The Paraguayan government recently enacted the last law of a package of ten laws that it has been putting into effect since the beginning of October 2019, as part of its strategy to approve the evaluations of compliance with the 40 Recommendations of the Financial Action Task Force (FATF), which began on November 18 with the arrival in the country of a special delegation from the FATF for that purpose.
The following are general comments on each of the new laws:
1. Law No. 6,431/2019 that Creates the Special Procedure for the Application of Confiscation, Special Confiscation, Deprivation of Benefits and Profits and Autonomous Confiscation. With it, Law No. 4,575/2012, which established a special procedure for the application of confiscation, is repealed, replacing it with one that allows the judge a wider scope of application with a view to making it more effective, and thereby curbing the operations of organized crime by hitting it economically. Its main novelty is the regulation of “autonomous confiscation”, which allows it to be carried out outside the framework of an ordinary criminal proceeding, in cases where one has not already been initiated.
2. Law No. 6.446/19 which creates the Administrative Registry of Legal Persons and Structures and the Administrative Registry of Beneficial Owners of Paraguay. The law creates two registries that will be under the responsibility of the Ministry of Finance: an Administrative Registry in which all legal persons of Paraguay as well as trusts and investment funds must be registered; and a single registry of all natural persons that directly or indirectly have significant participation, benefit or control over legal persons of Paraguay. This law unifies the timely, accurate and necessary information of the beneficial owners, as they were previously scattered in many registries.
3. Law No. 6.430/19 that Prevents, Criminalizes and Punishes the Punishable Acts of Transnational Bribery and Transnational Bribery. This law adapts the criminal legislation to the provisions of the UN and OAS Conventions against Corruption by extending the effects of the existing articles on bribery and bribery in the Paraguayan Criminal Code to officials of foreign states and international organizations.
4. Law No. 6.419/2019 that Regulates the Immobilization of Financial Assets of Persons Linked to Terrorism and the Proliferation of Weapons of Mass Destruction and the Procedures for Dissemination, Inclusion and Exclusion in Sanctions Lists Prepared in Pursuance of the Resolutions of the United Nations Security Council. It obliges all financial intermediation entities and other companies indicated by law to proceed to immobilize, without notice to the affected party, all funds or assets of which they are aware that may be linked to terrorism, financing of weapons of mass destruction, the sanctions lists of the UN Security Council resolutions or requests to immobilize funds for the same reasons coming from third countries, which circulate through them. SEPRELAD must act in the same way.
On the other hand, the law establishes the procedure for the receipt and dissemination of the lists of persons sanctioned by the resolutions of the United Nations Security Council to public and private entities obliged to cooperate with the pursuit of terrorism, the financing of nuclear weapons and money laundering; as well as the procedure and criteria for the inclusion and exclusion of individuals and legal entities in such lists.
5. Law No. 6.379/2019 that Creates Jurisdiction in Economic Crimes and Organized Crime in the Jurisdiction of the Criminal Court. Two new classes of specialized jurisdiction are created for guarantee, execution, and sentencing courts, and appeal courts of the criminal jurisdiction.
One of them is the competence in economic crimes and corruption, and includes all lawsuits on money laundering, on punishable acts against property, against patrimonial rights, against the exercise of public functions, on tax evasion and fraudulent acquisition of investments, as well as against customs collection and against the securities market; provided that the value of the lawsuits exceeds the amount indicated for each case.
The other competence is in drug trafficking and organized crime, and includes all trials on terrorism, drug trafficking, human trafficking, illicit manufacturing and trafficking of firearms.
6. Law No. 6,452/2019 which amends several provisions of Law No. 1160/1997 “Criminal Code” and its amendment Law No. 3,440/2008. This new law modifies the articles on special confiscation of substitute value, fraudulent promotion of investments and asset laundering of the criminal code; at the same time it adds three new criminal offenses, market manipulation, private bribery and private bribery.
Thereafter, the special confiscation may be substituted by another good of the same value as the thing obtained from a punishable act when a special confiscation order cannot be executed. Regarding money laundering, the punishable acts that may constitute it if an attempt is made to disguise the origin of the proceeds obtained therefrom are detailed with precision; and as a novelty, the express clarification that a money laundering proceeding may be initiated without a prior conviction for the punishable act that generated the goods or proceeds to be laundered.
With regard to the new criminal offenses, market manipulation condemns certain bad faith maneuvers to take personal advantage to the detriment of third parties in the securities markets; and the new criminal offenses of bribery and private bribery extend the existing provisions on bribery and bribery to private legal entities when this is done to obtain benefits that unfairly harm other competitors in the market.
7. Law 6399/2019 which amends Articles 3° and 4° of Law No. 5,895/2017 “Which establishes transparency rules in the regime of companies incorporated by shares” and establishes transitory measures. It extends the deadline given by Law No. 5895/2017 for all corporations in Paraguay and their shareholders to fully exchange their bearer shares for registered shares, which shall be set by the Ministry of Finance and may not exceed six months from December 10, 2019. It is also relevant to note that new consequences are added for the non-compliance with such term, such as, for example, if after six months from the expiration of such term the exchange of shares is not carried out as established by law, the company must be dissolved and liquidated immediately.
8. Law No. 6396/2019 amending Article 46 of Law No. 5876/17 “On the administration of seized and forfeited assets”. It establishes the form of distribution of the proceeds of seized and forfeited assets. 20% is intended to cover the expenses generated by the seizure or forfeiture together with its maintenance costs; 30% is to be distributed by allocating 5% to each of the following institutions: the Public Prosecutor's Office, the National Center for Addiction Control of the Ministry of Public Health and Social Welfare, SEPRELAD, SENAD, SENABICO (an agency specialized in the administration of seized and forfeited assets), and the National Police. Fifty percent is allocated to projects for the rehabilitation of addicts and social reintegration, and projects for the prevention of money laundering, organized crime, financing of terrorism, and financing of the proliferation of weapons of mass destruction and drug trafficking.
9. Law 6408/2019 which amends Article 3 of Law No. 4024/2010 “That Punishes the Punishable Acts of Terrorism, Terrorist Association and Financing of Terrorism”. It broadens the range of application of the criminal type of financing of terrorism and financing of the proliferation of weapons of mass destruction, while increasing its penalty for the case in which the money used for such financing also comes from punishable acts.
10. Law No. 1.015/97 “That Prevents and Represses the Illicit Acts Intended for the Legitimization of Money or Goods” and its amendment Law No. 3.783/09”. This new law introduces changes of great importance, which for ease of understanding can be classified as follows: 1) New actions, obligations and procedures to prevent money laundering and financing of terrorism; 2) Modification of the nature and organic composition of SEPRELAD; 3) Restructuring of administrative sanctions and procedural issues.
Thus, ten of the thirteen bills submitted by the Paraguayan executive with a view to bringing the country's regulations up to date with FATF requirements were enacted. With respect to the other three bills, one of them was unified with the bill of Law No. 6419/29, and was included in said law; another one, which sought to create a Financial Intelligence Secretariat to replace SEPRELAD, was withdrawn; and the last one, which sought to repeal Art. 3 of Law No. 4673, modifying the Income Tax on Personal Services, did not obtain the necessary support in Congress to be approved.
With these laws, important measures are being taken in order to face the tests in question. The GAFILAT evaluations will last about thirteen months and if Paraguay does not pass, due to insufficient actions taken since 2012, it will be granted one year, until December 2021, to correct the problems found; otherwise it will be included again in the Gray List, as in 2008.
Should you require further information, please do not hesitate to contact Carlos Vouga (cvouga@vouga.com.py) or Rodrigo Fernandez (rfernandez@vouga.com.py).
