Within the framework of the Paraguayan State's Strategic Plan to combat Money Laundering, Financing of Terrorism and the Proliferation of Weapons of Mass Destruction, approved by Decree No. 11,200/2013, and in order to bring Paraguayan regulation in this matter in line with the international standards established by the 40 Recommendations of the Financial Action Task Force (“FATF”), the Secretariat for the Prevention of Money or Asset Laundering (“SEPRELAD”) issued on March 15, 2019, Resolution No. 70, approving the “Regulations for the Prevention of Money Laundering and Financing of Terrorism based on a Risk Management System for Banks and Financial Institutions supervised by the Superintendency of Banks of the Central Bank of Paraguay” (the “Resolution No. 70”) and Resolution No. 71 approving the “Regulations for the Prevention of Money Laundering and Financing of Terrorism based on a Risk Management System for Regulated Entities supervised by the Superintendence of Insurance of the Central Bank of Paraguay” (the “Resolution No. 71” and jointly with Resolution No. 70, the “Resolutions”).

Although the Resolutions are addressed to different regulated entities, on the one hand Banks and Finance Companies (in the case of Resolution No. 70) and, on the other hand, Insurance Companies (in the case of Resolution No. 71) (the Banks, Finance Companies and Insurance Companies, jointly the “Regulated Entities”); the object of the Resolutions is the same and will affect the current processes and controls carried out by the Regulated Entities regarding Money Laundering and Financing of Terrorism, which must be adapted to these new Resolutions.

The regulations approved by both Resolutions establish the structure and responsibilities for the different levels of authorities of the Regulated Entities (responsibility of the board of directors, management, insurance agents and brokers, compliance officer, committees, etc.) and the obligations of the Regulated Entities in the matter and the guidelines to be followed by the internal rules of the Regulated Entities (such as the prevention manual and the code of conduct).

The Resolutions specify that the Regulated Entities must develop a risk rating system to evaluate the risk of their clients. Likewise, the Resolutions provide for the obligation to prepare reports related to the evaluation of the level of risk exposure of the new products and/or services offered by the Regulated Entities; the need to perform a risk evaluation in case of operating in new geographic areas is also established.

Another issue addressed by the Resolutions, regarding the treatment of risks, are the obligations at the time of performing the know your customer process, commonly known as “KYC” (Know your Customer). Among the important points in this aspect, firstly, it differentiates and defines who are considered customers, users and suppliers. Secondly, the different stages that must be followed when performing due diligence (such as the identification, verification and monitoring stages). Thirdly, it divides the due diligence obligations according to four regimes (establishing the persons subject to each regime and the obligations of the regulated entities when one or the other regime applies); a general regime, a simplified regime, an expanded regime and a special regime for occasional customers performing foreign exchange operations (this regime is only applicable to banks and finance companies in Resolution No. 70).

The Resolutions establish administrative measures to be followed by the Regulated Entities in relation to market knowledge; due diligence policies in the knowledge of their directors, managers and employees, suppliers, intermediaries, etc.; establish training programs; internal manuals for the development and implementation of systems and procedures for the communication of the necessary information; processes for the detection and reporting of suspicious transactions; and the performance of internal and external audits in order to evaluate compliance with the established prevention policies and procedures.