Thursday, January 21, 2021

What are Brazil’s money laundering laws?

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Money laundering in Brazil is a widespread problem. As a result, the Government of Brazil (GOB) has put a comprehensive Anti-Money Laundering (AML) regulatory system in place.

Brazilian authorities claim that the major sources of illegal proceeds in the country are crimes against the financial system (such as fraud and embezzlement), drug trafficking, and tax evasion.

Money laundering in Brazil seems to be primarily associated with domestic crime, including the smuggling of contraband goods and corruption, narcotics trafficking, and organised crime, which generates funds that may be laundered through the banking system, real estate investment, or financial asset markets.

A brief history of Brazil’s laws

In 1998, the GOB enacted Law 9.613, which criminalised money laundering related to drug trafficking, terrorism, arms trafficking, extortion, and organised crime.

In the same year, the Financial Intelligence Unit (FIU) and the Conselho de Controle de Actividades Financieras (COAF) were created, which are both housed within the Ministry of Finance.

Related: Brazil moves money laundering intelligence unit to central bank

The COAF consists of representatives from regulatory and law enforcement agencies, including the Central Bank and Federal Police. It regulates those financial sectors not already under the jurisdiction of another supervising entity.

Law 9.613 was updated in 2002, providing a more wide-ranging definition of the types of illicit activity that fall under the category of “harmful acts”.

In 2003, a new law was implemented that criminalised terrorist financing as a predicate offense for money laundering. The law also established crimes against foreign governments as predicate offenses.

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Following the establishment of the law, the Central Bank was required to create and maintain a registry of information on all bank account holders, enabling the COAF to request financial information from all government entities on anyone suspected of involvement in criminal activity.

AML in Brazil

As mentioned above, there has been some form of AML enforcement in Brazil since the early 2000s. The current laws require financial institutions to train their employees on how to recognise suspicious activity that may be tied to money laundering or terrorist financing activities.

In 2012, following the publication of the Financial Action Task Force’s (FATF) executive summary of the AML/CFT measures in place in Brazil, the Central Bank amended the rules applicable to procedures that must be adopted by financial institutions in order to prevent and combat money laundering and terrorist financing.

Banking regulation in Brazil

The Brazilian Central Bank (BACEN), created in 1964, issues currency and controls the money supply, credit, foreign capital, and other high-level financial activities in the country.

Related: Brazil appeals judge lifts temporary arrest of former billionaire Eike Batista

The federal government also uses other public financial institutions to implement its policies, the most important of these being the Bank of Brazil. The largest bank in the country, the Bank of Brazil has numerous agencies at home and abroad and is the main source of long-term loans for farmers and exporters of manufactured goods.

Brazilian financial institutions operating in the domestic market are in general diversified, dynamic, and competitive. Brazil has approximately 168 commercial banks with total assets of approximately $349 billion.

Many states have their own government banks, among which the Bank of São Paulo is the most important. A lesser share of Brazil’s commercial banking is in the hands of private banks, which also provide short-term loans and savings accounts.

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