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Brazil Struggles with Financial Crimes Reporting Requirements
SAO PAULO, BRAZIL - Brazil’s financial system continues to grapple with significant challenges related to money laundering and terrorist financing, despite efforts by authorities to strengthen its anti-money laundering (AML) framework.
The Scale of the Problem
According to estimates, between $25.8 billion and $64.4 billion is laundered every year in Brazil, highlighting the need for effective AML measures to prevent financial crimes.
Terrorist Financing and Organized Crime
Brazil has been identified as a hub for organized crime groups with links to terrorist entities, including the FARC and Hezbollah. Proceeds from drugs, robberies, and kidnappings have been funneled into terrorist activities, highlighting the need for robust AML measures.
State-Owned Enterprises and Corruption
The country’s state-owned enterprises, which include key sectors such as energy, banking, and construction, create opportunities for public corruption and bribery in awarding contracts. This has led to a lack of transparency and accountability in these sectors.
AML Policy Summary
Brazil is considered weak in AML knowledge among obligated entities and prosecution, although it is stronger in prevention and investigation. The country’s authorities have formed a working group to prepare an National Risk Assessment (NRA), which will help identify areas for improvement.
Main Money Laundering Laws in Brazil
The main money laundering laws in Brazil include:
- Law 9.613/1998, which designates money laundering laws
- Law 13.260/2016 and Law 13.170/2015, which tackle terrorist financing
- Law 13.810/2019, which enforces terrorist asset freezing measures
- Central Bank of Brazil Circular 3.978/2020, which promotes AML/CTF frameworks
Weaknesses in the System
Despite efforts to strengthen its AML framework, Brazil continues to face significant challenges. Lawyers are seen as the top facilitators of financial crime in Brazil, while real estate, gas stations, and shell companies are key conduits for money laundering. Powerful business interests and politicians can obstruct the justice system, leading to jurisdictional delays that result in justice disappearing.
Prosecution Challenges
Brazil has a very low conviction rate for financial crimes. Out of nearly 5,000 investigations in a two-year period, only 11 resulted in a conviction. Prosecutors can only target individuals for money laundering crimes, not legal entities, creating loopholes for wrongdoing to go unpunished.
Strengths in the System
However, Brazil has been strengthening its legislation in recent years. It established a risk-based approach for financial entities, along with comprehensive monitoring and money laundering regulation. New procedures for identifying and freezing terrorist assets have demonstrated that Brazil is making substantial progress and addressing its deficiencies.
Conclusion
Brazil continues to face significant challenges related to financial crimes reporting requirements, despite efforts by authorities to strengthen its AML framework. However, the country’s commitment to strengthening its legislation and improving its AML measures provides a positive outlook for the future.