WHAT ARE THE
Money laundering and terrorism financing laws in Brazil?
In Brazil, money laundering and terrorism financing are serious offences and are governed by the following laws and regulations:
- Law No. 9.613/1998: This law, known as the Anti-Money Laundering Law, establishes measures to prevent and combat money laundering activities in Brazil. It outlines the obligations of reporting entities, such as financial institutions, casinos, and other designated non-financial businesses and professions (DNFBPs), to implement anti-money laundering (AML) measures, including customer due diligence, suspicious transaction reporting, and record-keeping requirements.
- Decree No. 8.420/2015: This decree provides regulations for the implementation of Law No. 9.613/1998, specifying requirements for reporting entities to comply with AML obligations. It establishes guidelines for risk assessment, customer due diligence procedures, internal controls, and reporting of suspicious transactions.
- Law No. 13.260/2016: This law, known as the Counterterrorism Law, establishes measures to prevent and combat terrorism financing activities in Brazil. It criminalises terrorism financing and provides for penalties for individuals or entities engaged in terrorism-related offences. The law also addresses issues such as terrorist financing investigations, asset freezing, and international cooperation in counterterrorism efforts.
- Resolution No. 29/2017 of the National Monetary Council (CMN): This resolution establishes guidelines for financial institutions to implement measures to prevent and combat money laundering and terrorism financing. It requires financial institutions to adopt risk-based approaches to AML/CFT compliance, conduct customer due diligence, and report suspicious transactions to the Financial Activities Control Council (COAF).
- Resolution No. 25/2019 of the National Monetary Council (CMN): This resolution amends previous regulations related to AML/CFT compliance for financial institutions. It updates requirements for customer identification, beneficial ownership information, and risk assessment procedures to enhance the effectiveness of AML/CFT measures.
- Regulation of the Financial Activities Control Council (COAF): COAF, or Conselho de Controle de Atividades Financeiras, is the government agency responsible for receiving, analysing, and disseminating reports on suspicious transactions related to money laundering and terrorism financing. It operates under the Ministry of Economy and plays a central role in Brazil's efforts to combat financial crimes.
WHAT ARE THE
Key obligations reporting entities have under Brazilian laws?
The key obligations under the AML/CTF laws in Brazil include:
- Business-Wide ML/TF Risk Assessments: Reporting entities must conduct business-wide risk assessments to identify and assess the money laundering and terrorism financing risks associated with their business activities, customers, products, and services. This involves evaluating the likelihood and potential impact of money laundering and terrorism financing risks and implementing measures to mitigate those risks.
- Internal Controls and Compliance Programs: Reporting entities are required to establish and maintain internal controls and compliance programs to ensure adherence to AML and CTF regulations. This includes policies, procedures, and training programs for employees to detect and prevent money laundering and terrorism financing activities.
- Customer Due Diligence (CDD): Reporting entities are required to conduct customer due diligence procedures to verify the identity of their customers and assess the risk associated with their business relationships. This involves collecting information such as the customer's name, address, identification documents, and the nature of the business relationship.
- Enhanced Customer Due Diligence (ECDD): In cases where there is a higher risk of money laundering or terrorism financing, reporting entities must apply enhanced customer due diligence measures. This may include obtaining additional information about the customer, the source of funds/wealth, and the purpose of the transactions.
- Employee Training: Regular training must be provided to employees, ensuring they are knowledgeable about AML/CFT laws and regulations, including how to identify and report suspicious activities. Ongoing awareness programs should also be in place to keep staff informed of evolving risks and responsibilities related to money laundering and terrorism financing.
- Suspicious Transaction Reporting: Reporting entities are obligated to report suspicious transactions to the Financial Activities Control Council (COAF). This includes transactions that are unusual, inconsistent with the customer's known profile or business activities, or otherwise raise suspicion of money laundering or terrorism financing.
- Record-Keeping: Reporting entities must maintain records of customer identification, transactions, and due diligence measures for a specified period. These records must be sufficient to enable authorities to reconstruct transactions and demonstrate compliance with AML and CTF requirements.
