The Law on Modernization and Strengthening of Paraguayan Financial System Regulations (Law 5,787/16) modified the previous banking law in the following key ways:
1) Initial vetting for establishment of financial entities. The Paraguayan Central Bank (“BCP”) may reject applications to establish banks and other financial institutions when it is not fully satisfied with the suitability of the project or the profile of the directors, administrators or auditors, taking into account the profile of the shareholders and origin of its capital funding.
2) Transparency regarding final beneficiaries. The BCP may request information regarding any shareholder of a financial entity, up to the final beneficiary of a corporate entity shareholder.
3) Prohibition on serving as president, director, manager, accountant or auditor of a financial entity for those who: have been convicted of intentional crimes, have been sanctioned by local or international financial regulators for poor professional performance, or have a conflict of interest that could affect the entity’s proper functioning. The BCP’s Superintendent of Banking (“SB”) may also demand that individuals who incur any of these infractions while serving in one of those roles step down from their position.
4) It makes the president and board of directors of financial entities liable for: approving operations and adopting agreements that conflict with applicable laws, failing to implement efficient policies and procedures for risk management and corporate governance, noncompliance with BCP instructions, failure to provide timely information to the SB in the correct format, failure to respond to communications from the SB or BC, failure to adopt measures needed to guarantee adequate supervision by an external auditor, failure to comply with applicable laws or regulations. The BCP may issue sanctions for such conduct.
5) Lifting of bank secrecy when information is requested by: BCP and its supervisory authorities in the exercise of their legal faculties, judicial authorities through rulings issued in processes where the affected person is a party, taking appropriate measures to preserve confidentiality, the Republic’s General Comptroller in the exercise of his or her functions, as long as it is in reference to a specific person, in the course of an inspection or audit of same, and it is formally requested, the head of the Taxation Under-secretariat or the National Customs Office in the exercise of their functions, as long as it is in reference to a specific person, in the course of a an inspection of same, and it is formally requested, the Attorney General and public prosecutors in the exercise of their functions, the Secretariat on Prevention of Money and Asset Laundering (SEPRELAD) in the exercise of its functions, and financial entities exchanging information with one another, while preserving confidentiality.