On December 19, 2016, the Law of Modernization and Strengthening of the Norms that Regulate the Functioning of the Paraguayan Financial System (Law 5.787/16) was promulgated, which modifies the previous Bank 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 it's not fully satisfied with the suitability of the project, the profile of the directors, administrators or auditors, taking into account the profile of the shareholders and origin of the capital funds.
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: (a) been convicted for intentional crimes; (b) been sanctioned by local or international financial regulators for poor professional performance; (c) a conflict of interest that could affect the proper functioning of the entity. The Banking Superintendent ("BS") of the BCP may also demand that individuals that incur in one of these infractions while serving in one of those roles to step down from their position.
4) Makes the president and board of directors of financial entities responsible for: (a) approving operations and adopting agreements that conflict with applicable laws; (b) failing to implement efficient policies and procedures for risk management and corporate governance; (c) noncompliance with BCP guidance; (d) failure to provide timely information to the SB in the correct format; (e) failing to respond to communications from the SB or BCP; (f) failure to adopt measures needed to guarantee adequate supervision of an external auditor; (g) failure to comply with applicable laws or regulations. The BCP may issue sanctions for such conduct. 5) Lifting of the bank secrecy when information is requested by: (a) BCP and its supervision branches performing their legal faculties; (b) judicial authorities through resolutions issued in processes where the affected person is a party, taking appropriate measures to preserve confidentiality; (c) the Republic's General Comptroller performing his functions, as long as it is referred to a specific person, there is a verification or audit on the same and it is formally requested; (d) the head of the Taxation Subsecretariat or the National Customs Direction performing their functions, as long it is referred to a specific person, there is a verification on the same and it is formally requested; (e) the Attorney General and public prosecutors performing their functions; (f) the Secretariat on Prevention of Money and Assets Laundering (SEPRELAD) performing its functions; and (g) financial entities exchanging information among them, preserving confidentiality.
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