A 2005 report by the International Monetary Fund (IMF) refers to a detailed assessment by the Financial Action Task Force (FATF) in which Brazil was assessed against the FATF's forty plus eight recommendations and special recommendations. The 2005 IMF report concluded that Brazil has a "comprehensive legal and regulatory framework" to combat money laundering. However, the assessment was not conducted per the 2004 (revised) FATF methodology and therefore cannot be used as an accurate measure of Brazil's Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regime. Nevertheless, the 2005 IMF report does provide some valuable insights into the Brazilian AML/CFT regulatory framework. For example, at the time of the report, Brazil did not have clear legislation criminalizing the financing of terrorism. A later report in 2008 by the U.S. Department of State (DoS) also mentions that, as yet, terrorist financing is not an autonomous crime in Brazil. Instead it is a predicate offense for money laundering under Law No. 10.701 of 2003. Similarly, the report notes that at the time of its publication, in March 2008, there were no money laundering prosecutions in which terrorist financing was a predicate offense, and so as to whether financing of terrorism could be contested as an enforceable predicate offense was debatable. According to the 2008 U.S. DoS report, there is a proposed amendment bill (PLS 209) in the Brazilian Senate, which if adopted would bring Brazil's AML/CFT regime more in line with the FATF's recommendations. However, there is scant recent information publicly available relating to Brazil's adoption of this amendment.

General Overview

In 2005, the International Monetary Fund (IMF) released its Report on the Observance of Standards and Codes (ROSC) in which it summarized the findings of the Financial Action Task Force's (FATF) assessment of Brazil's Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regime. Accordingly, Brazil "has established a comprehensive legal and regulatory framework to combat money laundering" (p. 2). However, the assessment was not conducted per the 2004 (revised) FATF methodology and therefore cannot be used as an up to date measurement of Brazil's AML/CFT regime. Information provided on the Council for Financial Activities Control (COAF) website indicates that the Brazilian AML law (No. 9.613 of 1998) incorporates various international rules on AML/CFT including the FATF's forty plus nine recommendations and special recommendations.

Money laundering in Brazil is criminalized pursuant to Law No. 9.613, which according to the 2005 IMF report, is sufficiently broad with regards to the definition of the offence of money laundering, the predicate offences and the available sanctions. The law contains the following broad categories of predicate offences: (1) terrorism, (2) corruption, (3) acts committed by a criminal organization, (4) crimes against the financial system, (5) bribery of foreign public officials and (6) financing of terrorism. The Law penalizes offenders with a maximum of 10 years in prison. One of the main weaknesses in the Brazilian AML/CFT framework, as pointed out by several reports is the absence of terrorist financing as an autonomous crime. In 2003, Law No. 10.701 amended aspects of Law No. 9.613 establishing terrorist financing as a predicate offense for money laundering. A 2008 report by the U.S. Department of State (DoS) also mentions that at the time of its publication in March 2008 there were no money laundering prosecutions in which terrorist financing was a predicate offense and so as to whether financing of terrorism could be contested as an enforceable predicate offense was yet to seen. However, the report points out that an amendment bill, PLS 209, to Law 9.613 was introduced to the legislature in 2003. The bill, per the U.S. DoS report is under consideration in the Brazilian Senate and the Senate has incorporated further amendments to the Bill. The report also states that "if the Senate-proposed amendment to PLS 209 is adopted, its passage should bring the GOB [government of Brazil] into greater compliance with the anti-money laundering and counter-terrorist financing standards of the Financial Action Task Force and the Egmont Group of financial intelligence units." The Brazilian authorities expect the Bill to be approved sometime in 2008. However, there is no report publicly available identifying the passage of this Bill.

With regard to the confiscation, freezing and seizing of proceeds of crime, the IMF report noted that "legal measures for freezing and confiscating relating to money laundering appear sufficiently broad" (p. 3). The Criminal Code (Penal Code) and Law No. 9.613 of 1998 contain provisions for the confiscation of assets, rights and valuables derived from the laundering of money and predicate offences. However, due to the unavailability of statistics on the amounts frozen, seized or confiscated, the IMF evaluation team found it difficult to assess the effectiveness of the legal regime. As pointed out earlier, Law No. 10.701 of 2003 which modifies Law No. 9.613, establishes terrorist financing as a predicate offense for money laundering, however, there is no further information publicly available on the freezing of funds used for terrorist financing. The 2008 U.S. DoS report adds that Brazil has established systems for identifying, tracing, freezing, seizing, and forfeiting narcotics-related assets which are managed jointly by the Brazilian financial intelligence unit (FIU) and the Ministry of Justice.

