article 8 of Resolution N° 265 mirrors obligation under Article 8 of Resolution N 266 for Real Estate Agents. - Criterion 5.4 (Identification of Legal Persons or Other Arrangements): Article 15 and 16 of Law 1015/97; Article 8, paragraph b) of Resolution N° 267 mirrors Article 8 of Resolution N 266 for Real Estate Agents. - Criterion 5.5 (Identification of Beneficial Owners): - Law 1015/97, Article 15 establishes method of identification and Article 16 contemplates identification of the principal of the client. - Law 1015/97 does not contemplate obligation to identify the Beneficial Owner. - Resolution N 267, Article 8 stipulates similar provision as Article 16, Law 1015-97. - Criterion 5.6 (Information on Purpose and Nature of Business Relationship) is not expressly covered. - Criterion 5.7 (Ongoing Due Diligence): Resolution N° 267, Article 8 mirrors Article 8 of Resolution N 266 applicable to Real Estate Agents but does not contemplate provisions set under Criterion 5.7.2. - Criteria 5.8-5.12 (Risk) are not contemplated under Resolutions N 265 and 267. - Criteria 5.13 and C.5.14 (Timing of verification): Law 1015-97, Article 14 stipulates obligation to carry out verification when entering into business relations; identification of beneficial owner not contemplated. Resolution N° 265, Article 7 mirrors Article 7 of Resolution N 264 for Real Estate Agents. - Criteria 5.15 and 5.16 (Failure to complete CDD) are not contemplated; Resolutions do not set requirements for pawnbrokers when unable to comply with Criteria 5.3 to 5.5. - Criteria 5.17 and 5.18 (Existing Clients): Article 17 of Resolution N 265 mirrors Article 16 of Resolution N 264. - Resolution enacted by SEPRELAD for pawnbrokers has not been implemented and requirements set do not comply with the standard. ### Politically exposed persons and new technologies (Recommendations 6 and 8) - Recommendation 6: SEPRELAD Resolutions No. 265 and 267 do not contemplate PEPs as required by Recommendation 6. The evaluation team was provided with no evidence of guidance. Criterion not met. - Recommendation 8 (Misuse of New Technology for ML/FT; Risk of Non-Face Business Relationships): Not contemplated under Resolutions No. 265 and 267. Criterion not met. ### Third parties and record-keeping (Recommendations 9 and 10) - Recommendation 9: Resolution N° 267, Article 8 prohibits pawnbrokers from delegating responsibility to third parties for customer identification obligations. - Recommendation 10: - Law 1015/97, Article 17: reporting entities shall identify and record clearly and precisely any transaction conducted by their clients. - Article 18: reporting entities shall keep for a minimum period of f five years any documents, files and correspondence establishing or identifying the transactions. The five-year period shall be computed from completion of the transaction or from the time when the account was closed. - Resolution N° 265, Article 18: pawnbrokers must preserve all records and reports as the time period specified in the existing regulatory laws. - No obligation contemplated to keep records for a longer period than five years if so requested by a competent authority in specific cases and upon proper authority; not specifically contemplated what such records should contain. Resolution for pawnbrokers not implemented. Requirements do not fully comply with the standard. ### Suspicious transaction reporting and tipping-off (Recommendations 11, 13, 14) - Recommendation 11: - Not specifically contemplated for pawnbrokers the obligation to pay attention to all complex, unusual or large transactions or to analyze background and objective and make results available to competent authorities and auditors. - Law 1015/97, Article 19: obligation to report suspicious transactions, irrespective of value, for which there is some indication or suspicion they relate to the offence of money laundering. - Article 19 defines suspicious transactions and mentions complex, unusual, large or operations not meeting usual patterns. - Resolution N° 265, Article 12 mirrors Resolution N 264, Article 11 (Real Estate Agents) regarding need to report acts or operations; Article 13 states which are considered suspicious. - Measures focus more on identifying suspicious transactions than on paying attention to unusual transactions. Requirements do not follow the standard. - Recommendation 13: - Law 1015/97, Article 13, paragraph m contemplates pawnbrokers as obligated to notify any act or transaction, regardless of size, with indication or suspicion of relation to money laundering. - Article 19 imposes obligation to report any act or transaction, regardless of size, with indication or suspicion of relation to money laundering. - There have not been suspicious reports made from pawnbrokers. - Obligation to submit STR does not apply to funds when there are reasonable grounds to suspect connection to terrorism or financing of terrorism. Terrorism is not punishable under Law N 1015/97. - No indication that STR obligations are limited when transactions involve tax matters. - Resolution N° 265 requires pawnbrokers to report any act or transaction, regardless of amount, including attempted ones, which could be linked or related to money laundering. - Requirements to address Recommendation 13 do not follow the standard and have not been implemented yet. - Recommendation 14 (Protection for STR - Tipping off): - Law 1015/97, Article 34 and Article 13 establish exemption from liability for reporting entities. - Law 1015/97, Article 20 establishes prohibition against tipping-off. - Resolution N° 265, Article 15 mirrors prohibition imposed by Resolution N 62, Article 16 (Gambling Establishments) and Resolution N 264, Article 14 (Real Estate Agents). - Criterion 14.3 is not contemplated. ### Internal controls, compliance officer, training and audit (Recommendation 15) - Law 1015/97, Article 21: duty for reporting entities to establish appropriate procedures for internal auditing to discover, forestall and prevent ML operations. - Resolution N° 265: - Article 2 mirrors obligation on formulation of policies and procedures and states such policies and procedures must also be available to the Municipality. - Article 4: obligation to appoint a Compliance Officer for implementation, training and monitoring program (Criterion 15.1.1). - Article 5: functions and powers of Compliance Officer; mirrors provisions in Resolution N 62 and N 264 but does not expressly provide timely access to customer identification data and other CDD information, transaction records, and other relevant information as required under Criterion 15.1.2. - Article 6 mirrors audit function obligations but does not expressly contemplate maintenance of adequately resourced and independent audit function to test compliance as required under Criterion 15.1. - Article 5 mirrors obligations for ongoing employee training on AML-CFT matters but has not been implemented; training requirement arises from Compliance Officer functions rather than as an explicit independent requirement and does not contemplate what training programmes shall include per Criterion 15.3. - Article 5 also mirrors screening procedures when hiring employees and obligation to have a Code of Conduct, but not implemented among pawnbrokers. - Criterion 15.5 not expressly contemplated; requirement that Compliance Officer must be an officer with high authority. - Overall: Not implemented by pawnbrokers the requirements regarding internal policies, procedures and controls to prevent ML and FT or to appoint a Compliance Officer; audit function and training not implemented. ### Supervision and sanctions (Recommendation 17) - Article 29 of Law 1015/97: administrative infringements of the law and regulations relating to money or property laundering may be regulated, investigated and criminalized only through institutions responsible for supervision and monitoring of obligors. - Article 24 of Law 1015/97: system of administrative criminalities for legal persons. - Resolution N° 267, Article 16: omission to report by pawnbrokers raises background for the supervisory body in accordance with existing laws related to money laundering or property. - Resolution N° 265 Article 1: pawnbrokers subject to supervision and inspection of Municipalities. - Authorities could not provide information regarding supervision of pawnbrokers to verify whether supervisor effectively controls compliance and has powers to apply sanctions per Recommendation 17. - No evidence of control or supervision regarding pawnbrokers to ensure compliance with AML/CFT requirements. ### Cross-border and country-risk measures (Recommendation 21) and modern techniques (c. 20.2) - Law 1015/97 and Resolutions No. 265 and 267 do not foresee need to pay attention to business relations and transactions with persons from countries that do not apply or insufficiently apply FATF Recommendations (c. 21.1 & 21.1.1). - Not contemplated: examination of transactions with no Apparent Economic or Visible Lawful Purpose from Countries Not Sufficiently Applying FATF Recommendations (c. 21.2) and application of Counter Measures (c. 21.3). - Resolutions No. 265 y 267 do not foresee Criterion 21.1, 21.2 or 21.3. - Authorities did not provide information on measures to encourage development and use of modern and secure techniques for conducting financial transactions less vulnerable to money laundering (c. 20.2). ### Key findings and compliance gaps - Resolutions N° 265 and 267 for pawnbrokers have not been implemented. - Significant gaps across multiple Recommendations: 5, 6, 8-11, 13-15, 17 and 21. - Specific shortcomings include: - No legal coverage for dealers in high value and luxury goods, auction houses and investment advisers as non-financial businesses and professions -other than DNFBP- (Criterion 20.1). - Lack of explicit requirements to prohibit anonymous accounts or accounts in fictitious names and to cover all CDD cases per Criterion 5.2. - Absence of obligation to identify Beneficial Owners. - No provisions for extended record retention beyond f five years upon competent authority request. - No requirement to pay special attention to PEPs. - No explicit measures addressing misuse of new technologies and non-face-to-face relationships. - Incomplete requirements for attention to complex, unusual or large transactions and written examination of their background and findings. - Lack of fully resourced, independent audit function, explicit training programme content, and guaranteed timely access by Compliance Officer to CDD and transaction records. - No evidence of active supervision or sanctions regime applied to pawnbrokers. ### Recommendations (authorities are recommended to) - Incorporate under Law No. 1015/97 non- financial business and professions -other than DNFBP- that may be at risk of being misused for money laundering and terrorism financing, such as dealers in high value and luxury goods, auction houses and investment advisers as stated under Criterion 20.1. - Expand to pawnbrokers the requirements of due diligence with customers so as to incorporate and / or adapt regulations to the ones set out under Recommendation 5, especially: - prohibition through law or regulation to keep anonymous accounts or accounts in fictitious names, - cover all cases that require CDD in accordance with Criterion 5.2, - identification measures, - Identification of legal arrangements, - identification of the Beneficial Owner, - risk, - timing of verification, - ongoing Due Diligence, - information on purpose and nature of business relationships, - failure to complete CDD. - Incorporate for pawnbrokers the provisions contemplated under Recommendation 6 with regards to PEPs and incorporate obligation to pay special attention to money laundering threats from new developing technologies and to have policies and procedures addressing risks associated with non-face relationships or transactions in accordance with Recommendation 8. - Incorporate obligation to keep records for a period longer than five years if so requested by a competent authority in specific cases and upon proper authorization and ensure customer and transaction records and information are available on a timely basis to domestic competent authorities upon appropriate authority. - Establish obligation covered under Recommendation 11 concerning unusual transactions. - Criminalize terrorism and financing of terrorism and include under the Law the obligation to inform in terms of Article 19 of Law No. 1,015/97 not only acts linked to money laundering but also those related to terrorism. - Expressly contemplate maintenance of adequately resourced and independent function to test compliance with procedures, policies and controls required under Criterion 15.1. - Provide staff training as a specific point within internal control program (not only as function of Compliance Officer) and incorporate in training programmes information on new developments, current ML and FT techniques, methods and trends and requirements concerning CDD and suspicious reporting. - Establish requirement for the Compliance Officer and other appropriate staff to have timely access to customer identification data and other CDD information, transaction records, and other relevant information as stated under Criterion 15.1.2. - Establish relevant regulation to ensure Compliance Officer’s position is at a level that guarantees independence. - Take necessary measures to encourage enactment of relevant regulations by supervisor in charge of pawnbrokers to ensure full compliance with AML legislation and SEPRELAD Resolutions. - Define functions and powers of supervisory board and a sanctions regime over pawnbrokers applying to individuals, legal persons and their directors and senior managers. - Clarify sanctions regime and incorporate not only disciplinary measures but also withdrawal or suspension of license of the institution in question. - Incorporate provisions of Recommendation 21 regarding special attention to business relations and transactions with persons from countries that do not apply or insufficiently apply FATF Recommendations and requirements under Criterion 21.2 and 21.3. - Take measures to encourage development and use of modern and secure techniques for conducting financial transactions less vulnerable to money laundering in accordance with Criterion 20.2. ### Compliance with Recommendation 20 — Rating summary - R.20: NC - Factors underlying rating: - Law No. 1015/97 does not contemplate non- financial business and professions –other than DNFBP- that may be at risk of being misused for money laundering, or terrorism financing such as dealers in high value and luxury goods, auction houses and investment advisers as stated under Criterion 20.1. - Lack of explicit requirements under regulation to all obligations imposed by Recommendation 5 – Prohibition of anonymous accounts or accounts in fictitious names, all cases when CDD is required in accordance with Criteria 5.2, identification measures, Identification of legal persons or arrangements, Risk, timing of verification, ongoing due diligence, information on purpose and nature of business relationships, failure to complete with CDD. - Lack of regulations to impose pawnbrokers, in addition to performing due diligence measures, to pay attention to PEPs in accordance with Recommendation 6. - Lack of regulation for pawnbrokers to pay special attention to new technologies that may favor anonymity and to address risks associated with non face-to-face business relationships or transactions. - Lack of full compliance with respect to recordkeeping in accordance with provisions under Recommendation 10. - Lack of explicit obligation to pay attention to all complex, unusual or large transactions and unusual patterns and to examine their background and set out findings in writing in compliance with Recommendation 11. - Lack of full compliance within pawnbrokers with provisions under Recommendation 15 especially regarding unlimited access by the Compliance Officer to customer identification data and other CDD information, the audit function, training programmes – information on