Financial Crime World

Brazil Takes Step towards Implementing Open Banking, But Raises Concerns over Banking Secrecy

Introduction

The Brazilian Central Bank has announced plans to implement an Open Banking model in the country, aimed at increasing integration among financial institutions and promoting competition. This new system will allow for the sharing of data, products, and services among licensed entities, including banks, payment institutions, securities brokers, and leasing companies.

Key Features of Open Banking

The Brazilian Open Banking concept encompasses four main categories:

  • Products and Services: Participating institutions can offer a range of products and services to clients.
  • Client Data: Clients’ personal data will be shared among participating institutions.
  • Transactional Data: Clients’ transactional data will be shared, including payment initiation and fund transfers.
  • Payment Services: Regulated entities will be able to provide payment services such as payment initiation and fund transfers.

Concerns over Banking Secrecy

The increased transparency raised by Open Banking raises concerns over banking secrecy, a protected right under Brazil’s 2001 Banking Secrecy Law. Financial institutions are prohibited from disclosing client and transaction information without the express consent of the interested party, which is also a requirement under the recently enacted Brazilian General Data Protection Law (GDPL). This means that clients’ explicit consent will be needed for their data to be shared with third parties.

Implementation Plan

Despite these concerns, no legislative changes are necessary for Open Banking to be implemented in Brazil. If clients grant their consent, regulated institutions can exchange information without amending existing laws. The Central Bank is expected to establish a general framework outlining non-discriminatory access to data and defining agreements for transferring data between regulated and non-regulated entities.

Public Hearing and Implementation Timeline

The Central Bank has scheduled a public hearing for the second half of this year to discuss the draft Open Banking regulation. Implementation of the new system is planned for the second half of 2020.

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