- Reporting Obligations to Authorities: In addition to reporting suspicious transactions, reporting entities may have other reporting obligations to regulatory authorities. This may include reporting large cash transactions, cross-border fund transfers, and other activities specified in the regulations.
- Independent Audits and Reviews: Institutions must conduct independent audits and reviews of their AML/CFT programs to ensure compliance with regulations and to assess the effectiveness of their internal controls and procedures.
WHO ARE THE
ML/TF regulators in Brazil and what functions do they perform?
In Brazil, the regulators responsible for overseeing and enforcing AML/CTF measures are primarily:
- Financial Activities Control Council (COAF): COAF, or Conselho de Controle de Atividades Financeiras, is the government agency responsible for receiving, analysing, and disseminating reports on suspicious transactions related to money laundering and terrorism financing. It operates under the Ministry of Economy and plays a central role in Brazil's efforts to combat financial crimes.
- Central Bank of Brazil (Banco Central do Brasil): The Central Bank of Brazil regulates and supervises financial institutions, including banks, credit unions, and other financial intermediaries, to ensure compliance with AML and CTF regulations. It sets guidelines for AML/CFT compliance and conducts inspections to assess the effectiveness of AML/CFT measures.
- Securities and Exchange Commission (Comissão de Valores Mobiliários - CVM): The CVM regulates and supervises the securities market in Brazil, including stock exchanges, brokerage firms, and investment funds. It ensures compliance with AML and CTF regulations within the securities sector and may issue guidelines and regulations to address AML/CFT risks.
- Superintendence of Private Insurance (Superintendência de Seguros Privados - SUSEP): SUSEP regulates and supervises the insurance industry in Brazil, including insurance companies and intermediaries. It sets requirements for AML/CFT compliance within the insurance sector and monitors insurance activities for potential money laundering or terrorism financing risks.
- Superintendence of Corporations (Superintendência de Empresas - SEP): SEP regulates and supervises companies and corporate entities in Brazil. While not a primary AML/CFT regulator, SEP may play a role in overseeing compliance with AML/CFT regulations for certain types of businesses and industries.
- Attorney General's Office (Advocacia-Geral da União - AGU): The AGU is responsible for providing legal advice and representation to the Brazilian government, including law enforcement agencies and regulatory authorities, in matters related to AML/CFT enforcement and prosecution. It may also coordinate international cooperation efforts in combating money laundering and terrorism financing.
WHAT ARE THE
Industry sectors subject to ML/TF regulations?
The regulated industry sectors in Brazil subject to AML/CTF regulations include, but are not limited to:
Designated Non-Financial Businesses and Professions (DNFBPs)
DNFBPs are entities or individuals outside the traditional financial sector that are susceptible to being used for money laundering or terrorism financing purposes. In Brazil, DNFBPs may include lawyers, accountants, real estate agents, trust and company service providers, dealers in precious metals or stones, and other professionals or businesses engaged in high-value transactions.
WHAT ARE THE
Penalties for non-compliance with AML/CTF laws?
The penalties for non-compliance with money laundering and terrorism financing laws in Brazil can include the following:
- Administrative Sanctions: Regulatory authorities, such as the Financial Activities Control Council (COAF), the Central Bank of Brazil, and other relevant supervisory bodies, have the authority to impose administrative sanctions on entities found to be in violation of AML/CTF regulations. These sanctions may include fines, warnings, temporary suspensions of operations, or revocation of operating licences.
- Criminal Penalties: Serious violations of AML/CFT laws may lead to criminal prosecution. Individuals or entities engaged in money laundering, terrorism financing, or related offences may face criminal charges, which can result in imprisonment, substantial fines, asset freezing or seizing or any combination of these. Criminal penalties may vary depending on the severity of the offence and applicable laws.
- Civil Penalties: In addition to administrative and criminal sanctions, non-compliance with AML/CTF laws may expose individuals and entities to civil penalties. This could involve legal action brought by regulatory authorities or affected parties seeking damages for harm caused by the violation of AML/CTF regulations.