new developments, current ML and FT techniques, methods and trends, requirements concerning CDD and suspicious transaction reports and independence of the Compliance Officer. - Lack of relevant regulation issued by the supervisor to ensure compliance with AML Law and SEPRELAD Resolutions. - Lack of supervision over pawnbrokers to ensure compliance with Recommendations 5, 6, 8-11, 13-15, 17 and 21. - Lack of a sanction regime for pawnbrokers in accordance with Recommendation 17. - Lack of requirements to give special attention to business relationships and transactions with persons, including legal persons and other financial institutions, from countries that do not apply or insufficiently apply FATF Recommendations and to ensure reporting entities are advised of concerns about weaknesses in AML-CFT systems in other countries as well as requirements under Criterion 21.2 and 21.3. - Lack of measures to encourage development and use of modern and secure techniques for conducting financial transactions that are less vulnerable to money laundering as considered under Criterion 20.2. *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09235.pdf* ### 5. LEGAL ### 5. LEGAL ### 5.1. Legal Persons—Access to Beneficial Ownership and Control Information (R.33) #### 5.1.1. Description and Analysis - Legal framework and institutional arrangements: - National Direction of Public Registries established by Law No. 871/81 “Code of Judicial Organization” (para. 850). - Title IX, Article 262 of Law No. 871/81 lists registries held by the National Direction, including “Legal Persons and Associations” and the “Public Registry of Commerce” (para. 851). - Some registries (Airplanes Law No. 1,860/02 DINAC; Trademarks Law No. 2,576/05; Intellectual rights Law No. 1,328/98; Industrial Property Law No. 1,294/98) are no longer under the National Direction; new registries include wills, bills of sale, leasing and trusts (para. 852). - National Direction is administratively dependent on the Supreme Court of Justice; has autonomy to regulate particulars but access to budgetary resources is deeply limited (para. 853). - Legal persons register upon payment of judicial and special fees under two offices: “Legal Persons and Associations” and “Public Registry of Commerce” (para. 854). - Scope and practice of registration: - “Legal Persons and Associations” registers acts of incorporation, bylaws of private legal persons, bylaws of foreign legal persons authorized to operate in Paraguay, liquidations, and acts of incorporation of associations without legal personality (para. 855). - “Public Registry of Commerce” registers acts and instruments requiring registration under the Commercial Code and complementary laws; applies to all merchants (para. 856). - Code of Judicial Organization does not list required recorded information for non-profit organizations or commercial companies; registries record complete information provided at incorporation on exclusive or stamped paper, attaching a certified copy of the public deed (para. 857). - Merchant’s license registration is the only exception currently conducted through an IT program that issues licenses in one day and facilitates timely access to merchant information (para. 857). - Limitations affecting anti–money laundering (AML) and transparency: - Registries are manual and only record information from 1986 onwards; majority of pre-1986 court records were reported lost (para. 862). - No laws require adequate transparency concerning beneficial ownership of legal persons (para. 862). - Information updated only via amendments to bylaws; amendments recorded as marginal notes (para. 858). - Access to information: reports, certificates of status, copies of records upon judicial order, exhibition of records upon justified request; manual records make timely, cost‑effective provision difficult for third parties and competent authorities (paras. 859, 865–866). - No sanctions for legal persons failing to update direct ownership information; no measures requiring registration of beneficial ownership information (para. 864). - Corporations (sociedades anónimas) are the preferred vehicle per limited statistics for the past two years; authorities provided no total-company statistics or request statistics from competent authorities (para. 872). - For corporations, changes in ownership that do not amend bylaws are not likely to be kept up to date in the National Direction; companies must register changes in the stock ledger book held at each corporation’s office but there are no sanctions for failing to keep stock ledgers up to date or for losing them; many corporate books are reported lost (paras. 874–875). - Bearer shares: - Ownership in corporations may be by nominal or bearer shares; laws do not ensure bearer shares are not misused for money laundering (para. 868). - Bearer share certificates may only be issued once shares are paid in full; provisional nominal certificates used until then; share certificates must be numbered, signed by one or more directors, and contain specified corporate information (para. 869). - Mission conclusions: - Central registration system contributes minimally to preventing unlawful use of legal persons related to money laundering (para. 861). - Manual, incomplete registries, lack of beneficial ownership transparency requirements, absence of timely access by competent authorities, and absence of measures on bearer shares undermine AML effectiveness (paras. 862–866, 868). - Mission recommends legislative and operational measures to improve transparency, timely access, and registry informatization (paras. 863, 867, 876). #### 5.1.2. Recommendations and Comments - Adopt measures to prevent the unlawful use of legal persons in relation to money laundering by ensuring that commercial, corporate and other laws require adequate transparency concerning the ownership and control of legal persons. - Adopt measures to allow competent authorities to obtain or have access in a timely fashion to adequate, accurate, and current information on beneficial ownership and control of legal persons. - Adopt measures to prevent the unlawful use of legal persons using bearer shares in relation to money laundering. - Allocate additional resources to the National Direction of Public Registries and improve registry conditions, specifically: - speed up processes of informatization of the databases; - improve the facilities where records are held; - reduce the costs to registration; - increase public awareness on the benefits of registration; - amend appropriate laws to sanction failures to register relevant acts and information (para. 876). #### 5.1.3. Compliance with Recommendation 33 - Rating: R.33 NC - Factors underlying rating: - The laws do not require adequate transparency concerning the ownership and control of legal persons. - Competent authorities have no access in a timely fashion to adequate, accurate, and current information on beneficial ownership and control of legal persons. - There are no measures to prevent the unlawful use of legal persons using bearer shares in relation to money laundering (section summary). ### 5.2. Legal Arrangements—Access to Beneficial Ownership and Control Information (R.34) #### 5.2.1. Description and Analysis - Legal framework: - Trusts (fideicomisos) governed by Law No. 921/96 (para. 877). - Article 1 of Law No. 921/96: trust involves transfer by creator to trustee of one or more specified assets to administer, dispose or fulfill a determined goal for the creator or a beneficiary (para. 878). - Trust modalities include guarantee, administration, investment, execution and development of construction projects, securitization of assets for development of the productive sector, and restructuring of companies (para. 879). - Article 4 requires transfer of property subject to registration via public deed and registration in corresponding registry (para. 880). - National Direction of Public Registries technical disposition 3/2000: registers trust agreements involving property subject to registration and transfer of ownership rights (para. 881). - National Direction registers only trust agreements involving transfer of ownership rights of property subject to registration; trust agreements involving other property types are not subject to registration requirements (para. 882). - Access and transparency limitations: - Registry limited in scope to trusts involving transfer of ownership of registrable property; no laws require transparency concerning beneficial ownership and control of trusts (para. 884). - Registry affected by the manual-records problems described under Recommendation 33; manual recording makes timely provision of information difficult and costly (para. 886). - Trusts involving non-registrable property are not registered anywhere and would be extremely difficult for competent authorities to obtain information on (para. 887). - Additional element: - No specific measures to facilitate access by financial institutions to beneficial ownership and control information (para. 889). - Mission conclusion: - System contributes minimally to preventing unlawful use of trusts for money laundering; mission recommends measures to require adequate transparency and timely access to beneficial ownership and control information (paras. 884–885, 888). #### 5.2.2. Recommendations and Comments - Adopt measures to prevent the unlawful use of trusts in relation to money laundering by ensuring that commercial, trust and other laws require adequate transparency concerning the ownership and control of trusts. - Adopt measures that may allow competent authorities to obtain or have access in a timely fashion to adequate, accurate, and current information on beneficial ownership and control of legal persons. #### 5.2.3. Compliance with Recommendation 34 - Rating: R.34 NC - Factors underlying rating: - The laws do not require adequate transparency concerning the ownership and control of trusts. - Competent authorities have no access in a timely fashion to adequate, accurate, and current information on beneficial ownership and control of trusts. ### 5.3. Non-Profit Organizations (SR.VIII) #### 5.3.1. Description and Analysis - Legal framework and reporting obligations: - Article 13.l of Act 1,015/97 includes foundations and non-governmental organizations (NGOs) among reporting entities; such organizations have reporting and client identification obligations (para. 891). - Review of adequacy and supervision: - Tax authorities reported that some legal persons registered as NPOs conduct commercial activities to obtain tax exemptions; law provides that tax benefits should not be recognized where commercial activities occur (para. 892). - Tax authorities are legally entitled to supervise NPOs but no supervision is conducted due to lack of resources (para. 892). - Paraguay has not reviewed the adequacy of domestic laws and regulations relating to nonprofit organizations, has not used available sources to undertake domestic reviews, and lacks capacity to obtain timely information on activities, size and features of the non-profit sector to identify NPOs at risk of terrorist financing abuse (para. 893). - Outreach: - (Content on outreach begins at para. 894 onward; source content up to para. 893 included here.) *Source: _cr09235 - 5. LEGAL* ### 894. Paraguay has not undertaken any outreach to the NPO sector with a view to protecting the ### _cr09235 - 894. Paraguay has not undertaken any outreach to the NPO sector with a view to protecting the ### Supervision, monitoring and outreach for NPOs (Special Recommendation VIII) - Paragraphs 894–897: Paraguay "has not undertaken any outreach to the NPO sector with a view to protecting the sector from terrorist financing abuse." - The authorities "have not provided any information for the assessment" of: - Supervision or monitoring of NPOs that account for a significant share of the sector’s resources or international activities (c. VIII.3) (para. 895). - Measures to ensure effective investigation and gathering of information (c. VIII.4) (para. 896). - Domestic cooperation, coordination and information sharing on NPOs (c. VIII.4.1), access to information on administration and management of NPOs during investigations (c. VIII.4.2), sharing of information, preventative actions and investigative expertise and capability with respect to NPOs suspected of being exploited for terrorist financing purposes (c. VIII.4.3), and responding to international requests regarding NPOs - points of contacts and procedures (c. VIII.5) (para. 897). - Result: Mission "is unable to assess Paraguay’s compliance with the international standards under Special Recommendation VIII.3, VIII.4 and VIII.5" due to lack of information. ### Recommendations and policy actions for NPO sector (Section 5.3.2) - Review the adequacy of domestic laws and regulations relating to nonprofit organizations; use all available sources of information to undertake domestic reviews or have the capacity to obtain timely information on activities, size and relevant features of the non-profit sector to identify NPOs at risk of misuse for terrorist financing; conduct periodic reassessments. - Undertake outreach to the NPO sector to protect it from terrorist financing abuse, including: - raising awareness in the NPO sector about the risks of terrorist abuse and the available measures to protect against such abuse; and - promoting transparency, accountability, integrity, and public confidence in the administration and management of all NPOs. - Promote effective supervision or monitoring of NPOs which account for: - (i) a significant portion of the financial resources under control of the sector; and - (ii) a substantial share of the sector’s international activities. - Require NPOs to maintain information on: - (1) the purpose and objectives of their stated activities; and - (2) the identity of person(s) who own, control or direct their activities, including senior officers, board members and trustees. - This information should be publicly available either directly from the NPO or through appropriate authorities. - Adopt measures to sanction violations of oversight measures or rules by NPOs or persons acting on behalf of NPOs; sanctions should not preclude parallel civil, administrative, or criminal proceedings where appropriate. - Require all NPOs to be licensed or registered and make information available to competent authorities. - Require NPOs to maintain, for a period of at least five years, and make available to appropriate authorities, records of domestic and international transactions sufficiently detailed to verify that funds have been spent in a manner consistent with the organization’s purpose and objectives. - Implement measures to ensure competent authorities can effectively investigate and gather information on NPOs. - Ensure effective domestic co-operation, co-ordination and information sharing among all levels of appropriate authorities or organizations holding relevant information on NPOs of potential terrorist financing concern. - Ensure full access to information on the administration and management of a particular NPO (including financial and programmatic information) may be obtained during the course of an investigation. - Develop and implement mechanisms for prompt sharing of information among relevant competent authorities to take preventative or investigative action where suspicion exists that an NPO is exploited for terrorist financing or is a front organization; ensure investigative expertise and capability and mechanisms for prompt investigative or preventative action. - Identify appropriate points of contact and procedures to respond to international requests for information regarding particular NPOs suspected of terrorist financing or other forms of terrorist support. ### Compliance assessment for Special Recommendation VIII (Section 5.3.3) - Rating: SR.VIII — NC - Factors underlying rating: - Paraguay has not conducted its review of the adequacy of domestic laws and regulations that relate to nonprofit organizations. - No outreach has been undertaken to the NPO sector with a view to