According to the 2005 IMF report, Law No. 9.613 created the Brazilian FIU - the COAF (housed within the Ministry of Finance). The report finds that the FIU "generally functions effectively and performs a useful AML co-ordination role within Brazil" (p. 4). The COAF includes representatives from regulatory and law enforcement agencies, including the Central Bank and the Federal Police. COAF's main functions include the following (1) examining and identifying any illicit activities; (2) issuing instructions for entities not subject to specific monitoring by a regulatory agency for instance bingos, real estate, credit and payment card administrators; (3) applying administrative sanctions and; (4) coordinating and developing policies for money laundering related information. COAF is also empowered to receive bank suspicious transactions reports (STRs) data and can access additional information from reporting parties and, therefore, is now capable of sharing STR information with foreign counterparts as well. The 2008 U.S. DoS notes that the COAF received 18,960 suspicious activity reports per month in 2007.

Other bodies related to supervising AML/CFT activities in Brazil are the Central Bank (BCB), the Securities and Exchange Commission (CVM), the Superintendency of Private Insurance (SUSEP), the Office of Supplemental Pension Plans (PC), and the Federal Police. According to the 2008 U.S. DoS report, the "Central Bank has established the Department to Combat Exchange and Financial Crimes (DECIC) to implement anti-money laundering policy, examine entities under the supervision of the Central Bank to ensure compliance with suspicious transaction reporting, and forward information on the suspect and the nature of the transaction to the COAF."

Brazil is a party to the 1988 United Nations (UN) Drug Convention, the UN Convention against Transnational Organized Crime, the UN Convention against Corruption, the International Convention for the Suppression of the Financing of Terrorism, and the Inter-American Convention against Terrorism. Brazil is a member of the FATF and the Financial Action Task Force for South America (GAFISUD). The 2008 U.S. DoS notes that the Government of Brazil holds the presidency of the FATF in 2008, and the COAF's director assumes the role of FATF president. Brazil is also a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering and the COAF has been a member of the Egmont Group since 1999.

The Principles

1. Legal Systems and Related Institutional Measures

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There is no comprehensive assessment (based on the 2004 FATF methodology) publicly available on Brazil's compliance with the FATF's recommendations and special recommendations pertaining to this principle. According to the 2008 U.S. DoS report, Law No. 9.613 of 1998 criminalizes money laundering in Brazil. The Law penalizes offenders with a maximum of 10 years in prison. Terrorist financing, however, is not considered an autonomous crime and Law No. 10.701 of 2003 that amends aspects of Law No. 9.613 establishes terrorist financing as a predicate offense for money laundering. The 2008 U.S. DoS notes that, since 2006, the COAF, the Central Bank, the SUSEP and the Pension Funds Secretariat have issued resolutions and circulars mandating the reporting of suspected terrorist financing activity.

With regards to confiscation, freezing and seizing of proceeds of crime, the IMF report notes that "legal measures for freezing and confiscating relating to money laundering appear sufficiently broad" (p. 3). The Criminal Code and Law No. 9.613 contain provisions for the confiscation of assets, rights and valuables derived from the laundering of money and other predicate offences. However, due to the unavailability of statistics on the amounts frozen, seized or confiscated, the IMF evaluation team found it difficult to assess the effectiveness of the regime.

Law No. 9.613 created the COAF which includes representatives from regulatory and law enforcement agencies, including the Central Bank and the Federal Police. SARs electronically received by the respective regulatory bodies are then electronically submitted to COAF. COAF's main functions include the following (1) examining and identifying any illicit activities; (2) issuing instructions for entities not subject to specific monitoring by a regulatory agency for instance bingos, real estate, credit and payment card administrators; (3) applying administrative sanctions; and (4) coordinating and developing policies for money laundering related information. COAF is also empowered to share STR information with foreign counterparts.

Other competent bodies related to supervising AML/CFT activities in Brazil are the Central Bank of Brazil, the Securities and Exchange Commission, the Superintendency of Private Insurance, the Office of Supplemental Pension Plans, and the Federal Police. According to the 2008 U.S. DoS report, the "Central Bank has established the Department to Combat Exchange and Financial Crimes (DECIC) to implement anti-money laundering policy, examine entities under the supervision of the Central Bank to ensure compliance with suspicious transaction reporting, and forward information on the suspect and the nature of the transaction to the COAF." The 2008 U.S. DoS notes that regulations issued in 1998 require that individuals transporting more than 10,000 Brazilian Real (BRL) in cash, checks, or traveler's checks across the border must fill out a customs declaration to be sent to the Central Bank. However, the 2008 U.S. DoS finds weaknesses in the enforcement of currency controls and cross-border reporting requirements.

2. Preventive Measures - Financial Institutions

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According to the 2008 U.S. DoS report, "since 1999, the COAF has issued a series of regulations that require customer identification, record keeping, and reporting of suspicious transactions to the COAF by obligated entities. Financial institutions are regulated by the BCB, the CVM, and the SUSEP and these institutions file STRs with their respective regulatory body. The regulatory body then submits these STRs to the COAF. The 2005 IMF report notes that Law No. 9.613 establishes a comprehensive framework for AML requirements for financial institutions and contains general requirements for customer identification, record-keeping, and suspicious transaction reporting. However, as previously noted, the 2005 IMF report is based on the 2002 (old) FATF methodology and there is no comprehensive report publicly available addressing Brazil's compliance with the FATF's requirements for this principle.

