Financial Crime World

Brazil Strides Towards Sanctions Compliance, But Challenges Remain

December 21, 2023 - RIO DE JANEIRO

Progress in Combating Money Laundering and Terrorist Financing

In recent years, the Brazilian government has made significant efforts to improve its system for combating money laundering and terrorist financing. According to a mutual evaluation report by the Financial Action Task Force (FATF) and the Latin American Financial Information Registry (GAFILAT), Brazil has demonstrated improved international cooperation, risk assessment, and policy coordination since its last evaluation in 2010.

Key Areas of Improvement

  • Understanding of Money Laundering Risks: Brazil has shown a good understanding of money laundering risks, particularly those arising from corruption, organized crime, tax crime, drug trafficking, and environmental crimes.
  • International Cooperation: The country has demonstrated improved international cooperation with other countries in the region.

Challenges Remaining

Despite this progress, there are still significant gaps that need to be filled:

Lack of Coordination Between Institutions

Brazil’s authorities have been criticized for a lack of cooperation and coordination between key institutions, including the police, prosecution authority, and tax office. This needs to be addressed to ensure effective implementation of policies.

Prosecution of Money Laundering Cases

The country needs to improve its prosecution of money laundering cases, particularly in regards to environmental crimes and the laundering of proceeds.

Exposing Cross-Border Threats

As one of the largest economies in the world, Brazil is exposed to various cross-border threats due to its significant banking and securities sectors. The country’s porous borders further exacerbate these risks. To address these challenges:

  • Enhanced Supervision: Brazil needs to enhance its supervision of non-financial sectors, such as lawyers.
  • Improved Asset Recovery: The country should improve asset recovery and confiscation.

Transparency in Business Entities

The report highlights the importance of full transparency in business entities, particularly through the beneficial ownership database. While initiatives like REDESIM have been implemented to detect misuse of companies:

  • Accuracy and Up-to-Date Data: There are still significant challenges in ensuring that this data is accurate and up-to-date.

Combating the Financing of Terrorism

Brazil has made progress in recent years but still needs to make significant advancements in implementation. The risks of terrorist financing are relatively low in Brazil, but the country should enhance its understanding and mitigation of these risks.

Conclusion

While Brazil has taken important steps towards sanctions compliance, there is still much work to be done to address the remaining challenges.