protecting the sector from terrorist financing abuse. - The authorities have not provided enough information for the complete assessment of this recommendation. ### National cooperation and coordination in AML/CFT (R.31) — summary (Sections 6.1.1–6.1.3) - Legal framework referenced: Law No. 1,015/97; Executive Decree No. 15,125 (para. 898). - Institutional roles and practice: - Article 28 of Law No. 1,015/97 provides the only contact point for reviewing and discussing coordination of AML/CFT activities, though SEPRELAD "has not played a leading role" since 1997; members meet infrequently and mainly to approve draft resolutions prepared by the UAF (para. 899). - The UAF–SEPRELAD maintains regular contact with government agencies and has assumed many coordination functions; UAF has established formal mechanisms to support cooperation and coordination between domestic authorities in combating ML (para. 900). - Coordination remains unsystematic, ad hoc, and reliant on personal relationships; some key AML/CFT agencies maintain little to no contact with each other (para. 901). - The Inter-Agency Commission (Executive Decree No. 15,125) is charged with coordination to implement commitments under UNSCR 1373; no policy-level coordination to support implementation of UNSCR 1267 to date (para. 902). - Coordination for MLA requests is managed satisfactorily by the Directorate for International Affairs and External Legal Assistance at the OAG (para. 903). - There are no mechanisms for coordination between supervisors and the UAF or between supervisors and law enforcement (para. 905). - Communication between UAF and financial system supervisors and the OAG appears adequate; communication between UAF and law enforcement is "somewhat limited" (para. 906). - "There are no effective mechanisms for coordinating the exchange of financial intelligence" (para. 907). - Consultation mechanisms with regulated institutions are ad hoc and not regular (para. 908). - Statistics: "There is no system for maintaining comprehensive statistics on AML matters" and available information is not used to review effectiveness (para. 909). - Recommendations (Section 6.1.2): - Establish formal and informal mechanisms to support cooperation and coordination at policy and operational levels, e.g., assigned duties, regularly scheduled meetings, distribution of contact lists. - Establish operational task forces at an early stage of investigations involving proceeds of crime, money laundering and terrorist financing. - Establish or strengthen mechanisms for consultation between competent authorities, the financial sector and other sectors (including all DNFBPs). - Conduct a review of the effectiveness of cooperation and coordination systems for AML/CFT in the short term and regularly thereafter; update and maintain statistical systems in line with Rec. 32. - Compliance with Recommendation 31: - Rating: R.31 — NC - Factors: - Policy development and coordination functions are not clearly assigned. - Coordination and cooperation among agencies is ad hoc and inconsistent. - Existing mechanisms are inadequate for policy makers, UAF, law enforcement and supervisors to effectively cooperate and coordinate in development and implementation of AML/CFT policies and measures. ### The Conventions and UN Special Resolutions (R.35 & SR.I) — summary (Sections 6.2.1–6.2.3) - Constitutional/legal note: Article 137 of the National Constitution of 1992 makes international agreements part of national law upon ratification (para. 910). - Paraguay is a party to: - 1988 UN Drug Convention (Law No. 16/90). - UN International Convention for the Suppression of the Financing of Terrorism (Law No. 2,381/04). - Inter-American Convention on Terrorism, UN Convention against Corruption, UN Convention against Transnational Organized Crime (Law No. 2,298) (para. 910). - Ratifications and dates (paras. 911–913): - Vienna Convention adopted by Law No. 16/90. - Palermo Convention ratified by Law No. 2,298. - 1999 International Convention for the Suppression of the Financing of Terrorism ratified by Law No. 2,381/04. - Convention to Prevent and Punish the Acts of Terrorism Taking the Form of Crimes against Persons and Related Extortion That Are of International Significance, ratified on 05/13/04 (Law No. 2,378/04). - International Convention against the Taking of Hostages, ratified on 22 Sep 2004 (Law No. 2,359/04). - Convention on the Physical Protection of Nuclear Material ratified on 06 Feb 1985 (Law No. 1,086/84). - International Convention for the Suppression of Terrorist Bombings ratified on 22 Sep 2004 (Law No. 2,372/04). - The Inter-American Convention against Terrorism on 11/30/2004 (Law No. 977/96). - The International Convention for the Suppression of Acts of Nuclear Terrorism was signed on September 2005. - Implementation gaps: - ML offence covers most but not all elements required by Vienna and Palermo Conventions; predicate offences do not cover the full scope required by Palermo (para. 914). - FT is not criminalized in Paraguayan legislation (para. 915). - UNSCRs relating to prevention and suppression of FT have not been implemented, impeding international cooperation and provision of MLA under those UNSCRs (para. 916). - Existing legislation does not allow Paraguay to execute freezing orders issued by other countries in the context of UNSCRs; limited MLA for obtaining evidence may be possible for investigations of terrorist-related conduct (para. 917). - FT is not an extraditable offense (para. 918). - Paraguay ratified the Inter-American Convention against Terrorism via Law No. 2,302/04 of 11/30/2004 (para. 919). - Recommendations (Section 6.2.2): - Amend the AML Law and enact CFT legislation to fully cover the ML and TF offences to implement the Vienna, Palermo and Terrorist Financing Conventions. - Implement the UNSC Resolutions by developing a domestic legal framework and accompanying procedures. - Compliance summary (Section 6.2.3): - R.35 — PC - Factors: Significant limitations on scope of the ML offence; FT is not criminalized; penalties are not dissuasive and uncertainty regarding their effectiveness. - SR.I — NC - Factors: The U.N. Convention for the Suppression of the Financing of Terrorism has not been implemented with regard to criminalization of FT and freezing and confiscation of assets related to such offences; UNSCRs 267 and 1373 have not been implemented. ### Mutual Legal Assistance (R.36-38, SR.V) — summary (Section 6.3.1) - Legal instruments cited: Law No. 1,286/98 (CPP); Law No. 1,562/00; OAG Resolution No. 1,945 of 2004; OAG Resolution No. 10 of 2007; OAG Resolution No. 3,075 of 2007; bilateral MLA treaties with Venezuela, Peru, France, Colombia, Costa Rica, Ecuador and Mexico (para. 920). - Legal basis and practice (para. 921): - Articles 146 to 150 of the CPC set out international cooperation in criminal matters and apply without prejudice to international agreements. - Assistance can be provided pursuant to bilateral and multilateral treaties; in absence of a treaty, CPC allows assistance on basis of reciprocity. - Paraguayan authorities "often have provided legal assistance on the basis of reciprocity," but no statistical information was provided to the mission. - The mission was informed that customary international law is used in determining conditions for granting a foreign request. - Given limitations of the ML offence and absence of a FT offense, the possibility of providing both MLA and extradition in relation to ML or FT appears rather limited. *Source: _cr09235 - 894.* ### 922. In the scope of the international treaties to which Paraguay is a party, the possible assistance ### _cr09235 - 922. In the scope of the international treaties to which Paraguay is a party, the possible assistance ### Scope of international mutual legal assistance (MLA) - Possible assistance covers: - (a) production, search and seizure of information and evidence, including financial records, from financial institutions and other natural and legal persons; - (b) obtaining evidence and taking depositions from persons; - (c) provision of originals or copies of documents, information and evidence; - (d) provision of judicial documents; - (f) ensuring the voluntary appearance of persons to provide evidence and information; - (g) detection, freezing, seizing and confiscation of assets; - (h) notification of decisions and judgments; - (i) taking testimony and other statements; - (j) conducting and receiving expert examinations; - (k) executing searches and seizures; - (l) servicing of documents and records; - (m) identification or detection of chemicals, instruments and equipment for evidentiary purposes; - (n) transfer of persons accused, charged or prosecuted; - (o) any other form of MLA authorized by national and international law. ### Central authorities, channels and processing of MLA requests - Two channels for foreign authority MLA requests: - OAG is Central Authority for letters of request under: Vienna Convention, Palermo Convention, UN Convention against Corruption, Inter-American Anti-Corruption Convention, Inter-American Convention on Mutual Assistance in Criminal Matters; and for bilateral MLA treaties with Venezuela, Peru, France, Colombia, Costa Rica, Ecuador and Mexico. - MFA is Central Authority for requests from non-treaty countries or instruments not under OAG purview. - OAG processing: - Directorate for International Affairs and External Legal Assistance (DIA) created in 2004 processes MLA requests; letters received by DIA are processed more promptly than through MFA. - DIA clears requests and forwards to the Prosecutor on duty or one of the 12 courts of First Instance in Asunción designated for these purposes. - MFA processing: - MFA reviews requests for conformity with treaty limits or essential interests, forwards to the Supreme Court, which sends to Prosecutor or First Instance Judge on duty; may take several months. - If Prosecutor on duty receives request, it is sent to the DIA for channeling. - Refusals: - Paraguay does not refuse requests for legal assistance for reasons other than those stipulated in the treaties to which it is a party. ### Effectiveness, timeliness, and data gaps - Data limitations: - Mission did not receive information regarding the number of MLA requests made by Paraguay in the last five years or on requests received from other countries. - Lack of systematic compilation of data/statistics on incoming and outgoing requests (including numbers not acted upon, numbers declined and reasons, and time frames) prevents assessment of effectiveness. - Reported experience: - A single response to a GAFISUD Secretariat request indicates general satisfaction with Paraguay’s MLA provision. - One country reported challenges in extraditions from Paraguay due, at least in part, to corruption, compromising assistance in sensitive cases. - DIA capabilities that could expedite MLA: - IT module to track status of all letters of request, communications and the like. - Encrypted electronic mail system within OAS membership to facilitate swift communication and pre-verification of Paraguayan requirements. ### Legal limitations, secrecy and offenses coverage - Financial secrecy: - Financial sector secrecy provisions are not applicable in law enforcement investigations, including those based on foreign requests. - Legal basis unclear: - Authorities informed the mission that compliance authorities can provide a wide range of international cooperation, but the legal basis for this power is unclear (paragraphs 932 and 935). - Predicate offences: - List of offenses underlying current provisions has a limited number of serious crimes; Paraguay may not be able to seize and confiscate proceeds from any offense not included in the list, especially FT, if so requested by another party to an ML case. - Recognition of foreign orders: - Foreign non criminal confiscation orders are not recognized. ### Seizure, confiscation, asset sharing and coordination - Provisional measures and confiscation: - Due to limited list of predicate offences, Paraguay likely unable to seize/confiscate proceeds from offences not on the list, in particular FT, if requested by another Party in a ML case. - Subject to limitations, Paraguayan authorities can seize and confiscate property under Article 91 of the CC in cases relating to property of corresponding value. - Coordination and asset sharing: - Paraguay has not established specific mechanisms for coordinating seizure and confiscation with foreign authorities. - No arrangements to share confiscated assets with countries where confiscation resulted from coordinated action. - Paraguay does not have an asset forfeiture fund and has not formally considered setting one up. - No legal provision specifically authorizes or prohibits asset-sharing; confiscated property or its value from joint investigations is transferred to the general budget of the country where the property is found. ### Dual criminality and scope in bilateral treaties - Bilateral treaties require dual criminality for assistance. - Paraguayan authorities state dual criminality is not an obstacle owing to flexible application: investigated conduct should correspond to an offense under Paraguayan law. ### MLA powers relevant to R.28 and secrecy (R.36.6 / c.36.6) - Authorities can provide a wide range of international cooperation, but legal basis is unclear (paragraphs 932 and 935). - Financial sector secrecy not applicable to law enforcement investigations (c.36.5). ### Extradition (R.37, R.39, SR.V) — framework and practice - Legal framework: - Chapter VI, Code of Criminal Procedure covers communication, collaboration and extradition procedures. - Ministry of Foreign Affairs responsible for proposing/concluding agreements. - Paraguay has signed bilateral extradition treaties with: Argentina, Brazil, Chile, Austria-Hungary, Belgium, China, Spain, United States of America, United Kingdom, Italy, Switzerland, Uruguay, Korea, France, Peru, Australia, Bolivia, Costa Rica, Mexico and Panama. - Dual criminality: - Application of dual criminality is flexible: investigated conduct should correspond to an offense under Paraguayan law. - Money laundering: - ML is an extraditable offence by virtue of Article 147 of the CPP. - Active extradition decreed by the judge at request of OAG or the accuser under Article 148 of the CPP, provided the requested individual has been detained, remanded or has posted a personal bond. - Supreme Court reviews extradition requests refused by competent judges (Article 149 of CPP). - Extradition of nationals: - No legal constraints preventing extradition of Paraguayan nationals; decision rests with courts and treaty terms or reciprocity. - If extradition refused, principle of supplementary justice or criminal law through representation may be applied. - Efficiency and data: - Mission did not receive data to evaluate effectiveness of extradition process; no simplified procedures in place. - Impact of FT not criminalized: - As FT has not been criminalized, international cooperation in this area is severely limited. ### Other forms of international cooperation (R.40 & SR.V) - UAF-SEPRELAD international representation and MOUs: - UAF-SEPRELAD represents Paraguay with CICAD/OEA, UNODC, IMF, I.A.D.B., Egmont Group, GAFISUD, US Treasury Department Office of Technical Assistance. - Since 1998 Egmont Group adhesion, UAF-SEPRELAD has signed MOUs to exchange financial information with FIUs of 23 foreign countries. - Law enforcement agreements: - Agreements with Brazil, Argentina, Chile, Venezuela and Colombia. - Extradition treaty with United States entered into force in 2001; 1987 bilateral letter of agreement for counter-narcotics assistance extended in 2007. - 2002 Custom Mutual Assistance Agreement with US government. - Regional counterterrorism groups: - Member of "3+1" Counterterrorism Group on Tri Border Security (Argentina, Brazil, Paraguay, United States) since 2002. - Participant in Permanente Working Group against Terrorism within Mercosur since 2001. - FIU information exchange statistics (UAF-SEPRELAD): - UAF-SEPRELAD maintained statistics of requests exchanged