VZCZCXYZ0001
PP RUEHWEB

DE RUEHAC #0274/01 0722002
ZNR UUUUU ZZH
P 132002Z MAR 06
FM AMEMBASSY ASUNCION
TO RUEHC/SECSTATE WASHDC PRIORITY 3936
INFO RUCNMER/MERCOSUR COLLECTIVE
RUEHNR/AMEMBASSY NAIROBI 0171
RUEAWJB/DEPT OF JUSTICE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/WHITE HOUSE NSC WASHDC
RUMIAAA/USCINCSO MIAMI FL//SCJ3/SCJ33/SCJ34/SOCSO LNO//

UNCLAS ASUNCION 000274 
 
SIPDIS 
 
SIPDIS 
 
FOR WHA/BSC AND EB/IFD/OIA 
NAIROBI FOR MICHAEL FITZPATRICK 
SOUTHCOM FOR POLAD BARBARA MOORE 
NSC FOR SUE CRONIN 
TREASURY FOR OTA, TFI 
TREASURY FOR A/S O'BRIEN 
TREASURY FOR OTA WARFIELD, VAN KOCH, MILLAR 
STATE PASS TO USAID FOR LAC/AA AND LUIS CORONADO PCC/AA 
 
E.O. 12958: N/A 
TAGS: PGOV KCRM KMCA PA
SUBJECT: PARAGUAY: TREASURY A/S O'BRIEN'S VISIT CREATES NEW 
MOMENTUM ON AML LAW 
 
REF: ASUNCION 231 
 
¶1.  Summary.  Treasury A/S Patrick O'Brien's visit to 
Paraguay on 3/8 offered an excellent opportunity to reinforce 
with key GOP officials, legislators, and business community 
leaders the importance the U.S. attaches to rapid adoption of 
a strong anti-money laundering law.  All interlocutors 
stressed their commitment to moving ahead on this bill, 
noting modifications were likely.  Already, two of three 
initiatives discussed to push for more progress are moving 
ahead.  The key remains President Duarte's pressing his 
Colorado Senators to support the bill; he has committed 
himself to doing this, making prospects for adoption in the 
coming months stronger than ever.  Post supports OTA's 
participation in the MCA Threshold Program as the best way to 
strengthen the GOP efforts to combat corruption and impunity 
and strengthen formality.  End Summary. 
 
VP and Walde Convey GOP Commitment on Law 
----------------------------------------- 
 
¶2.  Vice President Castiglioni and Presidential Economic 
Advisor Carlos Walde assured O/Brien of the GOP's commitment 
to adopt a strong AML law to meet its international 
commitments and strengthen conditions for greater investment 
in Paraguay.  Both described the law as emblematic of the 
GOP's determination to combat corruption and transnational 
crime. Castiglioni assured us that both he and President 
Duarte were working with legislators, pressing them to move 
ahead on the law and that he was confident of success.  He 
urged prudence on our part, concerned that if the U.S. were 
too far out in front, opponents of the law could play the 
nationalist card.  While he recognized Paraguayan efforts 
were primary in turning the page on corruption, he considered 
U.S. support in the form of the MCA TP and ultimately an MCA 
Compact as critical. 
 
Senators Signal Support for Law with Modifications 
--------------------------------------------- ----- 
 
¶3.  O'Brien's visit with ANR Senators Pedrozo and Rachid, 
respectively the Presidents of the Finance and Legislation 
Commissions charged with reviewing the bill, prompted a frank 
exchange.  Pedrozo recounted that he had meet recently with 
U.S. Senator Coleman and State Department officials who 
stressed the need for movement on the law.  A businessman 
himself, Pedrozo assured O'Brien he appreciated the need for 
Paraguay to "formalize" its economy.  The law would 
necessarily undergo modifications but he was convinced it 
would be adopted.  Rachid remarked that he desired closure 
first on penal and procedural code reform before moving to 
adopt the money laundering law but that he too recognized the 
need to move on the latter.  Rachid maintained that concerns 
about funds flowing from the Arab community to terrorist 
groups were overplayed; he recommended greater focus on 
individual families, something Post already does. 
 
Bankers Want to be Allies 
------------------------- 
 
¶4.  O'Brien meet with Roberto Hattier, Executive Director of 
the Bankers Association, calling on the group to take a 
public stand in support of the law.  Hattier noted that the 
BA had narrowed its list of objections to the law to a mere 
handful that they were committed to resolving.  He maintained 
that the group recognized the need for the law and planned to 
join others from the business community in communicating this 
message publicly. 
 
