U.S. Department of State Country Reports on Terrorism 2006 - Paraguay

Although Paraguay was generally cooperative in counterterrorism and law enforcement efforts, its judicial system remained severely hampered by a lack of strong anti-money laundering and counterterrorism legislation. Such legislation is essential for Paraguay to meet its counterterrorism obligations under UN Security Council Resolutions and, equally important, acquire the tools it needs to effectively obstruct and prosecute money laundering and terrorist financing occurring in the Tri-Border Area, particularly Ciudad del Este.

Paraguay did not exercise effective immigration or customs controls at its borders. Efforts to address illicit activity occurring in the Tri-Border Area were uneven due to a lack of resources and, more principally, corruption within customs, the police, and the judicial sector. In October, a Legal Reform Commission introduced to Congress a Penal Code Reform bill that included provisions to update Paraguay's money laundering law. The Legal Reform Commission was also working on a Procedural Code Reform bill that would include provisions on money laundering and terrorism. Separately, Congress must pass another bill that would give Paraguay's Financial Intelligence Unit (FIU), the Secretariat for the Prevention of Money Laundering (SEPRELAD), the autonomy it would need to function effectively. Without this law, in June 2007 SEPRELAD could be suspended from the Egmont Group, the international group that facilitates information exchange among the Financial Intelligence Units of its 100 members. Despite expanded cooperation with other government entities and significant assistance from the United States over recent years, SEPRELAD has yet to demonstrate the ability to monitor and detect money laundering. Absent effective money laundering and terrorist financing legislation, it remained difficult for Paraguay to prosecute terrorist financiers or seize their assets.

Without effective counterterrorism legislation, Paraguay has successfully prosecuted suspected terrorist financiers under tax evasion or other statutes. The tax evasion case against Kassem Hijazi, a suspected Hizballah money launderer connected to 113 businesses and 46 individuals, remains ongoing. This case was set to go to trial pending Hijazi's latest appeal to the Supreme Court. Suspected terrorist fundraiser Hatim Ahmad Barakat was convicted of document fraud and was sentenced to six years in jail in June. Paraguayan authorities continued to seek the arrest of fugitive Hassan Ali Barakat (Ahmad Barakat's cousin), for conspiracy, piracy, and contempt of court.

Twelve of the 15 individuals charged with the 2004-5 kidnapping and murder of Cecilia Cubas, daughter of former President Raul Cubas, were convicted in November. Their sentences ranged from 10 to 35 years. Several of the defendants were tied to the leftist Free Fatherland Party (PPL) which, in turn, has allegedly received support from the Revolutionary Armed Forces of Colombia (FARC) and other foreign governments. The PPL supports armed struggle as a means to overthrow the Paraguayan elected government. Several co-conspirators remained at large. Six escaped to Argentina, one of whom subsequently fled to Bolivia after the others were captured, and were awaiting the possibility of extradition. Two escaped to Bolivia and extradition was pending.¹ An additional nine individuals remained at large and were under investigation.

The United States assisted Paraguay with training for judges, prosecutors, and police in investigating, preventing and prosecuting individuals involved in money laundering, bulk cash smuggling, and terrorism, including terrorism financing. Paraguay qualified for participation in the Millennium Challenge Account (MCA) Threshold Program and received a $35 million dollar grant to develop and strengthen institutions. Paraguay is a member of the Financial Action Task Force of South America Against Money Laundering (GAFISUD), which has been critical of Paraguay for its failure to adopt strong money laundering legislation. A delegation from the UN Security Council's Counterterrorism Committee visited Paraguay in June urging it to move expeditiously to adopt counterterrorism legislation that would meet its international obligations.

1 The two that escaped to Bolivia initially received refugee status in Bolivia but the Supreme Court overturned that decision in August. They remained at large.