Reform To Bank Law To Strengthen Compliance

Author:Mr Federico Silva and Sally Romero

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...

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