New Anti-Money Laundering Law in Brazil

By Nathan M. Walters, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – Earlier this week Brazilian President Dilma Rousseff signed into law (Law 12.683/2012) a bill aimed at curbing money laundering offenses in Brazil.  It is a significant change from previous money laundering rules, and another in a series of actions taken by the president to (as much as possible) stamp out corruption that still hinders the country’s progress.

President Rousseff signed the bill without invoking her line-item veto authority, a statement of the commitment to reduce illegal practices that have continued in the country under the former version of the law.

First enacted in 1998, Brazil’s money laundering laws (Law 9613) did not criminalize the act of money laundering unless the money or assets in question were related to enumerated illegal activities; arms and narcotics trafficking, terrorism, kidnapping and extortion among them.

The new amendments to Law 9613 does away with the reference to underlying crimes, criminalizing the transfer of funds of which the nature or source is concealed. In addition to lowering the threshold for prosecution, the new rule enhances the criminal and civil penalties for the offense.

Under the new rules, prison sentences have been increased from three to ten years and applicable fines drastically increased from R$200K to R$20 million (a provision in the new rules provides for the discretionary use of ill-begot funds to be offset against applicable fines).

The significant increase in the penalties is hoped to act as a effective deterrent to money laundering crimes. The new rules also have some bite, providing  police and prosecutors expanded investigatory powers. Brazil’s decision to embolden the rules on money laundering brings the country more in line with concerted international efforts to stop money laundering.

In response to the September 11, 2001 terrorist attacks in the U.S. (thought to be financed by laundered funds), the U.S., EU member states, and the International Monetary Fund (IMF) strengthened rules aimed at stopping the circulation of illicit funds.

The U.S. has been very active in developing rules targeting money laundering, among them the rules related to Qualified Intermediary regime (first promulgated following the 9/11 attacks and subsequently updated).

In short, Qualified Intermediary (QI) rules require increased disclosure of information related to account holders and the source of funds, failure to provide the Internal Revenue Service (IRS) with such information results in taxation of U.S.-sourced funds.

Some see Brazil’s failure to include rules like those in force in the U.S. and in European countries a missed opportunity for Brazil. Maureen Ferreira, a lawyer in Rio, says “although the new rules advance the fight against money laundering, the new law is far from being as effective as the anti-money laundering laws in force in OECD countries.”

“Brazil would do better if it adopted a version of the American laws on QI or other laws in force in the U.S. and Europe that engage the financial institutions as surveillance agents,” explains Ferreira.

The new law may leave some wanting more, but for many the amended rules represent another step in Rousseff’s fight against corruption in the country. A battle that has already witnessed the resignation of seven ministers since Rousseff took office in January 2011.