via Egmont Group secure web. - From 2004 to date UAF-SEPRELAD has received a number of 54 and contested to 49. Only 4 are in process of response. - Paraguayan FIU emitted 16 requests in four years, with 11 responses. - Timing of responses variable, to go to some weeks depending on request difficulty. - Law enforcement assistance quality: - Law enforcement authorities did not supply information permitting assessment of quality of Paraguayan international assistance responses. - Lack of resources and application of special investigative techniques remain considerations. ### Key recommendations (6.3.2 and 6.4.2) - Establish mechanism for determining the best venue for prosecution of defendants in cases subject to prosecution in more than one country. - Establish specific provision for applying provisional measures at the request of a foreign country for search, seizure and confiscation. - Consider establishing arrangements for coordinating seizure or confiscation actions with other countries. - Consider establishing asset forfeiture fund. - Consider establishing mechanism to share confiscated assets with other countries which participated in coordinated action. - Compile and maintain statistics on MLA requests received or made, relating to ML and FT, indicating the predicate offenses, including the nature of the request, its result, and the time of response. - Consider enhancing procedures to ensure extradition requests are not unduly delayed and provide for alternative simplified procedures for extradition on a case-by-case basis. - Establish statistics regarding extradition requests indicating the number of extradition requests received, the proportion granted, or the average processing time for the requests. ### Compliance ratings and summary of factors (6.3.3 and 6.4.3) - R.36 — PC - Mutual legal assistance is not practicable with respect to FT. offenses. - Timeliness, constructiveness or effectiveness of the assistance provided by Paraguay is difficult to assess in the absence of general data on incoming and outgoing mutual assistance requests. - R.37 — LC (section 6.3.3) / PC (section 6.4.3) - Effectiveness of extradition-related assistance provided by Paraguay is difficult to assess in the absence of general data on incoming and outgoing mutual assistance requests. - R.38 — NC - No specific provision for applying provisional measures at the request of a foreign country for search, seizure and confiscation in absence of a treaty. - No consideration given to establishing an asset forfeiture fund or to sharing confiscated assets with a foreign country after coordinated international action. - No arrangements for coordinating seizure or confiscation actions with other countries. - SR.V — NC - International cooperation with respect to FT is limited. - As FT has not been criminalized, international cooperation in this area is severely limited. *Source: _cr09235 - 922. In the scope of the international treaties to which Paraguay is a party, the possible assistance* ### 960. The National Central Bureau of INTERPOL, within the Paraguayan national police, is the ### _cr09235 - 960. The National Central Bureau of INTERPOL, within the Paraguayan national police, is the ### International cooperation and channels for exchange - The National Central Bureau of INTERPOL, within the Paraguayan national police, is the gateway for exchanging international criminal information and arrest warrants between police forces of this international network, in matter of any offense, including ML. - SEPRELAD is the exclusive gateway for exchanging financial information and requests with foreign countries, through the Egmont Group network, or directly with the countries SEPRELAD signed MOUs. - Cooperation between SENAD and Customs with the US authorities is continuous within bilateral assistance programs. - The Secretariat for the Prevention and Investigation of Terrorism (SEPRINTE) maintains permanent contact with other countries of MERCOSUR and US authorities, for exchanging information on terrorism and financing terrorism. - Information on international trade exchange is made between customs administrations that have a special assistance program with US Customs and Internal Revenue Service. ### Spontaneous exchange of information and FIU-to-FIU cooperation - Spontaneous exchange is applied within the Counter Terrorism Group 3+1, on terrorism and its financing matter. - MOUs signed by UAF-SEPRELAD and foreign FIUs govern that “to the extent authorized by the laws of its country, and consistent with its own policies and procedures, each authority will provide upon request from the other any information in its possession, that he has access to, or that it is authorized by law to collect that may be relevant to the investigation of money laundering, terrorism financing, or related crimes”. These inquiries are governed with restrictive conditions, particularly respecting confidentiality. - The mission was not informed on the existence of a concrete case of spontaneous exchange of such information. ### Inquiries and investigations on behalf of foreign counterparts - Within international/regional conventions and agreements, competent Paraguayan authorities can make inquiries on behalf of foreign counterparts. - UAF SEPRELAD is authorized to do inquiries by searching its own and other databases on behalf to which it may have access, including law enforcement authorities, public, administrative, financial and commercial available databases, on behalf of Foreign counterpart, according the Egmont Group principles and the correspondent agreement (Memorandums of Understanding) signed with foreign UIFs. - Article 38 of AML Law No. 1,015: the competent judge shall cooperate with counterparts in other States in the processing of warrants or attachment and other precautionary measures, as provided for in the Paraguayan procedural law, for the purpose of identifying the offender and locating the property, proceeds and instrumentalities connected with the ML offense, to which end he shall grand all requests made by letters of request received from abroad. - Paraguayan law enforcement authorities are authorized to conduct investigations on behalf of foreign counterparts under international/regional/bilateral treaties, conventions and agreements; such requests must respect legal and formal procedures through letters of request. - The Paraguayan authorities did not provide the mission with statistics or information on the number or outcomes of such requests. ### Legal safeguards, confidentiality and limits to exchange - Tax evasion is a criminal offense (Article 261 of the Paraguayan Penal Code), suggesting international assistance is possible in cases involving fiscal matters when conditions for judicial assistance are met. - Article 33 of Law No. 1,015/96: within the framework of international agreements, SEPRELAD could assist with the exchange of information, directly or through international bodies, with counterpart/competent authorities from other states, which will be subject to confidentiality obligation. When replying to requests of information from other states, particular consideration should be given to sovereign aspects and the protection of domestic interests. - There are no legal or regulatory provisions in the Central Bank Law, the Insurance Law, the Securities Law, and the Cooperatives Law enabling financial institutions in these sectors to exchange information and cooperate with their foreign counterparts. - 2003 MERCOSUR agreement (Central Banks of Brazil, Argentina, Uruguay and Paraguay) covers AML matters with objectives to: - a) Harmonize the regulations and control procedures to prevent money laundering within the financial sector; - b) Exchange general information about cash flows between the countries involved with the objective of detecting illegal movement of funds; - c) Cooperate in the investigation of activities or transactions linked to illegal activities, in accordance with the local legislation and procedures; and - d) Share experiences and methodologies gained as a result of activities designed to prevent and detect money laundering. - The MERCOSUR agreement provides for exchanges of information subject to confidentiality provisions; information received should only be used for lawful supervisory purposes and/or those purposes for which it was provided and requested, and as permitted by local legislation. - The mission did not receive information about legal difficulties or restrictive conditions on exchange of information, nor about cases of rejection of assistance based on bank secrecy or professional confidentiality. - Article 33 of Law No. 1,015 governs exchange of financial information between the UAF and similar foreign FIUs with confidentiality obligations. The mission was not informed of breakdowns of exchanged information but noted vulnerability of the UAF regarding its general security. ### Exchange with non-counterparts and provision of FIU information by other authorities - UAF SEPRELAD can only exchange information with counterparts within the Article 33 of Law No. 1,015. - The mission was not informed by Paraguayan authorities about provision of information to the FIU by other competent authorities pursuant to requests from foreign FIUs. ### International cooperation on Counter‑Financing of Terrorism (CFT) and SR V - Paraguay participates actively in international cooperation against terrorism and financing, particularly through regional working groups and the 3+1 Counterterrorism Group on Security in the Tri Border. - Absence of a CFT law and non‑implementation of the UNSCRs relating to the prevention and suppression of FT hinders international cooperation, particularly regarding seizure of terrorist assets. - UAF-SEPRELAD maintains statistics concerning exchange of financial information and requests of data of inquiries with foreign homologues through the Egmont Group secure web channel. - Law enforcement authorities (SENAD, police and OAG) did not provide statistics about international assistance requests in judicial matters. - UAF SEPRELAD has signed "more of twenty Memorandums of Understanding with counterparts" to strengthen international cooperation. - The mission did not receive information about refusals of collaboration by Paraguayan authorities in ML and FT international cases. - The mission did not receive information to estimate the value of international exchange of information; concerns remain about insufficiency of results against money laundering in the Paraguayan justice system and insufficiency of resources. ### Resources, statistics and effectiveness - Overall, allotted resources for SEPRELAD and investigative authorities are described as largely insufficient for adequate data processing tools for STR analysis and human resource management. - Specialized services on financial investigations (SENAD and National Police) lack sufficient resources or training to carry out AML pursuits efficiently. - AML training is insufficient for actors of the system, and particularly very insufficient for the judges. - The specialized financial unit of Prosecutors in Asuncion appears to have more adequate functionality and resources; however SEPRELAD’s functional concerns limit proactive AML judicial enquiries. - The OAG does not have a computerized centralization or statistics system to track AML investigations and results. - Lack of an adequate system for management of seized assets prevents correct application of provisional seizure measures. - UAF-SEPRELAD efforts since 2007 to present statistics (origin of STRs and foreign financial information exchange) are insufficient to mitigate other authorities’ deficiencies; AML statistical data remain incomplete and non‑concordant. - There are no statistics presenting AML-ATF typologies or about the volume of seized criminal assets. - The OAG is developing a computerized inter-institutional management system for letters of request and other judicial cooperation requests. - The mission estimates resources currently allotted are largely insufficient for application in conformity with international AML-ATF requirements; the current system for collecting and following information and statistics does not allow a satisfactory assessment of system effectiveness. ### Recommendations (as provided by the mission) - To develop mechanisms to centralized exchange of information. - To strengthen the operative actions against money laundering at regional level, and consider the establishment of regional operational task forces at an early stage of criminal investigations of matters involving the proceeds of crime, money laundering and terrorism financing. - Conduct a review of the effectiveness of the cooperation and coordination systems for AML/CFT in the short term and thereafter on a regular basis. Statistical systems should be updated and maintained in line with the recommendations in Rec. 32. - The Paraguayan authorities would have: - to allot the necessary and sufficient financial and human resources for the AML national authorities - to specialize the institution in charge of the police investigations - to coordinate all the administrative and repressive AML authorities - To develop adequate training schemes according to the functions of each institution. - To set up an adequate legislation and administration for seizing criminal assets. - To set up a reliable and complete statistical system of collection and follow-up of the statistical data, including in particular the AML-ATF typologies, the investigations in progress and finished the judgments as well as the seized assets. ### Ratings and key compliance findings - R.40: PC - As the law enforcement authorities did not provide the information requested the mission was unable to evaluate the efficiency of international cooperation and exchange of information. - Insufficient resources and investigative means for the law enforcement authorities can affect the response at foreign requests of inquiries. - SR.V: NC - Absence of criminalization of terrorist financing, blocking participation in international cooperation. - R.30: NC - Insufficient human and budget resources. - Insufficient AML-ATF training. - Lack of a specialized institution for seized assets administration. - R.32: NC - Lack of a centralized and co-ordinated system of AML/CFT statistical data collection. *Source: _cr09235 - 960. The National Central Bureau of INTERPOL, within the Paraguayan national police, is the — extracted content unit.