Country Reports on Terrorism 2008 - Paraguay

A weak, politicized judicial system, a police force widely viewed as corrupt and ineffective, and a lack of strong anti-money laundering and terrorist financing legislation continued to hamper Paraguay's counterterrorism efforts. On June 25, Paraguay's Congress took the final measure to pass improved anti-money laundering legislation as part of a major overhaul of the penal code. The Congress' Legal Reform Commission also drafted a criminal procedural code reform bill that would facilitate prosecution of money laundering and terrorism and modernize Paraguay's criminal justice system. However, the procedural code reform bill has since been "mothballed" in the Commission for more than a year. Terrorist financing legislation will be critical to keep Paraguay current with its international obligations. Efforts to include a terrorist financing statute in the new penal code failed; however, several draft terrorist financing laws are pending in Congress. Paraguay's Secretariat for the Prevention of Money Laundering (SEPRELAD) is working on a revised draft of the terrorist financing bill to present to Congress. Using its experience in the development of a similar law, Brazil is providing technical assistance to SEPRELAD. The Egmont Group notified Paraguay about the need to comply with its international commitments regarding terrorist financing legislation. If Paraguay does not show reasonable progress in enacting such a law, it could face expulsion.

Paraguay did not exercise effective immigration or customs controls at its porous 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. The United States continued to work closely with SEPRELAD, which made several in-roads into undermining money laundering in Paraguay, including December raids on illegal exchange houses. Paraguay fully paid its outstanding dues to the Financial Action Task Force of Latin America (GAFISUD) in mid-2008, after many years in arrears with the organization.

In October, a Paraguayan court dismissed tax evasion and money laundering charges against Kassem Hijazi, a suspected Hizballah money launderer, after significant indications of judicial and political interference with the prosecution of what had been the largest money-laundering case in Paraguay's history. A Paraguayan court convicted and sentenced suspected Hizballah fundraiser Hatem Ahmad Barakat on tax evasion charges in April 2006; during 2008, he continued to appeal his three-year sentence while on bail.

The United States assisted Paraguay with capacity building for law enforcement and training for judges, prosecutors, and police in counterterrorism awareness, as well as weapons of mass destruction response capabilities. Under the Millennium Challenge Corporation's Threshold Program, the United States assisted Paraguay with training for judges, prosecutors, and police in investigation techniques that are critical to money laundering and terrorist financing cases. Paraguay submitted a proposal for a second phase of the Threshold Program in November, which will focus in part on police corruption.