Movement on Next Steps 
---------------------- 
 
¶5.  Coming out of the O'Brien visit, post identified three 
bars for progress in the coming weeks: 
 
-- Negotiation of an agreed text of the law with the Bankers' 
Association; 
 
-- Wider publicity on the law, including educating the public 
on common perceptions and the most important benefits of the 
law; 
-- Negotiation of the AML law with key Senators. 
 
Post notes progress on the first two and is exploring options 
for the third. 
 
-- In the wake of O'Brien's visit, Banking Association 
leaders stressed to Minister of Industry and Commerce, Raul 
Vera, their commitment to coming to agreement on text.   AML 
law experts plan to meet with the lawyers from the BA on 3/16 
and are optimistic about prospects for closing on an agreed 
text.  BA leaders have signaled readiness to join a host of 
other business organizations in announcing publicly its 
support for the law. 
 
-- Post's Resident Legal Advisor (RLA) and Carlos Yegros, the 
Director of SEPRELAD, are working together to develop a list 
of the key misperceptions and benefits of the law.  We plan 
to work with Carlos Jorge Biedermann, President of the 
Paraguayan Chamber of Advertisers to ensure it gets 
appropriate public circulation.  Separately, post's Military 
Information Support Team (MIST) plans to release in coming 
weeks a series of radio and television spots on money 
laundering that will keep the issue in the public.  We have 
seen more positive press on an AML law in the last month than 
we have in the prior two years. 
 
-- Upon forging closure with the Banking Association, GOP 
allies are looking at scheduling a series of meetings with 
key Senators to pursue agreement on articles about which they 
have registered concerns.  An agreement with the Banking 
Association on a draft text will resound significantly in the 
Senate, as many Senators key off the position of the banks. 
 
-- March 7 VP Castiglioni told DCM that President Duarte will 
privately convoke ANR Senators within 2 weeks telling them to 
pass the law. 
 
OTA Participation in MCA Threshold Program Key 
--------------------------------------------- - 
 
¶6.  Post appreciates and shares Treasury's concern about 
delays in the adoption of an AML law.  U.S. pressure brought 
to bear, including the visit of A/S O'Brien, has reinforced 
for the GOP the importance we place on adoption of this law, 
and has created momentum towards its adoption.  President 
Duarte and VP Castiglioni have conveyed their commitment to 
adoption of this law and we intend to hold them to this 
commitment. 
 
¶7.  The MCA Threshold Program is centered around addressing 
GOP shortcomings in the areas of impunity and formality. 
Strengthening investigation units as reflected in component 8 
of this program is a key initiative.  Under President Duarte, 
Paraguay has taken some important steps to create a legal and 
institutional framework to combat corruption, gaining 
adoption of key legislation, including an unprecedented 
personal income tax law and a new customs code, and creating 
three investigative units in 2005 that will focus on the 
predicate offenses of money laundering and terrorist 
financing.  These units operate in the Ministry of Finance 
investigating criminal tax violations, the Customs 
Directorate investigating criminal customs violations, and 
the Finance Ministry itself conducing internal investigations 
of corruption and waste, fraud and abuse.  These three units 
together with investigative units in the Anti-drug 
secretariat (SENAD) assigned to investigate financial crimes 
 
SIPDIS 
related to drug trafficking and the Ministry of Industry and 
Commerce assigned to investigate violations of intellectual 
property rights, received basic criminal investigator 
training provided by post in September and October 2005.  The 
GOP's FIU is already assisting investigators and prosecutors 
in the analysis of financial intelligence relating to 
undercover major criminal organizations, and plans to 
implement a pilot project that would allow it to gather 
 
financial information electronically from banks and other 
obligated entities. 
 
¶8.  Post recognizes that these units could better execute 
their mission with a new AML law.  However, we also believe 
much can be done now, on the basis of the units created to 
date and the laws already adopted, to tackle corruption and 
counter the flow of illicit funds to criminal and terrorist 
organizations.  Through Treasury's OTA program, post has made 
an important contribution to standing up and training 
Paraguay's new investigation units.  Now that the units are 
up and running, continued OTA assistance, including through 
the MCA TP, is critical as the units begin to focus on 
specific cases and the myriad of complications that enter 
into play.  Post strongly supports OTA's continued leadership 
of USG efforts to engage, train, mentor, and guide Paraguay's 
investigation units to ensure they enjoy the full benefit of 
OTA's institutional knowledge and expertise in this area. 
(Note: This cable reflects the views and input of post's TDY 
OTA Legal Enforcement Advisor. End Note.) 
 
¶9.  A/S O'Brien did not have a chance to clear on this cable 
before departing post. 
CASON