* ### 6. Politically exposed persons ### _cr09235 - 6. Politically exposed persons ### 6. Politically exposed persons - NC - Lack of legal obligation to identify beneficial owners, in particular those that could be identified as PEPs. - Lack of requirements by SIB, SIS, CNV, and INCOOP to obtain management approval when the customer or beneficial owners is subsequently found to be PEP. - Lack of requirements by SIS and INCOOP to establish the source of wealth of PEPs. - Lack of requirements by INCOOP to conduct enhanced ongoing monitoring of relationships. ### 7. Correspondent banking - NC - Lack of requirements to gather sufficient information about the respondent to understand the reputation and quality of supervision, including whether it has been subject to a ML or TF investigation or regulatory action. - Lack of requirements to assess and ascertain the adequacy and effectiveness of the respondent institution’s AML/CFT controls. - Lack of requirements to document the respective AML/CFT responsibilities of each institution. ### 8. New technologies & non face-to-face business - PC - Lack of requirements for cooperatives and money remitters to apply policies and measures when establishing the relationship and conducting CDD. ### 9. Third parties and introducers - NA - The requirement does not apply due to prohibition in place. ### 10. Record-keeping - PC - Lack of legal obligation for financial institutions to maintain/retain identification data obtained through the customer due diligence process, account files, and business correspondence for at least five years, if requested by the competent authority in specific cases. - Lack of legal obligation for financial institutions to make customer identification data available on a timely basis to domestic competent enforcement authority upon appropriate authority. ### 11. Unusual transactions - NC - Lack of requirements imposed by the competent supervisory authorities on financial institutions to pay special attention to all complex, unusual large transactions or unusual patterns of transactions that have no apparent or visible economic or lawful purpose; to examine as far as possible the background and purpose of such transaction and set forth their findings in writing and available to competent authorities and auditors for at least five years. ### 12. DNFBP–R.5, 6, 8–11 - NC - Law 1015/97 does not cover Lawyers, notaries, other independent legal professionals and accountants when they prepare for or carry out transactions for their client concerning the activities set out in FATF Methodology and Trust and company service providers when they prepare for or carry out transactions for a client concerning the activities listed by GAFI. - Lack of regulation issued by SEPRELAD for Dealers in Precious Metals and Dealers in Precious Stones. - Recommendations 5, 8, 9, 10 and 11 are not properly covered. The measures in place are general and do not contemplate the level of detail under the Criterion. - Lack of explicit requirements under the regulation to all the obligations imposed by Recommendation 5 – Prohibition of anonymous accounts or accounts in fictitious names, all cases when CDD is required in accordance with Criterion 5.2 –Sections c-e, identification measures, Identification of legal personas and arrangements, Risk, timing of verification, ongoing due diligence, information on purpose and nature of business relationships, failure to complete CDD. - Lack of regulation, in addition to performing due diligence measures, to pay attention to PEPs in accordance with Recommendation 6. - Lack of regulation to pay special attention to new technologies that may favor anonymity and to address those risks associated with non face-to-face business relationships or transactions. - Lack of regulation to prohibit Gambling Establishments to rely on intermediaries or other third parties to perform some of the elements of the CDD process or to introduce business, or to explicitly indicate the requirements to be observed when such reliance is permitted. - Lack of fully compliance with respect to recordkeeping with the provisions set out under Recommendation 10. - Lack of explicit obligation to pay attention to all complex, unusual or large transactions or unusual patterns of transactions and to examine their background and set out their findings in writing in compliance with Recommendation 11. - CONAJZAR has not issued regulations for the Gambling Establishments. - FT is not criminalized in Paraguay l, thus the fulfillment of the Recommendations that refer not only to the prevention of money laundering but also the financing of terrorism, such as R. 8, is limited. - Lack of implementation by the designated non-financial businesses and professions listed under Article 13, Law 1015 of all the requirements set out in the AML Law and the Resolutions enacted by SEPRELAD regarding FATF Recommendations 5, 6, 8-11. ### 13. Suspicious transaction reporting - NC - Lack of direct obligation in law or regulation to report suspicious transactions to SEPRELAD. - Reporting obligation does not cover all financial institutions. - Financing of terrorism not criminalized. - Lack of obligation in law or regulation to report suspicious transactions related to terrorist financing. - Lack of obligation to report attempted transactions. - Low volume of suspicious transaction reports (majority of reports received from the banking institutions). ### 14. Protection & no tipping-off - C ### 15. Internal controls, compliance & audit - PC - No requirement to conduct a risk analysis of audit potential ML and FT risks. - No guidance governing the role, authority, reporting lines, resources need and independence for the compliance officer. - No requirement to maintain an adequately resourced and independent audit function. - No guidance on training topics to be considered by the institutions. - No requirements imposed on money remitters with respect to the training program. ### 16. DNFBP–R.13–15 & 21 - NC - Not all DNFBP are covered by Law 1015/97. - Compliance with the Recommendation is limited. Law 1015/97 does not cover all categories of DNFBP and the measures in place for those that are contemplated by Law are too general and lack the level of detail required under the standard. - Lack of regulation enacted by the SEPRELAD for Dealers in Precious Stones and Metals. - The Special Recommendation IV and the Criterion 13.2 are not met while terrorism is not criminalized under Law 1015/97. - The obligation to submit the STR is confined to the crime of money laundering and not the financing of terrorism. - Lack of requirements in place to fully address the requirements set out under Recommendation 15 especially with regard to Criterion 15.1.2, 15.2 and 15.3. - Recommendation 21 is not embodied in law or in the Regulations issued by the SEPRELAD. - Lack of implementation by the reporting entities listed under Article 13 of Law 1015 of the requirements set out in the AML Law and the Resolutions enacted by SEPRELAD regarding FATF Recommendations 13, 14, 15 and 21. ### 17. Sanctions - NC - No penalties/sanctions imposed by the competent supervisory authorities related to AML/CFT. ### 18. Shell banks - LC - Lack of measures that define or require physical presence in a way that would encompass the meaningful mind and management of the company. ### 19. Other forms of reporting - NC - No consideration given to implementing a cash reporting system as suggested by this recommendation. ### 20. Other NFBP & secure transaction techniques - NC - Law 1015-97 does not contemplate non- financial business and professions –other than DNFBP- that may be at risk of being misused for money laundering, or terrorism financing such as dealers in high value and luxury goods, auction houses and investment advisers as stated under Criterion 20.1. - Lack of explicit requirements under the regulation to all the obligations imposed by Recommendation 5 – Prohibition of anonymous accounts or accounts in fictitious names, all cases when CDD is required in accordance with Criteria 5.2, identification measures, Identification of legal persons or arrangements Risk, timing of verification, ongoing due diligence, information on purpose and nature of business relationships, failure to complete with CDD. - Lack of regulations to impose pawnbrokers, in addition to performing due diligence measures, to pay attention to PEPs in accordance with Recommendation 6. - Lack of regulation for pawnbrokers to pay special attention to new technologies that may favor anonymity and to address those risks associated with non face- to- face business relationships or transactions. - Lack of fully compliance with respect to recordkeeping in accordance with the provisions set out under Recommendation 10. - Lack of explicit obligation to pay attention to all complex, unusual or large transactions and unusual patterns and to examine their background and set out their findings in writing in compliance with Recommendation 11. - Lack of fully compliance within the pawnbrokers with the provisions set out under Recommendation 15 specially regarding the unlimited access by the Compliance Officer to customer identification, data and other CDD information, the audit function, training programmes –information of new developments, current ML and FT techniques, methods and trends, requirements concerning CDD and suspicious transaction reports and independence of the Compliance Officer. - Lack of the relevant regulation issued by the supervisor in order to ensure the compliance with the provisions set out under the AML Law and the Resolutions enacted by SEPRELAD. - Lack of supervision over pawnbrokers to ensure the compliance with Recommendations 5, 6, 8-11, 13-15, 17 and 21. - Lack of a sanction regime for pawnbrokers in accordance with Recommendation 17. - Lack of requirements to give special attention to business relationships and transactions with persons, including legal persons and other financial institutions, from countries that do not apply or insufficiently apply the FATF Recommendations and to ensure that the reporting entities are advised of concerns about weaknesses in the AML/CFT systems in other countries as well as the requirements contemplated under Criteria N 21.2 and 21.3. - Lack of measures in place to encourage the development and use of modern and secure techniques for conducting financial transactions that are less vulnerable to money laundering as considered under Criterion 20.2. ### 21. Special attention for higher risk countries - NC - Lack of requirements imposed by the INCOOP on financial institutions to pay special attention to business relationships and transactions with persons from or in countries which do not or insufficiently apply the FATF Recommendations. - Lack of requirements imposed by the SIB, the SIS, the CNV, and the INCOOP (competent supervisory) authorities to require financial institutions to examine as far as possible the background of transactions that have no apparent economic or visible lawful purpose and set forth in writing the findings of such transactions and make the findings available to the competent authorities and auditors. - Lack of apparent measures and authority at the SIB, the SIS, the CNV, and the INCOOP to advise their financial institutions of concerns about weaknesses in the AML/CFT systems of other countries and to apply appropriate counter-measures to address instances where a country continues not to apply or insufficiently applies the FATF Recommendations, respectively. ### 22. Foreign branches & subsidiaries - NC - No specific requirements in place to comply with the essential elements of this recommendation including for paying particular attention that the principles of this recommendation are observed with respect to branches and subsidiaries and to require financial institutions to apply the higher standard to the extent that local laws and regulations permit. ### 23. Regulation, supervision and monitoring - NC - Lack of direct obligation that designates a competent supervisory authority to regulate and supervise in aspects related to AML, including for money remitters. - Lack of explicit and clear measures to prevent criminals or their associates from owning or controlling a financial institution. - Lack of explicit fit and proper measures for directors and senior management of financial institutions. ### 24. DNFBP—regulation, supervision and monitoring - NC - DNFBP are not subject to an effective regulatory and supervisory regime to ensure compliance with the AML/CFT requirements. - Real Estate Agents and Dealers in Precious Stones and Metals do not have a Supervisory Body in terms of AML/CFT. - Lack of a comprehensive regulatory regime among DNFBP to ensure full implementation of the measures AML / CFT. - CONAJZAR is not at present supervising the Casinos in terms of AML and has not enacted the relevant regulation. - CONAJZAR does not have the adequate powers to perform its function in the supervision of the requirements set out under Resolution N 62; this includes the lack of powers to monitor compliance with the regulation. - CONAJZAR does not have a regime of sanctions under Law 1016/97 (Legal regime to operate games of chance or gaming) so at present is not able to impose any kind of sanction for non-fulfillment with the existing regulations regarding the prevention of money laundering ### 25. Guidelines & Feedback - NC - Lack of guidelines to help DNFBPs to implement and comply with their respective AML/CFT requirements which at minimum shall include a description of ML and FT techniques and methods and any additional measures that these institutions and DNFBPs could take to ensure that their AML/CFT measures are effective. ### 26. The FIU - PC - Lack of specific operational autonomy of the UAF. - Confusion between SEPRELAD and the UAF about respective functions and duties. - Insufficient operative budget for the UAF - Insufficient capacity of STR analysis to confirm money laundering activities. - Absence of statistic and description of money laundering typologies. - Lack of coordination with the investigative authorities. - Lack of regulations to some no financial reporting entities. - Insufficient protective measures into the SEPRELAD headquarters. - Lack of computerized analytical tools. - Insufficient use of Egmont Group for searching information. - Insufficient remuneration for the UAF employees. ### 27. Law enforcement authorities - NC - Lack of legislation about special investigative techniques in ML cases other than about drug trafficking. - Lack of application of special investigative techniques in ML investigations. ### 28. Powers of competent authorities - C ### 29. Supervisors - NC - Lack of direct obligation to empower the SIB, the SIS, the CNV, and the INCOOP to monitor and inspect financial institutions for compliance with the AML obligations. - Lack of adequate and frequent inspections by the SIB and the SIS of financial institutions to ensure compliance. - Lack of direct obligation to sanction financial institutions for failure to comply with or properly implement the requirements to combat money laundering, consistent with the Recommendations. - Lack of supervision by the CNV and the INCOOP to effectively address AML/CFT matters. ### 30. Resources, integrity, and training - NC - Insufficient human and budget resources - Insufficient AML-ATF training - Lack of a specialized institution for seized assets administration. ### 31. National co-operation - NC - Policy development and coordination functions are not clearly assigned. - Coordination and cooperation among agencies is ad hoc and inconsistent. - Existing mechanisms are inadequate for policy makers, UAF, law enforcement and supervisors to effectively cooperate and coordinate in the development and implementation of AML/CFT policies and measures. ### 32. Statistics - NC - Lack of a centralized and co-ordinated system of AML/CFT statistical data collection ### 33. Legal persons–beneficial owners - NC - The laws do not require adequate transparency concerning the ownership and control of legal persons. - Competent authorities have no access in a timely fashion to adequate, accurate, and current information on beneficial ownership and control of legal persons. - There are no measures to prevent the unlawful use of legal persons using bearer shares in relation to money laundering. ### 34. Legal arrangements – beneficial owners - NC - The laws do not require adequate transparency concerning the ownership and control of trusts. - Competent authorities have no access in a timely fashion to adequate, accurate, and current information on beneficial ownership and control of trusts. ### 35. Conventions - PC - Significant limitations on scope of the ML offence (see comments in relation to Rec.1); - FT is not criminalized. - Penalties are not dissuasive and there are doubts about their effectiveness (see comments in relation to Rec.2) ### 36. Mutual legal assistance (MLA) - PC - Mutual legal assistance is not practicable with respect to FT offences. - Timeliness, constructiveness or effectiveness of the assistance provided by Paraguay is difficult to assess in the absence of general data on incoming and outgoing mutual assistance requests. ### 37. Dual criminality - LC - Effectiveness of the extradition-related assistance provided by Paraguay is difficult to assess in the absence of general data on incoming and outgoing mutual assistance requests. ### 38. MLA on confiscation and freezing - NC - In the absence of a treaty, there is no specific provision for applying provisional measures at the request of a foreign country for search, seizure and confiscation. - No consideration has been given to establishing an asset forfeiture fund or to sharing confiscated assets