VZCZCXYZ0011
OO RUEHWEB

DE RUEHAC #1204/01 3352259
ZNR UUUUU ZZH
O 012259Z DEC 06
FM AMEMBASSY ASUNCION
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5094
INFO RUCNMER/MERCOSUR COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/WHITE HOUSE NSC WASHDC
RUEAWJB/DEPT OF JUSTICE WASHDC

UNCLAS ASUNCION 001204 
 
SIPDIS 
 
SIPDIS 
 
NSC FOR SUE CRONIN, S/CT FOR ARNOLD SIERRA 
 
E.O. 12958: N/A 
TAGS: PTER PREL KCRM SNAR PY
SUBJECT: PARAGUAY: SCENE-SETTER FOR 3+1 MEETING 
 
¶1.  (SBU)  Summary.  Paraguay has taken serious measures to 
address its reputation as a haven for illicit activity 
including as regards Ciudad del Este (CDE).  It has created 
special units, often with assistance from and in cooperation 
with the U.S. including in the context of our MCA Threshold 
Program with Paraguay.  The judicial sector, the police and 
customs remain the weakest links in the law enforcement 
realm, however, and illicit activity including money 
laundering, contraband, IPR violations, and drug and arms 
trafficking remain widespread in CDE. Paraguay has ratified 
all 12 UN counter terror treaties but its anti-money 
laundering legislation is deficient and it has not adopted 
counter terrorism legislation.  Paraguayan authorities are 
concerned about money laundering that occurs out of the TBA, 
including possible terrorist financing but will be reluctant 
to air those concerns over Brazilian objections.  The MFA's 
Head of the Office of Special Affairs Min. Victor Hugo Pena 
is only into his second month as the director of this newly 
created office but has signaled a desire to discharge his 
responsibilities as the Head of the Paraguayan delegation 
seriously.  End Summary. 
 
¶2.  (SBU)  Paraguay has a well-deserved reputation as the 
weakest link in combating the wide range of illicit 
activities that occur in the TBA.  Corruption at multiple 
levels undercuts serious law enforcement efforts. 
Nevertheless, Paraguay has taken serious steps to address its 
institutional deficiencies creating special units, 
principally in Customs and the Ministry of Industry and 
Commerce (MIC) to investigate more effectively IPR violations 
and customs fraud.   The MIC's Specialized Technical Unit 
(UTE) in particular has made a number of significant seizures 
of counterfeit products.  These units receive significant 
assistance from the USG in the form of INL funds or the MCC 
Threshold Program. 
 
¶3.  Paraguay's Anti-Money Laundering Secretariat (SEPRELAD) 
has also received technical assistance and equipment from the 
U.S.  Paraguay has subscribed to all 12 UN counter terror 
conventions but its anti-money laundering law is lacking in 
that it does not allow for prosecution of money laundering as 
an autonomous crime and Paraguay does not have counter 
terrorism legislation.  Paraguay seeks to meet its 
legislative obligations through provisions in a series of 
three bills.  UNCTC Executive Ruperez approved of the draft 
legislation text when he visited in July 2007.  The first 
bill establishing money laundering and terrorist financing as 
crimes and setting out the consequent penalties was delivered 
to Congress in October.  The bill on procedural tools for the 
prosecution of these crimes remains under arduous debate 
before a Legislative Reform Commission and could face much of 
the same when it is submitted to Congress.  The law 
establishing SEPRELAD's regulatory authorities has been 
drafted but not yet submitted to Congress pending movement on 
the first bill.  Paraguay's SEPRELAD could face suspension 
from Egmont should this bill not be adopted before June.  In 
the absence of an effective money laundering law, Paraguay 
has prosecuted three alleged terrorist financiers for tax 
evasion. 
 
¶4.  (SBU) Paraguay's Anti-Drug Secretariat represents the 
single most effective law enforcement body in Paraguay. 
Working closely with the U.S., it has effectively targeted 
Brazilian trafficking groups that are run mostly out of Pedro 
Juan Caballero (PJC) on Paraguay's northern border with 
Brazil.  Within the last six months, SENAD has made a number 
of significant arms seizures with evidence signaling links to 
Brazil's PCC and Colombia's FARC.  While these weapons were 
seized in PJC and Asuncion, arms and drug trafficking are 
also thought to occur out of CDE.  Presently, SENAD is hard 
pressed to meet challenges in that region for lack of 
resources. 
 
¶5.  (SBU)  Paraguay's delegation will be headed by Min. 
Victor Hugo Pena the Director of the MFA's newly created 
Office of Special Affairs which addresses Paraguay's 
interests and obligations as they relate to counter 
terrorism, drug trafficking, TIP, etc.  Pena brings a 
background in Paraguayan politics and has signaled 
seriousness about Paraguay's more effectively addressing 
terrorist financing concerns in the TBA.  When Pena met with 
POL Chief in November, he discussed the settlement Bank of 
America reached with Manhattan district prosecutor Robert 
Morgenthau in September to pay a fine of approximately $7 
million when it acknowledged its lax operations had allowed 
up to $3 billion dollars to be laundered out of the TBA.  We 
should be prepared to discuss this case and others as 
appropriate as evidence U.S. legal authorities are acting on 
concerns as relate to terrorist financing in the TBA. 
 
¶6.  (SBU)  Paraguay has signaled concern about potential 
terrorist financing occuring out of the TBA but will be 
reluctant to speak to this issue publicly.  Irrespective of 
our success in forging political consensus on a public 
statement on terrorist financing in the TBA we should shore 
up agreement that the widespread illicit activity that occurs 
there opens the door to terrorist financing.  We should also 
strengthen cooperation on the ground at the local level and 
between governments in undertaking investigations and 
prosecuting cases.  To the extent we can speak to how this 
effort redounds to Paraguay's benefit in fighting corruption, 
promoting economic development and countering crime and 
insecurity, Paraguay will likely be predisposed to be 
supportive. 
 
CASON