Financial Crime World

Brazil’s Anti-Money Laundering Regime: Penalties for Non-Compliance

In a bid to combat financial crimes, Brazil has implemented a robust anti-money laundering (AML) regime. The country’s AML laws require financial institutions and other designated entities to implement strict measures to prevent money laundering and terrorist financing.

Government Authorities Responsible for Enforcement

The Council for Financial Activities Control Foundation (COAF) is the primary government agency responsible for receiving suspicious transactions reports (STRs) and currency transaction reports (CTRs) from supervised entities. COAF also regulates and supervises certain sectors, including:

  • Factoring institutions
  • Dealers of jewelry and precious stones and metals
  • Trading of high-value goods and luxury items

Other regulators, such as the Brazilian Central Bank, the Securities and Exchange Commission of Brazil (CVM), and the Superintendence of Private Insurance (SUSEP) are responsible for enforcing AML compliance provisions in their respective sectors. The Appeal Council of the National Financial System (CRSFN) serves as an appellate body for administrative decisions issued by these regulators.

Reporting Suspicious Activity

Supervised entities must monitor and report suspicious activities to COAF. The criteria for reporting suspicious transactions are established by the specific AML regulations and depend on the sector of operation. Factors such as:

  • Parties involved
  • Geographic location
  • Type of transaction
  • Financial or legal basis for the transaction
  • etc.

are usually considered.

Confidentiality Requirements

The Brazilian AML Law requires supervised entities to maintain the confidentiality of their STRs and CTRs, including information about the client involved. Financial Intelligence Reports produced by COAF are also protected by legal confidentiality. Companies, individuals, and government officials may be sanctioned if they violate these requirements.

Reporting Large Currency Transactions

Regulated entities must keep records of currency transactions and file a currency transaction report whenever they exceed the threshold established by the competent regulators. The thresholds vary depending on the sector, with:

  • Financial institutions having a threshold of 50,000 reais
  • Factoring operations having a threshold of 50,000 reais

Reporting Cross-Border Transactions

There are no specific AML requirements for reporting cross-border transactions. However, these transactions must be reported to COAF if they involve high-risk jurisdictions or other criteria.

  • Central Bank Resolution No. 4,844/2020 requires the registration of transactions equal to or larger than 100,000 reais of deposit accounts of individuals or legal entities residing, domiciled, or with headquarters abroad.

Financial Intelligence Unit

COAF receives and reviews STRs and CTRs, identifying relevant information which is included in Financial Intelligence Reports (RIFs) sent to competent authorities such as:

  • Federal and State Prosecution
  • Police
  • Foreign financial intelligence units

Penalties for Non-Compliance

Failure to comply with Brazil’s AML rules can result in severe penalties. Companies and individuals may face:

  • Civil or criminal sanctions, including fines, imprisonment, or both
  • The severity of the penalty depends on the nature and extent of the non-compliance

Conclusion

Brazil’s AML regime is designed to prevent money laundering and terrorist financing by requiring financial institutions and other designated entities to implement strict measures to detect and report suspicious activities. Non-compliance can result in severe penalties, making it essential for entities operating in Brazil to understand and comply with the country’s AML regulations.