Countries/Jurisdictions of Primary Concern - Brazil
In 2015, Brazil was the second-largest economy in the Americas and among the ten largest economies in the world, by nominal GDP. It is a major drug-transit country, as well as one of the world’s largest consumer countries. São Paulo, Brazil’s largest city, is considered a regional financial center for Latin America. Money laundering in Brazil is primarily related to domestic crimes, especially drug trafficking, corruption, organized crime, gambling, and trade in various types of contraband and counterfeit goods. Money laundering channels include the use of banks, real estate investment, financial asset markets, luxury goods, remittance networks, informal financial networks, and trade-based money laundering.
São Paulo and the Tri-Border Area (TBA) of Brazil, Argentina, and Paraguay possess high risk factors for money laundering. In addition to weapons and narcotics, a wide variety of counterfeit goods, including CDs, DVDs, and computer software (much of it of Asian origin), are routinely smuggled across the border from Paraguay into Brazil. In addition to São Paulo and the TBA, other areas of the country continue to be of concern. The Government of Brazil and local officials in the states of Mato Grosso do Sul and Paraná, for example, report increased involvement by Rio de Janeiro and São Paulo gangs in the already significant trafficking in weapons and drugs that plagues Brazil’s western border states.
Brazil has four free trade zones/ports (FTZs). The government provides tax benefits in certain FTZs, which are located to attract investment to the country’s relatively underdeveloped North and Northeast regions.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: //2009-2017.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: List approach
Are legal persons covered: criminally: NO civilly: NO
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Commercial and savings banks and credit unions; insurance companies and brokers; securities, foreign exchange, and commodities brokers/traders; real estate brokers; credit card companies; money remittance businesses; factoring companies; gaming and lottery operators and bingo parlors; dealers in jewelry, precious metals, art, and antiques
Number of STRs received and time frame: 251,234: January 1 - October 31, 2015
Number of CTRs received and time frame: 860,802: January 1 - October 31, 2015
STR covered entities: Commercial and savings banks and credit unions; insurance companies and brokers; securities, foreign exchange, and commodities brokers/traders; real estate brokers; credit card companies; money remittance businesses; factoring companies; gaming and lottery operators and bingo parlors; dealers in jewelry, precious metals, art, and antiques
money laundering criminal Prosecutions/convictions:
Prosecutions: Not available
Convictions: Not available
Records exchange mechanism:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
Brazil is a member of the FATF and the Financial Action Task Force of Latin America (GAFILAT), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.fatf-gafi.org/countries/a-c/brazil/
Enforcement and implementation issues and comments:
On October 16, 2015, President Rousseff signed Law #13.170 which provides procedures for freezing assets relating to UNSCRs and for information provided bilaterally, closing a longstanding gap in Brazil’s ability to confront terrorist financing. Terrorism and terrorist financing are still not criminalized in a manner consistent with international standards; a bill has been pending before Congress for several months.
In March 2014, money laundering at a gas station tipped off Brazilian law enforcement to a connection with the parastatal oil company, Petrobras. Since then, “Operation Carwash” (Lava Jato) has uncovered a complicated web of corruption, money laundering, and tax evasion, leading to the arrests of money launderers, Petrobras directors, and major construction company executives. Many Brazilian politicians are also under investigation. The landmark operation continues to uncover what many believe is already the biggest corruption scandal in Brazilian history.
Brazil does not maintain comprehensive statistics on money laundering prosecutions and convictions. This lack of data makes it difficult to evaluate the effectiveness of Brazil’s AML/CFT regime.
The Government of Brazil continues to invest in border and law enforcement infrastructure. Brazilian Customs and the Brazilian Tax Authority continue to take action to suppress the smuggling of drugs, weapons, and contraband goods along the border with Paraguay. The Federal Police have Special Maritime Police Units that aggressively patrol the maritime border areas.
Some high-priced goods in the TBA are paid for in U.S. dollars, and cross-border bulk cash smuggling is a concern. Large sums of U.S. dollars generated from licit and suspected illicit commercial activity are transported physically from Paraguay into Brazil. From there, the money may make its way to banking centers in the United States. However, Brazil maintains some control of capital flows and requires disclosure of the ownership of corporations.
Brazil’s Trade Transparency Unit, in partnership with U.S. Immigration and Customs Enforcement, analyzes, identifies, and investigates companies and individuals involved in trade-based money laundering activities between the two countries. As a result of data comparison, the government identified millions of dollars of lost revenue.
Brazil should pass legislation to fix the gap in its legal framework regarding the criminalization of terrorist financing. The government also should maintain and release statistical data regarding the volume of money laundering prosecutions and convictions.