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Brazil

Last Updated: 06/07/2010

CENTRAL AUTHORITY FOR REPORTING

Council for Financial Activities Control.

OTHER ANTI-MONEY LAUNDERING REGULATOR(S)

ARE LAWYERS COVERED BY ANTI- MONEY LAUNDERING LEGISLATION?

Lawyers, and the legal profession as a whole, are not directly covered by AML legislation. However, they are covered under certain provisions of Law number 9.613/98, articles 9, 10 and 11. These specify the responsibilities and duties addressed to selected professionals and entities in relation to COAF. Although lawyers are not included, the general principles of the Brazilian Bar’s (OAB) Ethics and Discipline Code do apply which include:

  •  Articles 2º, Sole Paragraph, VIII, “d”: The lawyer, essential to the Justice administration, is the defender of democratic state of law, citizenship, public morality, Justice and social peace in order to observe its high public function. The article also stipulates that lawyers have a duty to refrain from co-operating with anybody that attempts against the ethics, moral, honesty and the human dignity;

  • Article 20: The lawyer should refrain from supporting any lawsuit contrary to the ethics , the moral or the legality of legal act object of his co-operation, guidance or consultation.

In addition, the Senate has tabled an amendment to bill 209 that would require lawyers to report suspicious transaction and be obliged to follow the AML obligations and, according to a report issued in 2008 by the US Department of State, this bill is expected to be enacted.

LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.

Please note that the associated documents are only available in Portuguese.

ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?

Yes. Everybody must comply with laws regarding anti-money laundering.

LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.

There is no money laundering guidance notes for lawyers. However, the guidance given by the Brazilian Bar Association (OAB) is that the professional confidentiality between lawyer and its client shall be respected.

IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?

The Brazilian Bar Association is not directly involved in supervising or enforcing AML regulations.

DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.

Article 10 of Law No.9.613 of 3 March 1998 imposes specific entities to:

I. Identify their customers and maintain updated records in compliance with the provisions set forth by the competent authorities;

II. Keep updated records of all transactions, in Brazilian and foreign currency, involving securities, bonds, credit instruments, metals, or any asset that may be converted into cash that exceeds the amount set forth by the competent authorities, and which shall be in accordance with the instructions issued by these authorities;

III. Comply with the instructions issued by the Council, established under article 14, within the time limit stipulated by the competent judicial authority. The judicial proceedings pertaining to such matters shall be conducted in a confidential manner.

When dealing with a legal entity, records should identify both the owners and the individuals who are legally authorised to represent it.

All records should be kept for a minimum of 5 years beginning on the date the account was closed or the transaction concluded.

Under Article 11, those who are legally addressed need to:

I. Pay special attention to any transaction that, in view of the provisions set forth by the competent authorities, may represent serious indications of or be related to criminal activity;

II. Report to the competent authorities within twenty-four hours and abstain from informing their clients of any reporting.

If the Senate-amended PLS 209 is enacted, these obligations will be conferred onto the legal profession.

DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?

Yes.

ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?

On March 2007, COAF issued Resolution No 16, in which the reporting requirements were specifically expanded in reference to PEPs.

The following extracts of Resolution 16 illustrates the situation for those entities subject to AML obligations:

Article 1

Paragraph 1. Politically exposed persons are public agents who are or have been entrusted with prominent public functions and positions in Brazil or in foreign countries, territories or facilities in the last five years, as well as their representatives, family members and close associates.

Paragraph 2. Concerning Brazilian politically exposed persons, paragraph 1 shall apply to:

I –  Elective office holders of Federal Executive and Legislative Branches;

II – Officials of the Federal Executive Branch holding the following positions:
  1. Minister or equivalent;
  2. Special position or equivalent;
  3. President, vice president and director position or equivalent, in governmental agencies, public foundations, public companies, or joint stock companies;
  4. Senior official position of level six or equivalent.

III – Members of the National Council for Justice, Federal Supreme Court and Federal High Courts;

IV – Members of the National Council of the Public Prosecution Service, as well as position of Attorney General of the Republic, Deputy Attorney General of the Republic, Attorney General of Labor Ministry, Attorney General of Military Justice, Under Attorney General of the Republic and Attorney General of Federal District and States Justice;

V – Members of the Federal Audit Court and the Attorney General of the Public Prosecution Service in the Federal Audit Court;

VI – State governors, Federal District governor, president of the Court of Justice, president of Legislative Assembly, president of District Chamber, president of State, City, Federal District Audit Court and Audit Council;

VII – Mayor and president of Municipal Chambers of State capitals.