The National Monetary Council (CMN) is the main body for the national financial system and consists of the Minister of Finance, the Minister for Planning and Budget, and the President of the Central Bank. The BCB's anti-money laundering unit, the DECIC, supervises compliance with anti-money laundering regulations and consists of nine regional offices. The SUSEP and the CVM regulate the insurance and securities market respectively. The 2005 IMF report noted that bank and other secrecy provisions should be improved in order to fully access information. The report, however, noted that requirements with regard to verification of customer identity are comprehensive and financial institutions are additionally required to verify the identity of the owner and controller of legal entities. Nevertheless, there is no obligation to verify third party identity for bank accounts and that an obligation to identify the ultimate beneficiary could be more effective in the Brazilian context.

Mentioned in the 2005 IMF report is the statement that "the legislation and regulations adequately cover the requirements for increased diligence for unusual or suspicious transactions and transactions involving jurisdictions with different AML regimes" (p. 6). In general, the IMF found Brazil's STR provisions comprehensive and effective, however, it noted that "the securities and insurance regulations are somewhat more limited in that they require reporting of suspicious transactions exceeding BRL 10,000 or transactions from the specific list, although the lists are general and broadly include most types of suspicious activities" (p. 7). Since the addition of terrorist financing as a predicate offence, all financial institutions must report suspicious transactions related to terrorist financing. Moreover, according to the 2008 U.S. DoS report, "since 2006, the COAF, BCB, SUSEP, and the Pension Funds Secretariat have issued resolutions and circulars mandating the reporting of suspected terrorist financing activity, and the reporting of suspicious or large cash transactions by politically exposed persons (PEPs)." The report also notes that the COAF received 50,320 cash transaction reports and 18,960 suspicious activity reports per month in 2007.

3. Preventive Measures - Designated non-Financial Business and Professions

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According to the 2005 IMF report, Law No. 9.613 covers several designated non-financial businesses and professions (DNFBPs). The COAF Resolution 1-8, issued in 1999 and Resolution 10 issued in 2001 define the obligations for the following sectors: real estate, factoring companies, lotteries, jewelry, precious stones and metal dealers, bingos, credit and payment card managers, commodities exchanges and their brokers, objects of art and antiques dealers and money transfer services. The Law also specifies the types of information that these DNFBPs must record for transaction records. Furthermore, the DNFBPs are required to report suspicious transactions directly to COAF. The 2008 DoS report states that in January 2008, the CVM extended AML requirements to luxury goods dealers and persons or companies dealing in large volume of cash. The 2008 U.S. DoS notes that COAF Resolution 14 of 2006 extended AML requirements to the real estate sector. The DoS report further points out that a COAF supported amendment, PLS 209, was under consideration at the senate which if passed would expand the scope of Law No. 9.613 to cover games of chance, slot machines and the clandestine art trade. The bill is expected to be passed in 2008. Despite the above information, none of the sources available addresses Brazil's compliance with the FATF's requirements relating to this principle.

4. Legal Person and Arrangements & Non-Profit Organizations

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There is insufficient information publicly available addressing Brazil's compliance with the FATF's recommendations on this principle. According to a 2006 report by the U.S. DoS, the Ministry of Justice announced plans to require all non-profit organizations to submit annual reports for the purposes of detecting the abuse of their non-profit status, including money laundering. These regulations would apply to non-governmental organizations, churches and charitable organizations, the report states.

5. National and International Co-operation

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According to the 2005 IMF report, in general, domestic co-operation between regulators seems comprehensive. With regards to international cooperation, the 2005 IMF report noted that "Brazil can provide mutual legal assistance (MLA) within the context of a treaty or on the basis of reciprocity [however] a letter rogatory will not be enforced to provide coercive measures such as the lifting of bank secrecy" (p. 5). The report also indicated that Brazil's ability to provide legal assistance on matters relating to terrorist financing is generally comprehensive. According to the Organization of American States' website, Brazil has extradition and other treaties with the U.S. and Mexico and several countries in South America. Brazil is a party to the 1988 UN Drug Convention, the UN Convention against Transnational Organized Crime, the UN Convention against Corruption, the International Convention for the Suppression of the Financing of Terrorism, and the Inter-American Convention against Terrorism. Brazil is a member of the FATF and the GAFISUD. The Government of Brazil holds the presidency of the FATF in 2008. Brazil is also a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering and the COAF has been a member of the Egmont Group since 1999. Despite the above information, none of the sources available addresses Brazil's compliance with the FATF's requirements relating to this principle.