PARAGUAY: ANTI-MONEY LAUNDERING SECRETARIAT

UNCLAS SECTION 01 OF 02 ASUNCION 001345

SIPDIS

STATE FOR WHA/BSC, S/CT
NSC FOR SUE CRONIN
SOUTHCOM FOR POLAD DAN JOHNSON
TREASURY FOR OTA WARFIELD, VAN KOCH, MILLAR

E.O. 12958: N/A
TAGS: PGOV KCRM KTFN ETTC PA
SUBJECT: PARAGUAY: ANTI-MONEY LAUNDERING SECRETARIAT
PRESENTS REGULATIONS FOR BANKING INDUSTRY


1. SUMMARY: On October 11, Paraguay,s Anti-Money Laundering
Secretariat (SEPRELAD) presented its rules and procedures for

SIPDIS
banks and other monetary institutions subject to reporting
requirements under the Superintendent of Banks. SEPRELAD,s
statutory powers provided by the current anti-money
laundering law 1015 of 1996, allow it to issue regulations
for Paraguay,s banking industry. These new regulations
spell out that all banks are now required to have a
designated compliance officer, to use "due-diligence," and to
exert "know your customer" policies. In addition, the
regulations apply money-laundering controls to non-bank
financial institutions, such as money exchange houses.
Passage of the new anti-money laundering law currently before
congress would allow SEPRELAD to expand its regulations, to
include the prohibition of the exchange of non-monetary
instruments through casinos, car dealerships, and pawnshops.
and would provide authorities with the resources and
mechanisms essential for proper investigation and law
enforcement. END SUMMARY.

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Regulations a Step Forward
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2. On October 11, Paraguay,s Anti-Money Laundering
Secretariat (SEPRELAD) working council passed a new set of

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rules and regulations for banks and monetary institutions
that report to the Superintendent of Banks. SEPRELAD,s
Director, Carlos Yegros, presented the new set of regulations
to Embassy officials on October 12. In his outline of the
new rules, Yegros highlighted that under existing anti-money
laundering law 1015 of 1996, SEPRELAD has the authority to
issue regulations for Paraguay,s banking industry aimed at
improving Paraguay,s ability to combat money laundering and
terrorist financing. In addition, the regulations apply
money laundering controls to non-bank financial institutions,
such as money exchange houses. The new regulations include
the following provisions:

-- designation of a compliance officer within each banking
institution to ensure conformity to the regulations;

-- familiarization of the new regulations and training for
banking personnel;

-- establishment of an employee code of conduct;

-- implementation of a program of internal hearing at each
institution to monitor prevention, detection, and reporting
controls;

-- establishment of "know your customer" policies;

-- establishment of "due-diligence" provisions;

-- creation of banking client profiles;

-- registration of all transactions;

-- and the filing of suspicious activity reports.


3. The establishment of these regulations will bring
Paraguay,s regulatory regime closer to international
anti-money laundering standards. While some individual banks
in Paraguay, such as Interbanco, had previously met
international anti-money laundering controls, there were no
regulations set forth for banking compliance. These policies
are the result of a yearlong effort to codify existing
procedures of some banks and monetary institutions and to
urge those not in compliance to begin implementing these
procedures. This year, SEPRELAD has made efforts to improve
Paraguay,s anti-money laundering enforcement by furthering
its capabilities, infrastructure, and cooperation with the
banking industry. These new regulations will increase
cooperation with the Risk Control Division of the
Superintendent of Banks, outlined as a priority in the
Memorandum of Understanding signed between both organizations
earlier this year.

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Further Progress Awaits Passage of New Law
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4. With the passage of a new law written to improve the
effectiveness of Paraguay,s anti-money laundering regime,
drafted in late 2003 and formally introduced to Congress in
May 2004, SEPRELAD could expand its regulations to include
the prohibition of the exchange of non-monetary instruments.
Oftentimes in Paraguay, suspected money launderers have
traded non-monetary instruments through pawnshops, car
dealerships, casinos, etc. to launder funds. The new
anti-money laundering law would also establish money
laundering as an autonomous crime punishable by a prison term
of five to 20 years. In addition, the new law would
establish predicate offenses as any crimes that are
punishable by a prison term exceeding six months, and
specifically criminalize money laundering tied to the
financing of terrorist groups or acts.


5. Comment: To date no individuals have been convicted of
money laundering. Instead, those implicated in money
laundering are prosecuted for lesser crimes like tax evasion.
Adoption and implementation of the new money laundering law
will provide authorities with the legal framework and
attendant law enforcement tools essential for proper
investigation and prosecution of money laundering cases.
KEANE