If in 2019, a report by the analytical company Kroll already classified Brazil as the world leader in money laundering, in recent years, unfortunately, the situation has not improved.
The latest international inspection by the Financial Action Task Force (FATF), created in 1989 at the initiative of the G7 to combat money laundering and terrorist financing, has put Brazil on alert.
According to the FATF report, Brazilian law firms, particularly, are among the networks still vulnerable.
According to Transparency International, this sector lacks anti-money laundering regulations.
Protecting the right to defense guarantees Brazilian lawyers the secrecy of professional relations with their clients and businesses.
According to Transparency International and the Financial Action Task Force, many criminals exploit this “vulnerability” in the system to launder money without control or intervention.
For this reason, during its last inspection, the FATF again asked the Brazilian Bar Association (OAB) to work for better regulation.
Still, the two bodies did not even manage to meet.
The problem is not new; it occurred during a previous inspection in 2009.
Among the criminal groups that exploit this vulnerability is the First Capital Command (PCC).
“Brazil needs to crack down on the system that enables the PCC’s money laundering operations, including lawyers, bankers, accountants, members of corporations, and other professional service providers,” says David Luna, one of the world’s leading experts on the illicit economy and senior fellow for national security at the Center on Terrorism, Transnational Crime and Corruption at George Mason University in Washington.
According to the experts, lawyers should report financial transactions they conduct on behalf of their clients to the Financial Activities Control Board, or COAF.
COAF is the central authority for the system to prevent and combat money laundering, currently under the Central Bank.
However, Transparency International believes it lacks the will to do so.
The OAB has not voted to align itself with anti-money laundering legislation.
According to Transparency International, Brazil is one of the few G20 countries, along with the United States, Australia, and Canada, that does not comply with the principles of transparency in the law firm sector.
The operations of the Federal Police sadly confirm this, from Operation “Anaconda” in 2003, which uncovered a scheme to sell court judgments whose profits ended up in Swiss banks, to Operation “E$quema S” in 2020, which accused a group of lawyers of corruption.
However, the V International Congress, organized last week in São Paulo by the Institute for the Prevention and Combating of Money Laundering and Terrorist Financing (IPLD), shows that the issue is much more complex and affects many sectors of Brazilian society.
With the exponential growth of drug trafficking in recent years – according to news site UOL, PCC turnover has increased from US$1.2 million in 2004 to US$200 million in 2019 – money laundering has become a major activity for Brazil’s major criminal groups.
“From free trade zones in Paraguay or Brazil, for example in Manaus, to money laundering through commercial activities or the clandestine hawala system to transfer funds without physically moving the money, with the help of local referents, the PCC uses numerous methods to launder the proceeds of its crimes,” explains David Luna.
The PCC reinvests this money in real estate, haciendas, cattle, gold, and churches.
Illegal mining has become one of the most sought-after sectors of organized crime because of its enormous potential for money laundering.
Bernardo Mota, President of the IPLD, stated:
“The greatest vulnerabilities are in the production chain of precious metals and gems due to the lack of adequate control and inspection in the exploration, production, and marketing of metals and gems in their raw state.”
“The greatest control occurs in identifying and marketing jewelry at the end of the chain.”
“Little is being done to address the environmental crimes associated with extracting precious metals and gemstones, such as deforestation and illegal mining.”
Although the issue of legal Amazon is a workhorse of the current government, there is a lack of appropriate legislation to ensure this legality.
For Judge Fausto De Sanctis of the Federal Land Court, who has been at the forefront of the fight against money laundering and corruption for years, “the law against money laundering does not contain specific articles on environmental crimes.”
“There is only a 2020 communiqué from the Central Bank that states that action must be taken in the event of suspicion of money laundering in atypical operations in municipalities and regions where mining is carried out.”
“Also, there is no communication between environmental and financial data, which makes it difficult to find signs of money laundering related to environmental crimes.”
