Brazil

1. Does Brazil have legislation making it a criminal offence to engage in money laundering and/or terrorist financing?

Yes. The crime of money laundering is provided for in Law No. 9,613 of March 3, 1998, amended in 2012, by Law No. 12,683 of July 3rd., 2012 (“Money Laundering Law” or “MLL”) which created the Control of Financial Activities Authority (Conselho de Controle de Atividades Financeiras – “COAF”), responsible for regulating financial activities, apply administrative penalties and identify illicit activities of money laundering.

The crime of financing terrorism is provided for in art. 6 of Law No. 13,260 of March 16, 2016 (which deals with terrorism in general) and Law No. 13,810 of March 8, 2019.

Furthermore, the Resolution No. 50, of 31 August 2021, issued by the Brazilian Securities Commission (“CVM”) provides for money laundering, terrorism, and proliferation of mass destruction weapons prevention in the securities market.

At last, also the Central Bank of Brazil (“Bacen”) Circular No. 3.978 of 23 January 2020, amended in 2021 by the Resolution No. 119, provides for the policy, procedures, and internal controls to be adopted by authorized institutions to operate in the financial system aiming at preventing illegal use of financial system for ‘laundering’ crimes or concealment of assets and values.

2. To whom does the legislation apply?

The MLL states that the crime of money laundering applies to all individuals and legal entities involved in transactions of this kind. Articles 9 of the MLL lists the activities developed by companies under obligation to control, monitoring and report activities and transaction according to the legal requirements.

Law No. 13,810/2016 provides that it applies to individuals and legal entities, as provided for in article 1 as follows: “This Law provides for compliance with sanctions imposed by United Nations Security Council resolutions, including the unavailability of assets of natural and legal persons and entities, and the national designation of persons investigated or accused of terrorism, of their financing or related acts.”

According to CVM Resolution No. 50 article 3, it applies to individuals and legal entities in the securities market, managing entities of organized markets, financial market infrastructure companies and agents that promotes services to the securities market.

The Bacen Circular No. 3.978/2020 applies to banks, exchange brokerage, credit union, securities dealership, savings and loan association among others.

3. What does the legislation prohibit?

According to article 1 of the MLL, the practice of “Hiding or disguising the nature, origin, location, disposition, movement or ownership of assets, rights or values arising directly or indirectly from a criminal offense.”

Law No. 13,260/2016 provides for the financing of terrorism in its article 6 that “Anyone who offers or receives, obtains, keeps, keeps in deposit, requests, invests or in any way contributes to obtaining an asset, asset or financial resource, with the purpose of financing, total or partially, person, group of people, association, entity, criminal organisation that has as its main or secondary activity, even occasionally, the commission of the crimes provided for in this Law.”

Article 44 of Bacen Circular No. 3.978/2020 prohibits the analysis of selected operations and situations through hiring third parties and such analysis to be carried out abroad.

4. How is money laundering defined? Does underlying criminal activity have to be proven?

The COAF defines money laundering as “ a set of commercial or financial operations that seek the incorporation into the economy of each country, temporarily or permanently, of resources, assets and values of illicit origin and that develop through a dynamic process that theoretically involves three independent phases that often occur simultaneously”. These are: (i) the distancing of the resources to its illicit origins, to avoid an association with a criminal activity; (ii) the disguise through several movements to difficult the tracking of the resources; and (iii) the disposal of the resources to the criminals after the “cleaning movements” so that it can be considered clean or legitimate.

Pursuant to article 2, item II of the MLL, prosecution of the crime of money laundering is independent of any related criminal activities prosecution.

5. What level of intent or knowledge is required to establish a violation?

There is ongoing discussion about intent and knowledge in the crime of money laundering and the Supreme Court has not yet ruled definitively over the matter. Money laundering does require the intent of concealing goods with a certain purpose to be effective.

6. What are the potential penalties for infringing the legislation?

Individuals convicted of money laundering may be subject to a term of imprisonment for a term of three to ten years, plus a pecuniary fine.

Article 1 sets out a list of aggravating and mitigating circumstances, which may either increase or reduce any sentence.

Law No. 13.506/2017 determines administrative procedure penalties for infringing BACEN and CVM resolutions. The penalties are defined in article 5, which involves pecuniary fine, prohibition to render services for financial institutions and cancelation of operation authorization. In case of individuals, the penalty can also be a fee or determine incapacity to act as administrator in financial institutions regulated by BACEN.

7. Does the legislation have extra-territorial reach?

Brazilian legislation relating to the crime of money laundering has extra-territorial scope. Chapter IV of the MLL covers crime committed in a foreign territory. It also allows Brazilian courts to determine assurance measures on the assets, rights or values involved in the criminal conduct, upon request from a competent foreign authority and the existence of a relevant international treaty or convention.

Article 9 of MLL lists the entities which have an obligation to report suspicious activities and also provides that the foreign offices of such entities are under the same obligation.

Articles 11 and 20 of CVM Resolution No. 50 provides for rules about assets that can be classified as unavailable by the Brazilian Authorities through a foreign authority request, as well as rules to simplify foreign institutions regulation in Brazil.

Articles 5, 16, 26, 27, 28, 44 and 59 of Bacen Circular No. 3.978/2020 states that the authorized institutions must held anti-money laundering and counter-terrorism financing policies in their units abroad. It also defines rules for negotiations with individuals and financial institutions overseas.

8. Are there additional anti-money laundering or counter terrorist financing regulations or obligations, such as registration or reporting obligations, for businesses or individuals that operate in particular sectors or undertake particular activities?

Article 9 of the MLL establishes that the entities undertaking the following activities, either permanently or temporarily, are under an obligation to report suspicious activities:

• the raising, intermediation and application of a third-party financial resources, in national or foreign currency;
• the purchase and sale of foreign currency or gold as a financial asset or exchange instrument;
• the custody, issue, distribution, settlement, negotiation, intermediation or administration of bonds or securities.

Entities subject to these obligations include:

• stock exchanges, commodities or futures exchanges and organized over-the-counter market trading systems;
• insurance companies, insurance brokers and supplementary pension or capitalization entities;
• administrators of accreditation cards or credit cards, as well as administrators of consortia for the acquisition of goods or services;
• administrators or companies that use cards or any other electronic, magnetic or equivalent means that allow the transfer of funds;
• leasing companies, commercial development companies (factoring) and Simple Credit Companies (ESC);

These companies are required to properly identify their customers and hold updated information about them. These companies or individuals are obliged to register every transaction that exceeds the value fixed by a competent authority. They must also comply with internal procedures and supervision requirements appropriate to the importance of the transactions they are involved with, and are obliged to be registered with supervising authorities, such as the COAF, and keep their registers updated. Finally, any illegal transaction or evidence of a crime must be reported within 24 hours to the authorities.

9. What are the potential penalties for failing to comply with these obligations?

Article 12 of the MLL provides that such entities are subject to administrative (not criminal) sanctions such as: admonition, fines, suspension, and cancellation of the ability to develop its activities; a temporary suspension for up to 10 years of the authorization to exercise administration/officer positions.

10. Who are the relevant enforcement authorities in Brazil and what are their contact details?

State public prosecutors are responsible for prosecuting money laundering and terrorism activities that will be judged by the state criminal courts. Federal competency will be triggered in different situations.

In the administrative sphere, according to article 14 of MLL, the COAF is the authority responsible for discipline, applying administrative penalties, receiving, examining, and identifying suspicious illicit activities relating to money laundering. Please find below the contact information of the Federal Public Prosecutor Office and COAF: