US embassy cable - 05ASUNCION1345

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 
-------------------------- 
 
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