In the recent race to go green, greenwashing – where sustainability is used as a cover for environmentally damaging or, in some cases, illegal activities – poses an increasing risk.
This is true, for example, of illegal Brazilian timber, the main cause of deforestation in the Amazon.
It arrives “clean” in Europe thanks to false documents guaranteeing a legal origin.
There’s no point in confiscating the wood if we don’t get to the root of the problem,” explains De Sanctis, “and that is the corruption of those who issue the fake documents, namely the government agencies and the politicians.”
“And we are losing the entire Brazilian anti-corruption structure.”
This week, Lula’s decision to appoint Cristiano Zanin, the lawyer who defended him in the Lava Jato case, to the Supreme Court has sparked controversy, partly because Zanin does not have the best resume for the position.
He is neither a university professor of law nor a renowned jurist, as Article 101 of the Brazilian Constitution requires.
According to Transparency International, Zanin’s appointment “contradicts Brazil’s international commitments to judicial independence, violates the constitutional principle of impersonality, and betrays the promise to save democratic institutions.”
The recent termination of the mandate of one of the prosecutors of Operation Lava Jato, Deltan Dallagnol, as a federal deputy has also generated controversy.
Not to mention the system’s central authority for preventing and combating money laundering, COAF, which the Supreme Federal Court (STF) stripped of its authority to conduct investigations.
It can now only pass on information and has recently been the subject of heated political debate.
Just yesterday, the provisional measure adopted by Lula to transfer COAF to the Ministry of Economy expired, a decision that was criticized because it led to a paradoxical situation in which the control managed the controller. Now COAF is again managed by the Central Bank.
According to Folha de São Paulo newspaper, the Lula government has thinned out the anti-corruption sector.
The Anti-Corruption Secretariat was dissolved, and the Directorate of Special Operations became a coordinating body housed in the office of another structure.
The Directorate of Special Operations, part of the abolished Secretariat, dealt with embezzlement investigations and misuse of public funds.
Officially, the CGU claimed that even after the change, the anti-corruption function “permeates all the work of the Office of the Comptroller General.”
Unfortunately, this general scenario attracts foreign criminals. Mafia gangs such as the Italian “Ndrangheta” have long laundered their money through the construction of resorts and real estate projects in northeastern Brazil and, more recently, in São Paulo.
Not to mention terrorist groups. In July 2022, Paraguay extradited Lebanese-born Brazilian Kassem Mohamad Hijazi to the United States.
According to the US Treasury Department, Hijazi’s money laundering network has operated globally since 2017 “with the ability to launder hundreds of millions of dollars.”
As revealed by the Washington think tank Foundation for Defense of Democracies, a 2005 US diplomatic cable described Hijazi as a “leading fundraiser and activist for Hezbollah who supports Hezbollah terrorist activities.”
Hijazi used import-export companies to transport goods from the United States and sell them in Latin America.
To avoid detection, he transferred the value of the transactions to the United States, China, Hong Kong, and other locations around the world through currency exchange offices and banks in Ciudad del Este in 2017.
The investigation indicates that the man moved the illicit proceeds worldwide using a network of front companies.
David Luna stated that “illicit trafficking by Hezbollah and similar networks along the tri-border, the area between Argentina, Paraguay, and Brazil, has increased significantly in recent years.”
Criminal activities include arms and drug trafficking, especially cocaine, counterfeiting, smuggling of illegal products and pirated goods, money laundering, and other criminal activities.
This contributes to growing corruption, violence, and insecurity in Brazil, Argentina, Paraguay, and the entire region.
Hezbollah can now build a global ecosystem of illicit financing that includes the TBA, Beirut, Dubai, and other financial centers in Africa, Asia, Europe, and North America.
Much remains to be done to combat a threat such as money laundering, which appears to be increasingly global, involving politics, organized crime, and terrorism.
Experts say that without political will and effective international cooperation to punish, for example, in the case of Hezbollah, local politicians and judges who are bribed not to do their jobs will only worsen.
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