Brazil Arrests 24 in Money Laundering Operation

By Maria Lopez Conde, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Brazil’s federal police arrested 24 people accused of laundering over R$10 billion in six states across Brazil this Monday, March 17th. The arrests were part of the federal police’s Lava Jato (car wash) operation, which included the apprehension of luxury vehicles and large amounts of money in euros and dollars.

The money came from diverse criminal activities, the federal police said, largely international drug trafficking, corruption, tax evasion, as well as from the illegal extraction and sale of diamonds. The Brazilian police force also said that the investigation involved “some of the main actors of the clandestine money exchange market in Brazil,” according to a police representative.

Money laundering associated to drug trafficking and corruption, though a widespread problem in Brazil, has been historically connected to a low number of convictions, according to the Financial Action Task Force international nonprofit.

The operation’s name – “car wash” – is an allusion to the criminal groups’ use of a network of laundrettes and gas stations to convert money from illicit activities into legitimate funds. Approximately four hundred federal police were involved in the operation, which involved the execution of 81 arrest warrants, eighteen preventive prison warrants, ten temporary prison warrants and 19 coercive citations in seventeen cities in Brazil.

The warrants in the cities of Brasília, São Paulo, Curitiba, Rio de Janeiro and Cuiabá, among others, were issued by the Federal Justice of the state of Paraná. The warrants also froze and seized assets that were allegedly obtained through criminal activities. In the Federal District, three suspects were arrested, including Carlos Chater, the owner of one of the largest gas stations in Brasília, which also houses a currency exchange facility.

In São Paulo, one of the suspects arrested in the operation was Enivaldo Quadrado, who was already condemned for money laundering in the landmark mensalão corruption trial. Quadrado, a former shareholder of stock broker Bônus Banval, was arrested in the city of Assis, São Paulo state, where he is serving a three year and six month community service sentence for money laundering.

The four criminal groups that were investigated were led by U.S. dollar dealers which made a profit off of illegal currency exchanges, but that also engaged in drug trafficking, illegal sale of precious stones and corruption of public agents. Márcio Anselmo, the delegate that conducted the investigation, said in a press conference in Curitiba city, Paraná, that the four gangs acted independently but had contact with each other.

The groups are estimated to have moved R$10 billion in the last ten years, according to information obtained from the Council of Control of Financial Activities (COAF), part of Brazil’s Treasury. Besides utilizing laundrettes and gas stations to hide illicit funds, they opened shell companies in Brazil and abroad to forge imports and exports contracts, which allowed them to evade taxes as well. Delegate Anselmo explained the sophisticated money laundering system in Curitiba to the press.

“They took advantage of some positive and negative externalities, such as when the Central Bank abolished the exports currency exchange controls. Those doleiros (currency exchange heads) took advantage of that and we have more than US$250 million in forged imports. They faked an export to a shell company that was also theirs abroad and sent that money abroad and from there sent it to their final owners,” the delegate said on Monday morning.

In July 2012, Brazil’s President Dilma Rousseff signed an expansion of the penalties on money laundering offenses in Brazil. The initiative came in the wake of the mensalão scandal, which condemned high-ranking political party and government officials for corruption, embezzlement, as well as money laundering, in a vote-buying scheme in the National Congress in 2004-2005. The expansion strengthened prison sentences for money laundering and facilitated prosecution for the offense.