Brazil’s FATF Evaluation: Key Findings and Areas for Improvement

The Financial Action Task Force (FATF) has evaluated Brazil’s progress in implementing the FATF Recommendations regarding Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF). Below are the key findings from the Mutual Evaluation Report, along with the areas for improvement identified for each recommendation.

Ratings

The report summarizes Brazil’s ratings as follows:

Compliant (C) – 11 recommendations
Largely compliant (LC) – 14 recommendations
Partially compliant (PC) – 9 recommendations

FATF Recommendations and Key Areas for Improvement

R.1 – Assessing risk & applying risk-based approach (LC)

Brazil’s assessment of ML/TF risk levels was largely compliant, but challenges remain in enhancing risk assessment effectiveness and applying a risk-based approach.

R.2 – National cooperation and coordination (LC)

Brazil showed progress but faced challenges, such as information sharing and clarifying roles and responsibilities.

R.3 – Money laundering offense (LC)

Brazil made progress in addressing money laundering but needs to ensure that the offense covers all ML forms and is effectively enforced.

R.4 – Confiscation and provisional measures (LC)

Brazil’s confiscation and provisional measures processes require further improvements, including addressing insufficient resources and procedural delays.

R.5 – Terrorist financing offense (PC)

Brazil partially complies with the terror financing offense recommendation, as the country faces challenges in application and enforcement.

Weaknesses persist in Brazil’s implementation and enforcement of targeted financial sanctions.

R.8 – Non-profit organizations (PC)

Brazil’s regulation and supervision of non-profit organizations need improvement, especially when addressing those potentially involved in ML/TF activities.

R.9 – Financial institution secrecy laws (C)

Brazil fully complies with this recommendation as its legal framework allows for information exchange in ML/TF investigations.

R.10 to R.14 – Customer due diligence, record keeping, and financial institution supervision (LC to C)

Brazil is moving towards making sufficient progress in customer due diligence, record keeping, and financial institution supervision.

R.15 – New technologies (PC)

Brazil partially complies with efforts to address new technologies, including ML/TF risk assessments, customer due diligence, and record keeping.

R.16 – Wire transfers (C)

Brazil fully complies with the wire transfers recommendation, as it has regulations in place addressing ML/TF risks.

R.17 – Reliance on third parties (LC)

Brazil is largely compliant with the recommendation concerning third-party risk management but requires ongoing efforts to ensure appropriate oversight.

R.18 – Internal controls and foreign branches and subsidiaries (LC)

Brazil is making progress in implementing internal controls and supervising foreign branches and subsidiaries.

R.19 – Higher-risk countries (PC)

Brazil partially complies with the recommendation on higher-risk countries and jurisdictions, as challenges remain in risk assessment and the application of effective countermeasures.

R.20 to R.22 – Reporting of suspicious transactions, tipping-off, and customer due diligence for Designated Non-Financial Businesses and Professions (DNFBPs) (PC)

Brazil faces challenges in implementing these recommendations effectively, including issues related to FIU reporting, tipping-off, and customer due diligence for DNFBPs.

R.23 to R.24 – Transparency and beneficial ownership of legal persons, and arrangements (PC)

Challenges remain in Brazil’s implementation of measures to ensure transparency in beneficial ownership and legal person information.

R.25 to R.31 – Regulation and supervision of financial institutions, DNFBPs, law enforcement, investigative authorities, and cash couriers (LC to PC)

Brazil requires further improvements in regulation and supervision of financial institutions, DNFBPs, and law enforcement and investigative authorities, as well as addressing cash couriers involved in ML/TF activities.

R.32 – Cash couriers (PC)

Brazil partially complies with the cash couriers recommendation, as the country faces challenges in effective implementation.

R.33 – Statistics (LC)

Brazil is largely compliant in collecting and disseminating statistics related to ML/TF activities.

R.34 – Guidance and feedback (LC)

Brazil must continue providing guidance and feedback to international and national partners to strengthen its AML/CFT framework.

R.35- Sanctions (LC)

Brazil is largely compliant in imposing and enforcing administrative and criminal sanctions related to ML/TF activities.

R.36 – International instruments (LC)

Brazil is largely compliant in implementing and applying international treaties, agreements, or arrangements related to ML/TF activities.

R.37 to R.40 – Mutual legal assistance, extradition, and other forms of international cooperation (LC)

Brazil received a largely compliant rating for international cooperation, including mutual legal assistance, extradition, and other forms of assistance.

Conclusion

Brazil has made progress in various areas concerning AML and CTF, but challenges remain which the country needs to address to enhance its effectiveness in implementing relevant FATF Recommendations.