with a foreign country after coordinated international action. - There are no arrangements for coordinating seizure or confiscation actions with other countries. ### 39. Extradition - PC - The mission did not receive data or other information that would allow it to evaluate the effectiveness of the extradition process. ### 40. Other forms of co-operation - PC - As the law enforcement authorities did not provide the information requested the mission was unable evaluate the efficiency of international cooperation and exchange of information. - Insufficient resources and investigative means for the law enforcement authorities can affect the response at foreign requests of inquiries. ### Special Recommendations (SR.I–SR.IX) - SR.I Implement UN instruments — NC - The U.N. Convention for the Suppression of the Financing of Terrorism has not been implemented with regard to the criminalization of FT and freezing and confiscation of assets related to such offences. - The UNSCRs 1267 and 1373 have not been implemented. - SR.II Criminalize terrorist financing — NC - FT is not criminalized. - FT is not a designated a predicate offence for ML. - SR.III Freeze and confiscate terrorist assets — NC - No mechanism in place to give effect to UNSCRs 1267 and 1373. - No mechanism to examine and give effect as appropriate to actions initiated under the freezing mechanisms of other jurisdictions. - No mechanism for communicating actions to the financial sector - SR.IV Suspicious transaction reporting — NC - Terrorist financing has not been criminalized. - SR.V International cooperation — NC - International cooperation with respect to FT is limited. - Absence of criminalization of terrorist financing, blocking participation in international cooperation. - SR.VI AML/CFT requirements for money/value transfer services — NC - No licensing/registration system or designated competent authority for informal MVTS. - SR.VII Wire transfer rules — NC - Lack of specific measures in place to address a majority of the criteria in this recommendation, including for: - handling batched and domestic transfers; - ensuring that intermediary and beneficiary financial institution in the payment chain is required to provide all originator information that accompanies a wire transfer; - adopting affective risk-based procedures for identifying and handling wire transfers that are not accompanied by complete originator information; - having measures in place to effectively monitor the compliance of financial institutions with rules and regulations implementing this recommendation; and - applying sanctions in relation to noncompliance with the requirements of this recommendation. - SR.VIII Nonprofit organizations — NC - Paraguay has not conducted its review of the adequacy of domestic laws and regulations that relate to nonprofit organizations. - No outreach has been undertaken to the NPO sector with a view to protecting the sector from terrorist financing abuse. - The authorities have not provided enough information for the complete assessment of this recommendation. - SR.IX Cash Border Declaration & Disclosure — NC - Lack of implementation of a national control policy against cross-border cash couriers. - Inexistence of cash transport control in the land frontier check points. - Inefficiency of cash transport control in the international airports. - Absence of results on the control of the cross-border cash transportation. *Source: _cr09235 - 6. Politically exposed persons* ### 1. General ### 1. General ### Legal System and Related Institutional Measures - Content focuses on legislative and institutional measures to strengthen anti-money laundering (AML) and countering the financing of terrorism (CFT) frameworks. ### Criminalization of Money Laundering (R.1, 2, & 32) - Amend the CC to incorporate the conducts of “conversion”, “transfer”, “acquisition”, “concealment or disguisement”, “possession” of property and “assisting a person involved in the commission of the predicate offence evade the legal consequences of his or her actions” into the money laundering offence of Article 196. - Amend the CC to allow proving that property is the proceeds of crime without the need for a conviction of a predicate offence. - Amend the CC to expand the list of predicate offences for ML to cover a range of offences in each of the designated categories of offences. - Amend the CC to criminalize “conspiracy”, “facilitation” and “counseling” to commit ML. - Amend the CC to make legal persons criminally liable for the commission of ML offences. - Amend its CC to re-categorize the offence of ML as a crime (as opposed to a misdemeanor), to allow for the concurrent imposition of “imprisonment” and “fines” and to raise the range of sanctions to make them effective, proportional and dissuasive, relative to other serious offences in the CC, and relative to the sanctions for ML applied by other countries in the GAFISUD region. - Continue to place more efforts at generating awareness on the opportunity that ML investigations and convictions represent to the general fight against crime, and particularly organized crime. - Strengthen the fight against corruption as an important pre-condition for the implementation of an effective anti-money laundering framework. - Develop a national AML strategy to build consensus and commitment and to improve the coordination and cooperation among relevant competent authorities in the development of policies and their effective implementation. ### Criminalization of Terrorist Financing (SR.II & R.32) - The offence of FT should be criminalized in keeping with the requirements of the offence as set out in the SFT Convention. - Provide training for judges, prosecutors, law enforcement agencies, and UAF staff on the understanding of the offence of FT and CFT measures. ### Confiscation, freezing, and seizing of proceeds of crime (R.3 & 32) - Amend the CC to allow for the forfeiture of property of corresponding value. - Amend the CC to allow for initial applications to seize property subject to forfeiture to be made ex-parte or without prior notice. - Amend Law No. 1,015/97 to explicitly transfer to the FIU the powers to request and obtain information that could be related with money laundering. - Enact provisions that permit Paraguayan authorities to take steps to prevent or void actions, whether contractual or otherwise, where the persons involved knew or should have known that as a result of those actions the authorities would be prejudiced in their ability to recover property subject to forfeiture. - Strengthen the fight against corruption as an important pre-condition for the implementation of an effective system of forfeitures. - Allocate more resources to improving the conditions of the registries of property. Speed up the informatization of the data bases, improve the facilities where records are held, reduce the costs to registration, increase public awareness on the benefits of registration, and amend appropriate laws to sanction failures to register relevant acts and information. - Developing effective and feasible procedures at Customs to detect, stop or restrain, and seize the cross border transportation of currency and bearer negotiable instruments. ### Freezing of funds used for terrorist financing (SR.III) - Put in place a system for freezing of terrorist assets ex parte and without delay, including the following elements: - A mechanism for reviewing and giving effect to, if appropriate, the actions initiated under freezing mechanisms of other countries; recognizing and reviewing terrorist lists of other countries and giving effect to those lists if appropriate; - An effective procedure for disseminating the UNSCR 1267 Sanctions Committee list as well as national lists and foreign lists under UNSCR 1373 to the financial sector; - Clear guidance on implementation to financial institutions and other persons or entities that may be holding targeted funds or other assets concerning their obligations in taking action under freezing mechanisms; - Procedures for unfreezing and for allowing access to funds for basic expenses; - Protection of bona fide third party rights; and - A mechanism for monitoring compliance and imposing sanction in cases of failure to comply. - Put in place procedures to examine and give effect to the actions initiated under the freezing mechanisms of other jurisdictions; - Put in place procedures for persons or entities whose funds or other assets have been frozen to challenge that measure with a view to having it reviewed by a court. ### The Financial Intelligence Unit and its functions (R.26) - To adopt a new law to clarify the attributions of the Financial Analysis Unit, and to give it a real autonomy. - To reconsider the present structure of the SEPRELAD and UAF. - To implement a secure computerized system of STRs sending between reporting authorities and SEPRELAD. - To develop and apply the investigative function that Law No. 1,015 gives to the SEPRELAD, and coordinate better the relation with the specialized unit of the SENAD, to strengthen the money laundering detection that permit the Prosecutor open more proactive judiciary investigations. - To reinforce the role of the UAF in the matter of information and training of the financial and non financial institutions and professionals obliged with the AML law. - To establish a monitoring to measure the risks of money laundering and terrorist financing, with the corresponding typologies. - To develop the statistics on typologies and their trends. - To strengthen the area of the financial analysis and the treatment of the suspicious transactions reports. - To develop training adapted for the analysts. - To strengthen the operative coordination with the national police, the SENAD, the Customs and the OAG. - To develop the systematical use of Egmont Group with respect to international cooperation. - To give to the SEPRELAD sufficient financial resources to equip it with computerized tools, and to give the sufficient financial remuneration to the personnel. - To consider the moving of the UAF headquarters toward more suitable premises with a better general security. - To develop a national strategy of prevention and in fighting the money laundering, in relation with the corruption and organized crime fighting. ### Law enforcement, prosecution and other competent authorities (R.27 & 28) - To increase the operative budget of the specialized units against financial crime of the SENAD and National Police. - To develop an adapted program of training focused on operative investigations and the coordination of the law enforcement agencies. - To develop a program of special training for the judges, in a national level, focuses on the interpretation of the evidences of the money laundering offense, including the terrorist financing aspect, and on the autonomy of these offences. - To consider the opportunity of creating a permanent interagency Task Force especially in charge of fighting the money laundering and terrorist financing activities that could be depending of Ministry public. - To consider the opportunity of create a specialized jurisdiction of judgment against the financial criminality, including the money laundering and terrorist financing offences that could actuate with a national competence. *Source: _cr09235 - 1. General* ### 3. Preventive Measures–Financial ### 3. Preventive Measures–Financial Institutions ### Customer due diligence, including enhanced or reduced measures (R.5–8) - R.5: Shortcomings in the Paraguay AML framework include requirements that should be in primary or secondary legislation being addressed through OEMs; measures are often too general and lack required detail. - Recommended that authorities: - prohibit, through law or regulation, anonymous accounts or accounts in fictitious names - establish, through law or regulation, clear requirements for financial institutions to: - Undertake customer due diligence (CDD) measures when: - carrying out occasional transactions above the applicable designated threshold. This also includes situations where the transaction is carried out in a single operation or in several operations that appear to be linked; - carrying out occasional transactions that are wire transfers in the circumstances covered by the Interpretative Note to SR VII; - there is a suspicion of money laundering or terrorist financing, regardless of any exemptions or thresholds; and - the financial institution has doubts about the veracity or adequacy of previously obtained customer identification data. - identify the customer (legal arrangements) and verify that customer’s identity using reliable, independent source documents, data or information (identification data) following the examples set out in the paper entitled General Guide to Account Opening and Customer Identification issued by the Basel Committee’s Working Group on Cross Border Banking. - verify, for customers that are legal arrangements, that any person purporting to act on behalf of the customer is so authorized, and identify and verify the identity of that person. - identify the beneficial owner, and take reasonable measures to verify the identity of the beneficial owner using relevant information or data obtained from a reliable source such that the financial institution is satisfied that it knows who the beneficial owner is. - determine who are the natural persons that ultimately own or control the customer. This includes those persons who exercise ultimate effective control over a legal person or legal arrangement. - establish requirements for financial institutions to conduct ongoing due diligence on the business relationship, particularly for higher risk categories of customer or business relationships, and maintain up-to-date customers records. - establish through law, regulation, or other enforceable means, clear obligations/requirements for financial institutions to: - understand the ownership and control structure of the customer who is a legal arrangement. - conduct ongoing due diligence on the business relationship with money remitters. - perform enhanced due diligence for higher risk categories of customer, business relationships, or transactions. - verify the identity of the beneficial owner before or during the course of establishing a business relationship or conducting transactions for occasional customers. - reject opening an account when unable to comply with CDD requirements and to consider making a suspicious report. - consider terminating the business relationship and making a suspicious transaction report when the business relationship has commenced and the financial institution is unable to comply with CDD requirements. - establish requirements for insurance companies to apply CDD measures on existing customers on the basis of materiality and risk and to conduct due diligence on such relationships at appropriate times. - R.6: - Amend the Law to impose an obligation on financial institutions to identify the beneficial owners, including beneficial owners that could be identified as PEPs. - SIB, SIS, CNV, and INCOOP authorities should establish through law, resolution/regulation, or other enforceable means, clear obligations/requirements for financial institutions to have appropriate risk management systems that consider obtaining senior management approval to continue a business relationship with a customer or beneficial owner who is subsequently found to be a PEP. - SIS and INCOOP should establish an obligation/requirements for financial institutions to establish the source of wealth of customers and beneficial owners identified as PEPs; INCOOP should extend the current obligation to carry out enhanced monitoring of business relationships with customers (which should also extend to beneficial owners) identified as PEPs to make this monitoring ongoing. - Authorities are encouraged to fully implement the 2003 United Nations Convention against Corruption, as well as the 1996 OAS IACAC Convention. - R.7: - SIB authorities need to modify resolutions to comply with essential elements, particularly: - establishing measures for obtaining information to understand the