HomeNewsBriefBrazilian Bank Slapped With Record Money Laundering Fine in Paraguay
BRIEF

Brazilian Bank Slapped With Record Money Laundering Fine in Paraguay

BRAZIL / 9 NOV 2020 BY ALESSANDRO FORD EN

Paraguayan authorities have announced historic sanctions against a major Brazilian bank in the latest case of Latin American governments cracking down on financial institutions that do not comply with anti-money laundering regulation.

On October 29, Paraguay’s Ultima Hora announced that the Central Bank of Paraguay (Banco Central del Paraguay - BCP) had imposed a $9.64 million fine on Brazil’s Banco Itaú for breaking anti-money laundering regulations last August 2020.

The bank had allegedly failed to report suspicious transactions to the Secretariat for the Prevention of Money or Property Laundering (Secretaría de Prevención de Lavado de Dinero o Bienes – SEPRELED), thereby violating Article 19 of Paraguay’s Law No. 1015 concerning money laundering.

SEE ALSO: Paraguay Currency Exchanges Launder Vast Amounts of Brazil Drug Money

This was the largest fine related to money laundering in Paraguayan history, Diego Marcet, general director of SEPRELED’s legal department told Radio Universo, adding that a lack of adherence to anti-money laundering regulations was systemic.

In response, Banco Itaú’s stated the fine was due to a specific incident on August 21 that the bank had reported itself and that it had a strict and rigorous money laundering prevention policy, according to news website RDN. The bank reportedly already lost its first appeal on September 9 but it may do so again.

And this is but the latest fine Banco Itaú has faced of late. In October 2019, Brazil’s Operation Car Wash (Lava Jato) anti-corruption probe found Banco Itaú had enabled $16.4 million worth of illegal transactions used for the payment of bribes. This was followed one month later by the city of São Paolo fining Itaú a gargantuan $662 million for evading state taxes. And in June 2019, the bank agreed to return $13.1 million to the 4.7 million customers it over-charged from 2008 to 2018, as well as paying a penalty of nearly $2 million.

InSight Crime Analysis

Big banks in Latin America have wilfully ignored anti-money laundering controls while profiting from illicit flows. Yet the surprising sanctioning of Banco Itaú by Paraguayan authorities may mean such impunity is finally beginning to be challenged.

In 2019, Paraguay was named in one index as the country with the second-highest risk of money laundering in Latin America. That same year, Brazilian authorities requested the extradition of former Paraguayan President Horacio Cartes (2013-2018) to face money laundering charges related to the Odebrecht scandal.

Paraguay’s role as South America’s main provider of both marijuana and counterfeit goods mean there is plenty of dirty money swirling around, while endemic police corruption, struggling judicial systems and the penetration of Brazilian organized crime mean the state lacks any meaningful enforcement capacity of even basic illegal activities, let alone more sophisticated financial crimes.

Yet this case may highlight tentative progress in Paraguay, with the aforementioned index noting a slight decrease in Paraguay’s vulnerability since 2017. This is perhaps due to a delayed effect of important steps taken in 2015 to combat the problem, such as the creation of an anti-money laundering unit within the Attorney General’s Office.

SEE ALSO: Latin America's Weak Points in Fighting Money Laundering

Paraguayan law enforcement are heavily dependent on Brazilian intelligence to conduct raids, making the fining of Banco Itaú particularly interesting. Investigating money laundering within an international bank is a complex matter yet Brazilian authorities appear not to have played a role with Itaú not having been sanctioned in Brazil on the same charges.

Brazilian banks became enmeshed in their own scandals during the “Lava Jato” investigation, which discovered that the country’s five biggest banks, including Itaú, had allowed the laundering of some $325 million used to pay bribes. Paraguayan financial institutions, particularly currency exchanges, have also laundered money for Brazilian criminal groups.

The most famous scandal related to banks laundering criminal proceeds came in 2012 when HSBC was famously fined $1.9 billion in the United States and $27.5 million in Mexico for negligently laundering over $881 million for Mexican and Colombian cartels.

But hopes the record sanctions would lead to substantive change never transpired. In September 2020, a new investigation by Connectas and Quinto Elemento Lab revealed that a former HSBC official, who had allegedly enabled corrupt clients to maintain their bank accounts in violation of the bank’s regulations, was now a senior anti-money laundering official in the Mexican government.

share icon icon icon

Was this content helpful?

We want to sustain Latin America’s largest organized crime database, but in order to do so, we need resources.

DONATE

What are your thoughts? Click here to send InSight Crime your comments.

We encourage readers to copy and distribute our work for non-commercial purposes, with attribution to InSight Crime in the byline and links to the original at both the top and bottom of the article. Check the Creative Commons website for more details of how to share our work, and please send us an email if you use an article.

Was this content helpful?

We want to sustain Latin America’s largest organized crime database, but in order to do so, we need resources.

DONATE

Related Content

BOLIVIA / 10 AUG 2011

In the one of the first acts of cooperation since Chile and Bolivia had a spat over the arrest of…

BRAZIL / 2 MAY 2014

Attacks on police units in Rio de Janeiro's "pacified" slums have increased amid some apparently coordinated efforts, in what represents…

BRAZIL / 15 MAY 2012

Rio de Janeiro's Security Secretary Jose Mariano Beltrame talks police corruption, militia groups, and the next phase of the favela…

About InSight Crime

THE ORGANIZATION

Venezuela Drug Trafficking Investigation and InDepth Gender Coverage

29 APR 2022

On May 4, InSight Crime will be publishing The Cocaine Revolution in Venezuela, a groundbreaking investigation into how the Venezuelan government regulates the cocaine trade in the country. An accompanying event,…

THE ORGANIZATION

InDepth Coverage of Juan Orlando Hernández

22 APR 2022

Ever since Juan Orlando Hernández was elected president of Honduras in 2014, InSight Crime has provided coverage of every twist and turn during his rollercoaster time in office, amid growing…

THE ORGANIZATION

Venezuela's Cocaine Revolution

15 APR 2022

On May 4th, InSight Crime will publish a groundbreaking investigation on drug trafficking in Venezuela. A product of three years of field research across the country, the study uncovers cocaine production in…

LA ORGANIZACIÓN

Widespread Coverage of InSight Crime MS13 Investigation

8 APR 2022

In a joint investigation with La Prensa Gráfica, InSight Crime recently revealed that four of the MS13’s foremost leaders had been quietly released from…

THE ORGANIZATION

Informing US State Department and European Union

1 APR 2022

InSight Crime Co-director McDermott briefed the US State Department and other international players on the presence of Colombian guerrillas in Venezuela and the implication this has for both nations.  McDermott…