Scope
On September 1, 2021, SEPRELAD issued Resolution 314, establishing Regulations on the Prevention of Money Laundering and Financing of Terrorism for natural and legal persons incorporated or domiciled in Paraguay who carry out activities associated with virtual assets, such as mining or its equivalent, exchange, transfer, storage and administration, or participation and provision of financial services related to them (the "Regulations").
AL/TF Prevention System
In this way, natural and legal persons incorporated or domiciled in Paraguay who carry out activities associated with virtual assets (the "Obliged Subjects"), must implement a comprehensive AL/TF prevention system, with policies that include compliance and risk management components, and procedures to identify, evaluate, mitigate and monitor the AL/TF risks to which they are exposed.
AL/TF Risk Self-Assessment
In turn, Obliged Subjects must also develop and implement methodologies and procedures to identify, evaluate and mitigate the risks of AL/TF to which they are exposed, taking into account the results they obtain through a self-assessment with a risk matrix elaborated for this purpose, as well as the risks detailed in the National Risk Assessment of SEPRELAD.
In the evaluation process, the following factors should at least be considered: clients served; the services provided; its distribution channels; the geographical area where they operate; and the technology they use for this purpose.
Risk assessment of new products and/or services, or of venturing into new geographical areas
Obliged Subjects have to evaluate the level of exposure to the risks of AL/TF associated with the new products and/or services that they may be prepared to offer, or when they implement new technologies in the processes of commercialization and/or transfer of the products and/or services offered, or when a change is made in an existing product, that changes their level of exposure to LA/FT risk, or when they venture into new geographical areas. The evaluation must be made before the factor that triggers its demand takes place and the result must be available to SEPRELAD.
Compliance Officer
Obliged Subjects must have a Compliance Officer with autonomy and independence in the exercise of their functions, with sufficient resources allocated for this purpose, who must respond directly to the highest authority of the entity.
AL/TF Prevention Manual and Code of Ethics
Obliged Subjects must compile all their AL/TF prevention policies and applicable legal standards in accordance with the Regulations in a manual.
In turn, Obliged Subjects must have a Code of Ethics and Conduct, approved by the highest authority, establishing the ethical principles that they must follow.
Audits
Obliged Subjects must also make an annual internal evaluation of the prevention procedures of AL/TF, resulting in a report with the verifications carried out and the conclusions reached within the framework of the current provisions, which must be brought to the attention of SEPRELAD within 90 days of the end of the year.
Obliged Subjects must also submit their AL/TF prevention procedures to an external audit, and the respective report must be sent to SEPRELAD within 180 days after the close of each audited year.
Customer Knowledge
Obligated Subjects must implement KYC procedures of their clients through a set of rules and measures to obtain sufficient information to know the identity of their clients and their final beneficiaries, understand the purpose of the relationship and operations, establish their transactional profile and verify that their operations are compatible with said profile.
If in the context of a transaction the assessment determines that the risks of AL/TF are low, an abbreviated KYC process can be applied, with lower documentary requirements. If the assessment determines that the risks in question are high, an expanded KYC process should be applied, increasing the frequency of controls, applying additional verification measures, and performing continuous and constant monitoring of operations.
If the KYC procedure cannot be carried out satisfactorily, the relationships should not be initiated and the relationships already initiated should be terminated.
Records
Obligated Subjects must keep an adequate record of all their transactions, regardless of their amount, without exception. Records must be kept for five years.
Reports
The Regulations require that any suspicious transaction be reported to SEPRELAD. It also requires Obliged Subjects to submit "negative reports" to SEPRELAD if they do not report suspicious transactions within three months.
Sanctions
Under Law 1.015/97, breaches of the Regulations may result in administrative sanctions against legal persons and natural persons. The natural persons involved, whether they are Obliged Subjects or collaborators of these, may be sanctioned by SEPRELAD with: warning; public reprimand; fine of up to 500 minimum wages (approximately US$ 162,000); fine of between 1% and 10% of the amount of the operation involved; removal from office with disqualification from three to 10 years for the exercise of management and administrative positions; the cancellation of authorizations held by them; and for partners with managerial positions, the suspension of dividend distribution for up to three years. On the other hand, legal persons can be sanctioned with: warning; public reprimand; fine of up to 5,000 minimum wages (approximately US$ 1,620,000); fine of up to 50% of the amount of the operation involved; or suspension, closure or disqualification from operating.