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Brazil Strengthens Sanctions Compliance Regulations

In a move to combat money laundering and terrorist financing, Brazil’s government has strengthened its sanctions compliance regulations. The new rules aim to ensure that financial institutions and other reporting entities are better equipped to detect and prevent illicit activities.

Regulatory Bodies Collaborate to Ensure AML Compliance

The Financial Activities Control Council (COAF), the Central Bank of Brazil (Banco Central do Brasil), and the Brazilian Securities and Exchange Commission (CVM) have joined forces to ensure Anti-Money Laundering (AML) compliance across various sectors of the Brazilian economy.

Risk-Based Approach Emphasized in New Regulations

The new circular, Circular No. 3,978/2020, empowers financial institutions to assess their own operations and clients, categorize their risks, and implement proportionally allocated controls based on risk levels. This approach provides flexibility, allowing financial entities to direct resources more efficiently and implement preventive measures in line with risk levels.

Penalties and Sanctions for Non-Compliance

The law outlines penalties and sanctions for entities and individuals that fail to comply with AML/CTF obligations, including fines, suspension of activities, and even imprisonment. Reporting entities may also face reputational risks if they are found to be non-compliant.

Sanctions Compliance Program Required for Financial Intermediaries

Financial intermediaries are required to establish and maintain effective sanctions compliance programs, which should include policies, procedures, and controls to identify and mitigate the risks associated with sanctioned entities or activities.

Enhanced Due Diligence Measures

Financial intermediaries are obligated to conduct enhanced due diligence on their customers, including verifying the identities of customers and beneficial owners. They should also perform ongoing monitoring to detect and report any suspicious transactions that may involve sanctioned parties.

Brazilian Financial Intelligence Unit/ COAF Plays Critical Role

The Brazilian Financial Intelligence Unit (UIF), also known as the COAF, plays a critical role in the fight against money laundering, terrorist financing, and other financial crimes in Brazil. COAF has the authority to issue recommendations to reporting entities based on its findings and can impose administrative sanctions on non-compliant entities.

Regulations Enforce FATF Recommendations

Brazil’s AML regulations, including Resolution No. 23/2013 issued by the Brazilian Central Bank, require financial institutions to conduct Customer Due Diligence (CDD) and maintain customer identification records. The country also implements measures to freeze assets and impose sanctions on individuals, entities, or countries involved in financial crimes or terrorism.

References

• Banco Central do Brasil (BACEN)
• International Comparative Legal Guide (ICLG)
• Bolsa de Valores de São Paulo (São Paulo Stock Exchange) (B3)
• Presidency of the Republic: Presidência da República do Brasil