Non-profit organisations, anti-corruption compliance and pro bono services in Paraguay

Federico Silva

Ferrere, Asunción

fsilva@ferrere.com

Carlos Vasconsellos

Ferrere, Asunción

cvasconsellos@ferrere.com

Non-profit organisations (NPOs) play a vital role in the shaping and implementation of participatory democracy. According to the United Nations’ Agenda 21, one of the main challenges facing the world community as it seeks to replace unsustainable development patterns with environmentally sound and sustainable development is the need to activate a sense of common purpose on behalf of all sectors of society. Specifically, NPOs possess well-established and diverse experience, expertise and capacity in fields which will be of particular importance to the implementation and review of environmentally sound and socially responsible sustainable development, particularly in a developing country, such as Paraguay. The community of NPOs, therefore, offers a global network that should be tapped, enabled and strengthened in support of efforts to achieve these common goals.

In Paraguay, NPOs in general have always been the recipients of resources from external cooperation. Few have limited financing from companies or the state, and even fewer manage to generate their own resources from the sale of services. NPOs may also obtain resources from agencies linked to international solidarity, often of a private or religious nature, and in recent years from some multilateral cooperation organisations. Nevertheless, sometimes such resources are just sufficient for NPOs to perform their activities.

Moreover, NPOs can be used as vehicles for asset laundering and other illicit activities. In order to prevent this in Paraguay, the Secretariat for the Prevention of Asset Laundering (Secretaría de Prevención de Lavado de Dinero o Bienes or ‘SEPRELAD’) has issued Resolution 453/11, which requires NPOs to adopt policies and preventive measures for identifying, registering and reporting transactions involving the suspicion of asset laundering.

According to the Resolution, NPOs must adopt policies aimed at:

1. identifying and knowing their contributors, donors or benefactors with supporting documents;
2. promoting a culture and awareness of asset laundering to all their members;
3. verifying the origin of funds received;
4. recording all funds received, to keep track of their destination;
5. implementing records of resources obtained from activities carried out;
6. implementing monitoring systems to allow the prompt detection of unusual donations, and reporting these to SEPRELAD where identified;
7. considering personal, employment and financial background of persons to be recruited; and
8. implementing preventive measures to reduce the degree of exposure to risks inherent to asset laundering.

These policies must be explained in a manual, which considers the nature, volume and type of activity carried out by NPOs, in order to prevent their use in events relating to asset laundering.

NPOs must also establish training programmes in asset laundering prevention for everyone who collaborates with them and due diligence measures must be applied whenever funds are received. NPOs must appoint a compliance officer and undergo periodic internal and external audits.

Under the current wording of Law 1,015/97 ‘On Prevention of Asset Laundering’, non-compliance with SEPRELAD’s Resolution 453/11 requirements may result in the imposition of serious sanctions against NPOs.

Individuals involved, whether they are officials or NPO staff, can be sanctioned with: a warning; a public reprimand; a fine of up to 500 times the minimum wage (approximately US$162,000); fines of between one and ten per cent of the amount of the involved transaction; and removal from office with three to ten years’ disqualification from holding management or administration positions.

Similarly, for their part, NPOs, as legal entities, can be sanctioned with: a warning; a public reprimand; a fine of up to 5,000 times the minimum wage (approximately US$1,620,000); a fine of up to 50 per cent of the amount of the involved transaction; or suspension or closure of activities.

Considering the high cost of implementing the compliance structure required by SEPRELAD’s Resolution 453/11, to date very few of Paraguay’s many NPOs have instigated it. The consequences for non-compliance can be very serious for NPOs and those who work with them. Recently, in response to the evaluation of the Financial Action Task Force that Paraguay’s anti-asset laundering is facing, SEPRELAD has increased its surveillance regarding compliance with its regulations.

Consequently, in Paraguay today, it is extremely important to support NPOs to help them comply with the anti-asset laundering requirements through pro bono legal services, which law firms such as Ferrere offer. For example, Ferrere has been involved in helping NPOs understand the obligations of Resolution 453/11, developing and drafting policies as well as having them approved by SEPRELAD, training compliance officers, conducting audits, and complying with the obligations in general.