reputation and the quality of supervision, including whether the institution has been subject to a money laundering or terrorist financing investigation or regulatory action; - establishing measures for assessing and ascertaining the adequacy and effectiveness of the respondent’s AML/CFT controls in place; and - establishing requirements for documenting the respective AML/CFT responsibilities of each institution. - R.8: - INCOOP needs to establish specific obligations for financial institutions to: - apply non face-to-face transactions and new technologies policies and/or measures when establishing customer relationships and when conducting ongoing due diligence; and - require the certification of documentation. - Authorities should modify the resolutions to establish these additional requirements in line with the elements of this recommendation and extend the requirements to money remitters. ### Third parties and introduced business (R.9) - Requirement “not applicable”. ### Financial institution secrecy or confidentiality (R.4) - Authorities are recommended to establish formal mechanisms and/or effective measures to enable information sharing and cooperation between the SIB and other competent supervisory authorities, without the need of a court order. ### Record keeping and wire transfer rules (R.10 & SR.VII) - R.10: - Authorities are recommended to establish an obligation on financial institutions to maintain/retain records on the identification data obtained through the customer due diligence process, account files, and business correspondence for at least five years after the business relationship is ended, or longer period, if requested by the competent authorities in specific cases and that such customer data are available on a timely basis to domestic competent enforcement authority upon appropriate authority. - SR.VII: - Modify existing resolutions to establish requirements for financial institutions to: - a) handle batched and domestic transfers; - b) ensure that each intermediary and beneficiary financial institution in the payment chain is required to provide all originator information that accompanies a wire transfer; - c) adopt affective risk-based procedures for identifying and handling wire transfers that are not accompanied by complete originator information; - d) have measures in place to effectively monitor the compliance of financial institutions with rules and regulations implementing this recommendation; and - e) apply sanctions in relation to noncompliance with the requirements of this recommendation. ### Monitoring of transactions and relationships (R.11 & 21) - R.11: - SEPRELAD authorities are recommended to modify Resolution No. 63, and sector specific resolutions (Resolution No. 321, Resolution No. 59, Resolution No. 262, and Resolution No. 60) to establish a direct legal or regulatory requirement for reporting entities to: - 1) pay special attention to all complex, unusual large transactions, and all unusual patterns of transactions, which have no apparent economic, or visible lawful purpose; - 2) examine as far as possible the background and purpose of such transactions and set forth their findings in writing; and - 3) keep such finding available for competent authorities and auditors for at least five years. - Revise Resolution No. 263 to establish the requirement for financial institutions under the SIS to make the finding available to the auditors for at least five years. - R.21: - INCOOP authorities are recommended to establish a regulatory obligation on reporting entities to give special attention to businesses and transactions with persons from or in countries which do not or insufficiently apply the FATF Recommendations. - SIS, CNV, and INCOOP authorities are further recommended to establish regulatory obligations on financial institutions to examine as far as possible the background of transactions that have no apparent economic or visible lawful purpose and set forth in writing the findings and make the findings available to competent authorities and auditors. - SIB, SIS, CNV, and INCOOP should have measures for financial institutions to be advised of concerns about weaknesses in the AML/CFT systems of other countries and the authority to apply appropriate counter-measures where a country continues not to apply or insufficiently applies the FATF Recommendations. ### Suspicious transaction reports and other reporting (R.13, 14, 19, 25, & SR.IV) - R.13 & SR.IV: - Authorities are recommended to: - Define the term “financial institutions” in line with the definition provided in the Methodology. - Expand the list of financial institutions to include those listed in the definition provided in the Methodology. - Modify the existing legal obligation to establish the requirement for financial institutions to report directly to the SEPRELAD. - Establish an obligation for financial institutions to report all suspicious transactions including attempted transactions, regardless of the amount of the transaction. - Criminalize the financing of terrorism. - R.19: - Consider feasibility and utility of a system where financial institutions and intermediaries report all domestic and international currency transactions above a fixed amount, to a national central agency with a computerized data base, available to competent authorities for use in money laundering cases, subject to strict safeguards. - SR.IV: - Criminalize the financing of terrorism to establish the legal obligation for financial institutions to report to the competent authorities transactions when they suspect or have reasonable grounds to suspect that funds are linked or related to, or are to be used for terrorism, terrorist acts or by terrorist organizations. - R.25: - Authorities, particularly SEPRELAD, are recommended to: - Provide guidance to assist financial institutions on AML/CFT issues covered under the FATF Recommendations, including at a minimum a description of ML and FT techniques and methods, and any additional measures that these institutions could take to ensure that their AML/CFT procedures are effective. - Establish communication standards and a mechanism for providing feedback to reporting institutions including general and specific or case-by-case feedback. - Consider reviewing the guidance provided by the FATF Best Practice Guidelines on Providing Feedback to Reporting Financial Institutions and Other Persons. ### Cross Border Declaration or disclosure (SR IX) - Authorities should take measures to apply an effective control on the cross-border cash transport. - SEPRELAD should coordinate with customs and police authorities for effective implementation of measures of its Resolution No. 61. ### Internal controls, compliance, audit and foreign branches (R.15 & 22) - R.15: Shortcomings to address include: - Establish an explicit requirement in resolutions for financial institutions to conduct a risk assessment exercise to determine vulnerabilities to ML and FT (although financing of terrorism is not yet criminalized) to develop and adopt necessary measures, controls, policies and procedures. - SIS and INCOOP should provide clear guidance to ensure compliance officers are not involved in operational or administrative activities; act independently and report directly to the highest authority; have sufficient resources; and have authority and unrestricted access to information and staff. - Establish explicit requirement in resolutions for financial institutions to maintain an adequately resourced and independent audit function to test compliance with AML policies, procedures, and controls. - Provide guidance on training type and topics including AML Law obligations and sanctions, ML and FT typologies, CDD, STR, etc. - Extend the obligation to money remitters to develop, adopt, and implement an ongoing AML training program. - R.22: - Establish requirements for branches and subsidiaries of financial institutions abroad to pay particular attention to countries which do not or insufficiently apply the FATF Recommendations; where home and host minimum AML/CFT requirements differ, apply the higher standard to the extent that local laws and regulations permit. ### Shell banks (R.18) - SIB authorities should establish measures for financial institutions to define and/or require physical presence for insurance companies and brokerage and mutual funds firms to encompass the meaning of meaningful mind and management of the company. ### The supervisory and oversight system – competent authorities and SROs (Role, functions, duties and powers) (R.23, 30, 29, 17, 25, & 32) - R.17: - Ensure that effective, proportionate and dissuasive administrative sanctions are available to deal with reporting entities that fail to comply with AML requirements. - R.23: - Establish a direct obligation that designates a competent supervisory authority to regulate and supervise money remitters in AML aspects. - Establish explicit and clear measures to prevent criminals or their associates from owning or controlling a financial institution. - Establish explicit fit and proper measures for directors and senior management of financial institutions. - R.25: - Establish sector specific guidelines and feedback mechanisms to assist financial institutions on ML and FT techniques and international developments. - R.29: - Establish a direct obligation that empowers the SIB, the SIS, the CNV, and the INCOOP to monitor and inspect financial institutions for compliance with AML obligations. - Conduct inspections of financial institutions to ensure compliance. - Sanction financial institutions for failure to comply with AML/CFT requirements consistent with the Recommendations. - Strengthen the overall AML/CFT supervisory process for SIB, SIS, CNV, and INCOOP to effectively address AML/CFT matters. ### Money value transfer services (SR.VI) - SR.VI: - Criminalize the financing of terrorism to establish the legal obligation for financial institutions to report transactions suspected to be linked to terrorism. - Designate a supervisory body responsible for licensing, regulation and supervision of money or value transfer (MVT) service operators, particularly those operating informal systems. *Source: _cr09235 - 3. Preventive Measures–Financial Institutions* ### 5. Legal Persons and ### 5. Legal Persons and Arrangements & Nonprofit Organizations ### Legal Persons – Access to beneficial ownership and control information (R.33) - Adopt measures to prevent the unlawful use of legal persons in relation to money laundering by ensuring that commercial, corporate and other laws require adequate transparency concerning the ownership and control of legal persons. - Adopt measures to allow competent authorities to obtain or have access in a timely fashion to adequate, accurate, and current information on beneficial ownership and control of legal persons. - Adopt measures to prevent the unlawful use of legal persons using bearer shares in relation to money laundering. - Allocate additional resources to the National Direction of Public Registries and to improving the conditions of the registries. In particular, the authorities should: - speed up the processes of informatization of the data bases; - improve the facilities where records are held; - reduce the costs to registration; - increase public awareness on the benefits of registration; - amend the appropriate laws to sanction failures to register relevant acts and information. ### Legal Arrangements – Access to beneficial ownership and control information (R.34) - Adopt measures to prevent the unlawful use of trusts in relation to money laundering by ensuring that commercial, trust and other laws require adequate transparency concerning the ownership and control of trusts. - Adopt measures that may allow competent authorities to obtain or have access in a timely fashion to adequate, accurate, and current information on beneficial ownership and control of legal persons. ### Nonprofit organizations (SR.VIII) - Review the adequacy of domestic laws and regulations that relate to nonprofit organizations; use all available sources of information to undertake domestic reviews of or have the capacity to obtain timely information on the activities, size and other relevant features of their non-profit sectors for the purpose of identifying the features and types of nonprofit organizations (NPOs) that are at risk of being misused for terrorist financing by virtue of their activities or characteristics; and conduct periodic reassessments by reviewing new information on the sector’s potential vulnerabilities to terrorist activities. - Undertake outreach to the NPO sector with a view to protecting the sector from terrorist financing abuse. This outreach should include: - (i) raising awareness in the NPO sector about the risks of terrorist abuse and the available measures to protect against such abuse; and - (ii) promoting transparency, accountability, integrity, and public confidence in the administration and management of all NPOs. - Take steps to promote effective supervision or monitoring of those NPOs which account for: - (i) a significant portion of the financial resources under control of the sector; and - (ii) a substantial share of the sector’s international activities. - Require NPOs to maintain information on: - (1) the purpose and objectives of their stated activities; and - (2) the identity of person(s) who own, control or direct their activities, including senior officers, board members and trustees. This information should be publicly available either directly from the NPO or through appropriate authorities. - Adopt appropriate measures to sanction violations of oversight measures or rules by NPOs or persons acting on behalf of NPOs. The application of such sanctions should not preclude parallel civil, administrative, or criminal proceedings with respect to NPOs or persons acting on their behalf where appropriate. - Require all NPOs to be licensed or registered and make information available to competent authorities. - Require NPOs to maintain, for a period of at least five years, and make available to appropriate authorities, records of domestic and international transactions that are sufficiently detailed to verify that funds have been spent in a manner consistent with the purpose and objectives of the organization. - Implement measures to ensure that competent authorities can effectively investigate and gather information on NPOs. - Ensure effective domestic co-operation, co-ordination and information sharing to the extent possible among all levels of appropriate authorities or organizations that hold relevant information on NPOs of potential terrorist financing concern. - Ensure that full access to information on the administration and management of a particular NPO (including financial and programmatic information) may be obtained during the course of an investigation. - Develop and implement mechanisms for the prompt sharing of information among all relevant competent authorities in order to take preventative or investigative action when there is suspicion or reasonable grounds to suspect that a particular NPO is being exploited for terrorist financing purposes or is a front organization for terrorist fundraising. There should be investigative expertise and capability to examine those NPOs that are suspected of either being exploited by or actively supporting terrorist activity or terrorist organizations. There should also be mechanisms in place to allow for prompt investigative or preventative action against such NPOs. - Identify appropriate points of contact and procedures to respond to international requests for information regarding particular NPOs that are suspected of terrorist financing or other forms of terrorist support. ### 6. National and International Cooperation ### National cooperation and coordination (R.31 & 32) - Establish formal and informal mechanisms to support cooperation and coordination at policy and operational levels. Such mechanisms could include: - assigned duties to individuals for coordination, regularly scheduled meetings, and distribution of contact lists; and - the establishment of