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Paraguay: Anti-Laundering Legislation - Implications of Law 6.446 / 19 

by Perla Alderete

Published: January, 2020

Submission: January, 2020

 



As part of Paraguay's commitment to the International Financial Action Task Force of Latin America (GAFILAT), in November 2019, the Executive Power enacted Law No. 6446 that creates a “General Directorate of People and Legal Structures and Final Beneficiaries ” Under the Ministry of Finance (hereinafter the Law), which will have the following functions: 
  • Acting as the authority of application, replacing the Treasury Law, of Law No. 5895/2017 “Establishing Transparency Rules in the Regime of Companies Incorporated by Shares”.
  • Set the guidelines for administrative registration and supervision of persons and legal structures.
  • Administer the Integrated System of Administrative Registration and Control of Legal Persons, Legal Structures and Final Beneficiaries.
  • Those assigned in corporate matters by legal provisions to the Department of Registration and Supervision of Treasury Law Societies, and
  • Any others attributed to it by legal or regulatory norms.

The General Directorate of Persons and Legal Structures and Final Beneficiaries will enable an Administrative Registry for the persons and legal structures that operate in the Republic of Paraguay, and an Administrative Registry for the final beneficiaries of those persons or legal structures.

Due to the great importance that for the legal entities constituted in Paraguay represent the registries created by the Law, and the seriousness of the sanctions applicable in case of breaches of its provisions, this Law deserves a special highlight with respect to the other laws dictated in the framework of the fight against money laundering, corruption and organized crime.

 


For the reasons mentioned, we highlight the following aspects of the Law:


 


1. It obliges all legal entities incorporated in the country, whether they are limited liability companies, associations, foundations, etc., and legal structures such as trusts or investment funds.

2. In the Administrative Registry of Persons and Legal Structures, the obligors must submit the following information:


  • Full data of shareholders or authorities in charge of the management, control, and administration of legal entities;
  • Corporate Bylaws;
  • Last meeting of shareholders of choice of authorities, in the cases that apply;
  • Those that issue shares or nominative securities must communicate the identification data of their holders, the percentage, or right that their participation in the share capital entails, and
  • Those in which the substantive participation of the capital belongs to companies or legal entities resident abroad, must keep updated the information on the ownership of the shares or quotas of capital, and the powers granted in the country.

3. In the Final Beneficiary Registry, the subjects bound by the Law must:


  • Inform as sworn statement the data of the [1] Final Beneficiaries including the entire chain of owners;
  • In the case of trusts, the natural person or persons that constitute Final Beneficiaries in relation to the trustor, fiduciary and beneficiary must be identified.

The Law provides that, when it is impossible to identify the Final Beneficiary, it will be presumed that the Final Beneficiary is the legal representative of the person or legal structure resident in Paraguay.


4. Any modification that is recorded in the data declared in the Administrative Registry of Persons and Legal Structures and of the Final Beneficiary must be communicated to the enforcement authority within a maximum period of 15 (fifteen) business days since the formal occurrence of the done.


5. The Deadlines for registration in the Registries established in the Law are the following:

  • In the Administrative Registry, within 45 (forty-five) business days after the constitution of the person or legal structure.
  • In the Register of Final Beneficiaries, within a maximum period of 9 (nine) months from the effective date of this Law, and according to the calendar that will be issued by the enforcement authority.

The provision of the required information will be carried out in all cases within the deadlines, forms and conditions established by the regulations and will have the character of an affidavit, without prejudice to the verification and other requirements by the enforcement authority.


6. Upon expiration of the deadlines for registration in the records and reports required by this Law, persons and legal structures that have not complied with the obligation will be subject to the following consequences:

 


  • They will not be able to open new accounts, issue debt or participation securities, or carry out deposit or remittance procedures, or perform other operations whether active, passive or neutral before the entities that make up the Financial System.

  • Blocking of the Single Taxpayer Registry (RUC) by the Undersecretariat of Taxation Status (SET); Y,

  • Suspension of the processing of any other presentation before the enforcement authority of this Law

Only once the breached obligation has been regularized, will the enforcement authority issue a certificate of compliance with the obligations set forth in this Law to carry out the suspended procedures again.


7. The penalties established by the Law for cases of breaches of its provisions range from the application of direct fines of 50 (fifty) to 500 (five hundred) minimum wages for various unspecified activities of the capital, up to fines equivalent to 30% (thirty percent) of profits or dividends to be distributed among its shareholders or partners.

The sanctions established by the Law may also be applied to those who refuse to provide information or provide erroneous, false or incomplete information about the administrative record of the person and legal structure and the Final Beneficiary.

The consequences established for cases of breaches of the Law, as well as the established sanctions, will be applied progressively through a compliance calendar to be issued by the Ministry of Finance, granting a period of time necessary to make the relevant structural adjustments, as well as the previous and necessary training to the obliged subjects.

8. Duty of Information. The enforcement authority shall report bimonthly to the Central Bank of Paraguay (BCP), to the Secretariat for the Prevention of Money or Property Laundering (SEPRELAD), and to the Subsecretariat of State for Taxation (SET) of the Ministry of Finance the list of legal persons that have fulfilled the expected obligations.


The compliance list will be published and updated semiannually on the web portal and will be freely accessible to the public, in accordance with the terms of Law No. 5282/2014 "OF CITIZEN FREE ACCESS TO PUBLIC INFORMATION AND GOVERNMENT TRANSPARENCY".

The subjects obliged by the Law must keep for the term of 5 (five) years the documents, files and correspondence that properly accredit or identify the Final Beneficiaries and all the documentation that supports the information required by the enforcement authority.

 

 

 

[1] Persons or entities that directly or indirectly possess a substantive participation or final control over the legal entity or legal structure or benefit from it within the limits defined by the Law.

 


 

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