The US Department of State announced on 24 August the imposition of financial sanctions on three individuals and five of their companies operating in Paraguay for being part of a money laundering network in the tri-border area (“TBA”) of Paraguay, Argentina and Brazil. Shortly afterwards, the National Anti-Drug Secretariat of Paraguay announced the arrest of Kassem Mohamad Hijazi, considered the leader of the organisation, in Ciudad del Este.
A senior trade analyst in Asunción told us, “Money laundering has always been a problem in Paraguay, but global awareness of the matter has made it more evident recently.”
“Money laundering has always been a problem in Paraguay, but global awareness of the matter has made it more evident recently.”
Senior trade analyst, Paraguay
The International Narcotics Control Strategy Report prepared by the US State Department categorised Paraguay as a jurisdiction of primary concern in respect of money laundering and financial crimes. In this context, the TBA is considered home to a multi-billion-dollar illicit goods trade, from drugs to arms. The report highlights that illicit businesses in the TBA often provide financial support to terrorist organisations worldwide.
One of the main concerns emphasised by US authorities in Paraguay is the level of public corruption although it has recently applauded the Paraguayan government’s efforts to reduce Paraguay’s financial system as a vehicle for money laundering. The government, led by President Mario Ando Benítez, has focused on eliminating bureaucratic inefficiencies and enhancing interagency coordination to combat financial crime in the country.
An experienced financial analyst in Paraguay confirmed the Paraguayan government is working closely with the US authorities, “The National Anti-Drug Secretariat of Paraguay (“SEPRELAD”), which de facto operates as the government’s financial intelligence unit, is responsible for managing the exchange of information with the FinCen of the US Department of Treasury. Paraguay has clearly stepped up its efforts to curb financial crime but more needs to be done.”
“Paraguay has clearly stepped up its efforts to curb financial crime but more needs to be done.”
Financial analyst, Paraguay
In turn, our sources confirmed that the US has welcomed Paraguay’s efforts, “Victoria Nuland (Under Secretary of State for Political Affairs in the US) visited Asunción last month and insisted that the US would continue to support Paraguay on security issues and she mentioned money laundering as a specific problem.”
Moreover, in 2020, Paraguay’s legislative body passed two anti-money laundering laws while the country’s Supreme Court formalised procedures outlining the scope and functions of new appeals courts specialised in financial crimes. However, even if money-laundering arrests have significantly increased, the number of convictions remains low and the sentences are seen as too lenient. The trade analyst gave one example, “The US would like to see harsher sentences for money laundering crimes. For instance, a former Colorado Party senator, Óscar González, was recently given a seven year prison sentence. He was found guilty of several charges, including illicit enrichment, but he was absolved for money laundering. It’s this type of thing which hinders progress.”
A highly regarded authority on financial crime risk in Latin America summarised, “Paraguay’s anti-money laundering efforts, both nationally and internationally, should be applauded, but the country is still going through a cultural change in terms of implementing efficient measures to tackle financial crime.”