operational task forces at an early stage of investigations of criminal matters involving the proceeds of crime, money laundering and terrorist financing. - Mechanisms should be established or strengthened for consultation between competent authorities, the financial sector and other sectors (including all DNFBPs) on implementation of the AML/CFT laws, regulations, guidelines or other measures. - Conduct a review of the effectiveness of the cooperation and coordination systems for AML/CFT in the short term and thereafter on a regular basis. Statistical systems should be updated and maintained in line with the recommendations in Rec. 32. ### The Conventions and UN Special Resolutions (R.35 & SR.I) - Amend the AML Law and enact CFT legislation to fully cover the ML and TF offences and thus completely implement the Vienna, Palermo and Terrorist Financing Conventions. - Implementing the UNSC Resolutions by developing and implementing necessary procedures and mechanisms. ### Mutual Legal Assistance (R.36, 37, 38, SR.V & 32) - Established mechanism for determining the best venue for prosecution of defendants in cases that are subject to prosecution in more than one country. - Establish specific provision for applying provisional measures at the request of a foreign country for search, seizure and confiscation. - Consider establishing arrangements for coordinating seizure or confiscation actions with other countries. - Consider establishing asset forfeiture fund. - Consider establishing mechanism to share confiscated assets with other countries which participated in coordinated action. - Compile and maintain statistics on MLA requests received or made, relating to ML and FT, indicating the predicate offenses, including the nature of the request, its result, and the time of response. ### Extradition (R. 39, 37, SR.V & R.32) - Consider enhancing procedure to ensure that extradition requests are not unduly delayed and provide for alternative simplified procedures for extradition on a case-by-case basis. - Establish statistics regarding extradition requests indicating the number of extradition requests received, the proportion granted, or the average processing time for the requests. ### Other Forms of Cooperation (R. 40, SR.V & R.32) - To develop mechanisms to centralized exchange of information. - To strengthen the operative actions against money laundering at regional level, and consider the establishment of regional operational task forces at an early stage of investigations of criminal matters involving the proceeds of crime, money laundering and terrorist financing. - Conduct a review of the effectiveness of the cooperation and coordination systems for AML/CFT in the short term and thereafter on a regular basis. Statistical systems should be updated and maintained in line with the recommendations in Rec. 32. ### 7. Other Issues ### Other relevant AML/CFT measures or issues - The Paraguayan authorities are recommended: - to allot the necessary and sufficient financial and human resources for the AML national authorities; - to specialize the institution in charge of the police investigations; - to coordinate all the administrative and repressive AML authorities; - to develop adequate training schemes according to the functions of each institution; - to set up an adequate legislation and administration for seizing criminal assets; - to set up a reliable and complete statistical system of collection and follow-up of the statistical data, including in particular the AML-ATF typologies, the investigations in progress and finished the judgments as well as the seized assets. *Source: _cr09235 - 5. Legal Persons and (IMF content unit).* ### 1. Banks; ### 1. Banks; ### Scope of Obligors - The following natural persons and legal entities are designated as obligors under this chapter: - 1. Banks; - 2. Financial institutions; - 3. Insurance companies; - 4. Bureaux de change; - 5. Stockbroking companies and securities dealers (stock exchanges); - 6. Investment companies; - 7. Trust companies; - 8. Administrators of mutual investment and pension funds; - 9. Credit and consumer cooperatives; - 10. Gambling establishments; - 11. Real estate agencies; - 12. Non-governmental organizations and foundations; - 13. Pawn shops; and - 14. Any other natural person or legal entity regularly engaged in financial broking, trading in precious metals, stones and jewellery, works of art or antiques, or investing in stamps or coins. ### Client Identification and Recordkeeping (Articles 14–18) - Article 14. Obligation to identify clients: - Obligors shall record and check, by reliable means, the identity of their clients, whether regular or occasional, upon entering into business relations with them, as well as of all persons intending to carry out transactions. - Article 15. Method of identification: - Identification shall consist of establishing the actual identity, party stated as being represented, domicile and occupation or corporate purpose in the case of a legal entity. - Article 16. Identification of the principal of the client: - If there is reason to assume or certain knowledge that clients are not acting on their own behalf, the obligors shall obtain precise information in order to ascertain the identity of the persons on whose behalf they are acting. - Article 17. Obligation to record transactions: - The obligors shall identify and record clearly and precisely any transactions conducted by their clients. - Article 18. Obligation to preserve records: - The obligors shall keep for a minimum period of five years any documents, files and correspondence establishing or identifying the transactions. - The five-year period shall be computed from completion of the transaction or from the time when the account was closed. ### Suspicious Transaction Reporting (Article 19) - Article 19. Obligation to report suspicious transactions: - The obligors shall report any act or operation, regardless of the sums involved, if there is an indication or a suspicion that such act or operation is connected with an offence of money or property laundering. - The following shall, in particular, be considered suspicious transactions: - 1. Operations which are complex, unusual or large, or do not follow the pattern of habitual transactions; - 2. Operations which, although not large, occur periodically and with no reasonable legal or economic basis; - 3. Operations which by their nature or volume are not consistent with the credit or debit operations conducted by the clients in the light of their activities or previous business practice; and - 4. Operations which, with no justifiable cause, involve cash payments by a large number of persons. ### Confidentiality, Internal Controls, and Cooperation (Articles 20–22) - Article 20. Duty of confidentiality: - Obligors shall not reveal, either to the client or to third parties, any steps taken or communications effected by them in compliance with the obligations set out in this Law and the regulations issued hereunder. - Article 21. Duty to maintain internal audit procedures: - Obligors, whether or not legal entities, shall establish appropriate procedures for the internal auditing of information in order to discover, forestall and prevent the execution of any operations for the purpose of money or property laundering. - The obligors shall notify their directors, managers, and employees and impose on them the duty to comply with the provisions of this Law, and with the internal procedures and regulations. - Article 22. Duty to cooperate: - Obligors shall provide all information relating to the matters covered by this Law that may be required by the enforcement authority hereby established, in which case provisions concerning bank secrecy shall not apply. - The duty of bank secrecy shall be observed by the enforcement authorities; unless the criminal court judge requests such information, and then only in relation to a specific pre-trial investigation or lawsuit. ### Special Obligations for Gambling Establishments (Article 23) - Article 23. Special obligations: - Obligors who operate gambling establishments, particularly casinos, shall comply with the provisions of article 19 if: - 1. Payments are made to clients by cheque in exchange for gambling tokens; - 2. The transfer of funds to a bank account or any other payment procedure not involving cash is authorized or ordered; and - 3. Certificates are issued of the client's winnings. ### Administrative Penalties and Gradation (Articles 24–25) - Article 24. Administrative penalties for legal entities — failure to comply shall be punished by: - 1. A caution; - 2. A public reprimand; - 3. A fine of between 50 (fifty) and 100 (one hundred) per cent of the amount of the transaction in the course of which the offence was committed; and - 4. Temporary suspension for between thirty and one hundred and eighty days. - Article 25. Gradation of punishment — penalties shall be graduated taking account of: - 1. The degree of responsibility or wilfulness in the commission of the acts; - 2. The prior conduct of the obligor with regard to the requirements set out in this Law; - 3. The income derived from the offences; - 4. Voluntary efforts to mitigate the effects of the offence; and - 5. The seriousness of the committed offence, under the terms of this Law. ### Enforcement Authority (Chapter IV, Articles 26–34) - Article 26. Secretariat for the Prevention of Money and Property Laundering: - A secretariat for the prevention of money and property laundering, to be attached to the Office of the President of the Republic, shall be established as the authority responsible for enforcing the present Law. - Article 27. Composition — the Secretariat shall be made up of: - 1. The Minister of Industry and Trade, who shall preside over the Secretariat; - 2. A member of the board of directors of the Central Bank of Paraguay, nominated by the board, who shall deputize for the president if the latter is absent or indisposed; - 3. A member of the National Securities Commission, nominated by the Commission; - 4. The Executive Secretary of the National Drug Control Secretariat (SENAD); - 5. The Superintendent of Banks; and - 6. The Commander of the National Police Force. - Article 28. Duties of the Secretariat — functions include: - 1. Issuing administrative regulations to be observed by the obligors with a view to preventing, detecting and reporting operations to launder money or property; - 2. Obtaining from public institutions and the obligors all information that may be related to money laundering; - 3. Examining information received in order to establish suspicious transactions and operations or patterns of money or property laundering; - 4. Keeping statistical records of the movement of property connected with money or property laundering; - 5. Ordering the investigation of any transactions that give rise to a reasonable presumption of an offence of money or property laundering; - 6. Referring to the Office of the Public Prosecutor any cases in which circumstantial evidence arises of the commission of an offence of money or property laundering so that the appropriate judicial investigation may be initiated; and - 7. Reporting to the bodies and institutions responsible for supervising the obligors any detected cases of administrative infringements of the law or the regulations, for the purposes of their investigation and punishment, as appropriate. - Article 29. Administrative infringements: - Administrative infringements of the law and the regulations relating to the offence of money or property laundering may be regulated, investigated and penalized only through the institutions responsible for the supervision and monitoring of the obligors, according to their nature. - The procedure shall be as established in the relevant laws governing each obligor. - Article 30. Financial analysis unit: - The Secretariat shall administer a financial analysis unit, to be composed of professional and technical staff skilled in finance and data processing, for the purpose of evaluating and analysing the information received by the Secretariat. - Article 31. Economic Crime Investigation Unit: - The investigation referred to in subparagraph 5 of article 28 shall be carried out by the Economic Crime Investigation Unit, attached to SENAD. - Article 32. Duty of professional secrecy: - All individuals working for the Secretariat and anyone obtaining from it information of a confidential nature or having knowledge of its activities or of particulars of a similar nature shall be obliged to maintain professional secrecy. Failure to comply with this obligation shall give rise to liability as stipulated by law. - Article 33. International cooperation: - Pursuant to international agreements and conventions, the Secretariat shall assist in the exchange of information, directly or through international agencies, with the enforcement authorities of other States exercising similar jurisdiction, which shall also be subject to the duty of confidentiality. - The relevance of aspects relating to sovereignty and the protection of national interests shall be evaluated when responding to requests for information from other States. - Article 34. Exemption from liability: - Information furnished to the Secretariat in compliance with this Law and regulations shall not constitute a breach of secrecy or confidentiality, and obligors, their managers, directors and officers shall be exempt from civil, criminal and administrative liability, regardless of the outcome of the investigation, except in the event of their complicity in the offence under investigation. ### Final Chapter — Judicial Measures and Cooperation (Articles 35–39) - Article 35. Criminal jurisdiction: - If the offence established under the present Law was committed on Paraguayan territory, the courts of the Republic of Paraguay shall have jurisdiction, without prejudice to any investigations that may be or have to be conducted under foreign jurisdiction in connection with related offences, and whether or not the offences that gave rise to the proceeds from laundering took place in a different territorial jurisdiction. - Article 36. Precautionary measures: - The judge may, ex officio or at the request of a party, upon the commencement or at any stage of the proceedings, order the provisional attachment or distraint of the property or any other precautionary measure for the purpose of safeguarding the property, proceeds or instrumentalities connected with the offence established in article 3 of this Law. - Article 37. Final disposal of the property, proceeds and instrumentalities: - Property, proceeds and instrumentalities which do not have to be destroyed or are dangerous to the population, shall be transferred, once the final judgment becomes enforceable, to organizations specializing in the fight against illicit trafficking in and the control and prevention of the abuse of narcotic drugs and psychotropic substances, for the purposes of rehabilitation and social reintegration of addicts. - The judge may rule that part of the proceeds from the property be transferred to another country that has participated in their seizure, provided that international agreements governing the matter exist. - Article 38. Judicial cooperation: - The competent judge shall cooperate with his counterparts in other States in the processing of warrants of attachment and other precautionary measures, as provided for in our procedural law, for the purpose of identifying the offender and locating the property, proceeds and instrumentalities connected with the offence established in Article 3 of this Law, to which end he shall grant all requests made by letters rogatory received from abroad. - Article 39. To be communicated to the Executive: - Done in the Chamber of Senators on the twenty-fourth day of the month of October of the year one thousand nine hundred and ninety-six, and in the Chamber of Deputies, the Law being enacted on the third day of the month of December of the year one thousand nine hundred and ninety-six. *Source: _cr09235 - 1. Banks;* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09235.pdf_