Foreign Private Banking Institutions Must Exercise Caution When Conducting Business in Brazil

A Leading Financial Expert’s Warning

Foreign private banking institutions looking to expand their operations into Brazil must exercise caution when marketing and conducting their activities in the country.

Regulation of Foreign Securities

Under Brazilian law, foreign securities are subject to regulation that affects the possibility of their offering in the country. While there is no definition of what constitutes a private placement of securities under Brazilian law, any contact or communication with investors in Brazil must be made on an individual one-to-one basis to mitigate the risk of questioning by the Comissão de Valores Mobiliários (CVM).

Licensing Requirements

There are no specific licenses required for cross-border private banking services into Brazil. However, financial institutions must ensure that they comply with all applicable laws and regulations in the country.

Employee Travel and Document Distribution

Employees of foreign private banking institutions may travel to meet clients and prospective clients in Brazil provided any contact is made on a strictly private basis.
There are no licensing or registration requirements for such purposes.
Foreign private banking institutions may send documents to clients and prospective clients in Brazil provided they are individually sent to investors following an initial contact. Documents should not be sent indiscriminately to a number of investors on a mass distribution basis.

Tax Disclosure and Reporting

Individuals considered as Brazilian residents for tax purposes must file an annual income tax return with the Brazilian tax authorities, disclosing all assets, rights, and liabilities held by the taxpayer at the end of the calendar year.
Those with investments abroad in excess of the equivalent of US$100,000 must file a declaration to the Central Bank of Brazil on an annual or quarterly basis.
Brazilian financial institutions are also required to file a biannual ancillary tax return with information on their clients, both domestic and international.

Client consent is not required for reporting purposes, and financial institutions must disclose the required tax information about their clients regardless of any consent.
There are no typical legal structures designed for holding private assets in Brazil. Private assets are generally held directly by individuals, which are subject to lower tax rates than legal entities in the country.

Establishing a Private Banking Relationship

Brazilian KYC standards generally require the identification of individuals authorized to represent the structure, as well as ownership up to the ultimate beneficial owner.
The name, identification, and tax ID of the structure are required.