PARAGUAY: 2008 COUNTRY REPORT ON TERRORISM

UNCLAS ASUNCION 000868

SIPDIS

S/CT RSHORE, WHA/BSC MDASCHBACH

E.O. 12958: N/A
TAGS: AEMR ASEC EFIN KCRM KHSL PETER PA
SUBJECT: PARAGUAY: 2008 COUNTRY REPORT ON TERRORISM

REF: SECSTATE 120019

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Tri-Border Area (Argentina, Brazil, and Paraguay)
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1. The Governments of the Tri-Border Area (TBA),Argentina,
Brazil, and Paraguay, have long been concerned with arms and
drugs smuggling, document fraud, money laundering, and the
manufacture and movement of contraband goods through this
region. In the early 1990s, they established a mechanism to
address these illicit activities. In 2002, at their
invitation, the United States joined them in what became the
"3 1 Group on Tri-Border Area Security" to improve the
capabilities of the three to address cross-border crime and
thwart money laundering and potential terrorist financing
activities. The United States remained concerned that
Hizballah and HAMAS sympathizers were raising funds in the
TBA by participating in illicit activities and soliciting
donations from sympathizers within the sizable Muslim
communities in the region. There was no corroborated
information, however, that these or other Islamic extremist
groups had an operational presence on the Paraguayan side of
the TBA.

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Paraguay
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2. In a historic transition, Paraguay's newly-elected
government of President Fernando Lugo assumed office August

15. Paraguay's efforts continue to be hampered by a weak,
politicized judicial system, a police force widely viewed as
corrupt and ineffective, and a lack of strong anti-money
laundering and terrosit-financing legislation. On June 25,
Paraguay's Congress took the final measure to pass improved
anti-money laundering legislation as part of a major overhaul
of the penal code; this statute should drastically improve
Paraguay's ability to effectively obstruct and prosecute
money laundering once the law goes into full effect in July

2009. The Congress, Legal Reform Commission also drafted a
criminal procedural code reform bill that would facilitate
prosecution of money laundering and terrorism and modernize
Paraguay's criminal justice system. The bill, however, has
been &mothballed8 in the Commission for more than one year.
Terrorist-financing legislation will be critical to keep
Paraguay current with its international obligations. Efforts
to include the statutes in the new penal code failed.
Paraguay's Secretariat for the Prevention of Money Laundering
(SEPRELAD) is working on a revised draft of the
terrorist-financing bill to present to Congress in early

2009. Using its experience in the development of a similar
law, Brazil is providing technical assistance to SEPRELAD.
The Egmont Group notified Paraguay about the need to comply
with its international commitments regarding
terrorist-financing legislation. If Paraguay does not show
reasonable progress in enacting such a law it could face
expulsion in 2009.


3. Paraguay did not exercise effective immigration or customs
controls at its porous borders. Efforts to address illicit
activity occurring in the Tri-Border Area were uneven due to
a lack of resources and, more principally, corruption within
Customs, the police, and the judicial sector. The United
States continues to work closely with SEPRELAD, which made
several in-roads into undermining money laundering in
Paraguay, including December raids on illegal exchange
houses. Though Paraguay long had been in arrears with the
Financial Action Task Force of Latin America (GAFISUD),it
fully paid its outstanding dues in mid-2008.


4. A Paraguayan court dismissed the tax evasion and money
laundering charges against Kassem Hijazi, a suspected
Hizballah money launderer, in October 2008 after significant
indications of judicial and political interference with the
prosecution of what had been the largest money-laundering
case in Paraguay's history. Suspected Hizballah fundraiser
Hatem Ahmad Barakat was convicted and sentenced on tax
evasion charges in April 2006, but he continues to appeal his
three-year sentence while on bail.


5. The United States assisted Paraguay with training for
judges, prosecutors, and police in terrorist financing;
counterterrorism awareness; weapons of mass destruction; law
enforcement capacity building; and investigating, preventing,
and prosecuting individuals involved in money laundering.
Under the Millennium Challenge Corporation's Threshold
Program, the U.S. assisted Paraguay with training for judges,
prosecutors, and police in investigation techniques that are
critical to money laundering and terrorist finance cases.
Paraguay submitted a proposal for a second phase of the
Threshold Program in November, which will focus in part on
police corruption.


6. Embassy Asuncion CT contacts are Joan Shaker
(jpshaker@state.gov) and Luis Hernandez
(hernandezlj@state.gov)

Please visit us at http://www.state.sgov.gov/p/wha/asuncion

FITZPATRICK