Financial Crime World

Brazil’s Financial Sector Tackles Compliance Challenges

In a bid to combat money laundering and terrorist financing, Brazil has established a robust regulatory framework to ensure compliance among financial institutions. At the heart of this effort are two key players: the Council for Financial Activities Control (COAF) and the Central Bank of Brazil (BCB).

COAF Takes Center Stage

As Brazil’s financial intelligence unit, COAF is responsible for regulating financial institutions, enforcing sanction policies, investigating suspicious transactions, and monitoring clients or accounts that pose a risk to the country’s financial sector. With technical and operational autonomy, COAF works closely with the BCB to ensure compliance with anti-money laundering and combating the financing of terrorism (AML/CFT) regulations.

BCB Ensures Compliance

The Central Bank of Brazil plays a crucial role in ensuring that national financial system institutions comply with AML/CFT legislation and regulations. Working under the guidance of the National Monetary Council, the BCB aims to prevent the misuse of the financial system for illegal activities such as money laundering or terrorism funding.

Compliance Requirements for Financial Institutions

To comply with COAF regulations, financial institutions must implement several key measures:

  • Establish internal controls:
    • Identify clients and ensure accurate records
  • Provide regular training programs:
    • For employees on AML/CFT requirements
  • Monitor transactions:
    • In domestic and foreign currency that exceed set limits
  • Implement policies, procedures, and internal controls:
    • To meet legal requirements
  • Register with the regulatory authority and/or COAF:
    • Comply with COAF’s requirements on a regular basis

Reporting Obligations

Financial institutions must also report certain transactions to the COAF in a fully confidential manner. These include:

  • Cash transactions:
    • Received from an insured institution equal to or greater than BRL 10,000
  • Transactions to non-Brazilian bank accounts:
    • Equal to or greater than BRL 100,000
  • Suspicious transactions:
    • Defined by SUSEP Circular no. 612/2020
  • Sanctions matches
  • Serious evidence of terrorism financing acts and persons involved in such activities

By understanding these compliance requirements and reporting obligations, financial institutions in Brazil can play a critical role in preventing money laundering and terrorist financing, thereby maintaining the integrity of the country’s financial system.