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

BRAZIL / 9 AUG 2021

A shadowy vigilante death squad operating on the Brazil-Paraguay border is killing supposed thieves and then leaving notes next to…

BRAZIL / 16 AUG 2021

The capture of a top Anti-Bala coalition member in Paraguay threatens to weaken a longstanding criminal in Brazil's southern border…

COCAINE EUROPE / 17 JUN 2021

A criminal group in Colombia is turning dirty money into adulterated gold, in the latest addition to a long list…

About InSight Crime

THE ORGANIZATION

Escaping Barrio 18

27 JAN 2023

Last week, InSight Crime published an investigation charting the story of Desafío, a 28-year-old Barrio 18 gang member who is desperate to escape gang life. But there’s one problem: he’s…

THE ORGANIZATION

Europe Coverage Makes a Splash

20 JAN 2023

Last week, InSight Crime published an analysis of the role of Amsterdam’s Schiphol Airport as an arrival hub for cocaine and methamphetamine from Mexico.  The article was picked up by…

THE ORGANIZATION

World Looks to InSight Crime for Mexico Expertise

13 JAN 2023

Our coverage of the arrest of Chapitos’ co-founder Ovidio Guzmán López in Mexico has received worldwide attention.In the UK, outlets including The Independent and BBC…

THE ORGANIZATION

InSight Crime Shares Expertise with US State Department

16 DEC 2022

Last week, InSight Crime Co-founder Steven Dudley took part in the International Anti-Corruption Conference organized by the US State Department’s Bureau of Democracy, Human Rights, & Labor and…

THE ORGANIZATION

Immediate Response to US-Mexico Marijuana Investigation

9 DEC 2022

InSight Crime’s investigation into how the legalization of marijuana in many US states has changed Mexico’s criminal dynamics made a splash this week appearing on the front page of…