Paragraph 3. Concerning foreign politically exposed persons, obligated persons may adopt the following procedures pursuant to paragraph 1:

I –   To request a written declaration from costumers to identify their identity;

II –  To access publicly available information;

III – To access commercial electronic database of politically exposed persons;

IV – To consider the definition of “politically exposed person” provided in the glossary of the FATF 40 Recommendations, not applicable to individuals in intermediate or low positions or categories, that “politically exposed persons” are individuals who are or have been entrusted with prominent public functions in a foreign country, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of stated owned corporations, important political party officials.

Paragraph 4. The five-year period referred to in paragraph 1 of this article shall be counted, retroactively, as of the date of the beginning of the business relationship or as of the date when the person began to be deemed “politically exposed person”.

Paragraph 5. In compliance with paragraph 1 of this article, spouse, companion, partner, stepchild and first-degree relatives are deemed family members.

Article 2

Pursuant to article 1 of this Resolution:

I – Reporting of financial activities to COAF, which is set out in Law 9613 of 3 March 1998, article 11, section II, shall inform that the suspect was identified as a politically exposed person;

II – Internal procedures adopted in accordance with [previous] Resolutions shall:

  1. Be structured so as to facilitate the identification of politically exposed persons;
  2. Be employed to determine the source of funds used in transactions conducted by individuals and beneficial owners identified as politically exposed persons, the compatibility between the transaction value and the equity stated in the declaration forms being checked.

Paragraph 1. Establishment or resumption of business relationship with politically exposed persons requires prior approval of the person responsible for the obligated company or prior approval of the manager or owner of an obligated entity, in compliance with regulations issued by COAF;

Paragraph 2. Obligated persons […] shall conduct enhanced ongoing monitoring of business relationships with politically exposed persons.

Article 3

Obligated persons […] shall pay special close attention to proposed business relationship and transactions with politically exposed persons of countries with which Brazil has close trade and economic relations, common boundaries, or ethnic, political and linguistic proximity.

ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?

No. However, COAF recommends the adoption of strengthened procedures to suspicious people, such as those listed this organization.   

ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.

Yes. Lawyers are not obliged to enhance due diligence measures. They can rely on financial institutions’ due diligence results, for instance, since the financial institutions are obliged to comply with these measures.

WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?

Lawyers have no specific obligation to report any event. However, the Senate’s Legislative Bill number 209, which might substitute Law No 9.613/98, outlines the obligation of legal and natural persons, who render consultancy, counselling or audit services, to inform the authorities of suspicious transactions of their clients. This bill may eventually be applied to lawyers. The exact applicability of the legislative bill will only be known after its approval, if that is the case.

DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?

Yes. Lawyers are not obliged to report suspicious transactions if the information is under attorney/client privilege. 

DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?

No.

ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?

Yes, lawyers can proceed with the legal advice even if the transaction is reported and it is not necessary to obtain consent from the authorities.  

IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.

There is a tipping off prohibition. Article 11 of Law No 9613 of 3 March 1998 states that clients should not be informed of any report. Article 12 imposes a fine for anyone found disregarding this prohibition.

DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.

Financial institutions are not obliged to reject clients classified as suspicious, but they could occasionally reject them. 

ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE.

According to article 2, paragraph 2, III of Resolution No 2554 enacted by the Central Bank, financial institutions must keep an ongoing monitoring system to evaluate their clients’ risk.

DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION.

None.  

HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?

There are public examples of lawyers who were prosecuted for money laundering offences. A few examples are: Paulo Roberto Cuzzuol, former lawyer of the drug-dealer Fernandinho Beira-Mar, João Carlos da Rocha Mattos, former federal judge, and Roberto Bertholdo, who was suspended from the Brazilian Bar Association for one year.

HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?

The International Monetary Fund (IMF) released a report in 2005 regarding the FATF’s recommendations. The report concluded that Brazil has a ‘comprehensive legal and regulatory framework’ for AML. Yet, the IMF report was conducted under the old methodology and does not reflect the recent measures that Brazil has implemented.

According to the eStandards Forum, the report highlights that Brazil does not have clear legislation for criminalising the financing of terrorism. Additionally, eStandards Forum has noted that a report by the US Department of State (DoS) in 2008  mentions that terrorist financing as yet is not an autonomous crime in Brazil. It is, instead, a predicate offence for money laundering under Law No. 10.701 of 2003. The report also highlighted the proposed amendment bill (PLS 209) which, if adopted, would bring AML/CFT more in line with the FATF’s recommendations.

There was an urgent requirement for a more recent evaluation in order to assess the effects of Brazil’s recent legislative and regulatory amendments. In order to fulfil this requirement, FATF in conjunction with the Financial Task Force on Money Laundering in South America (GAFISUD) prepared a mutual evaluation report which was adopted by the FATF Plenary on 25 June 2010.

According to this report, under Brazilian law, lawyers and notaries are referred to as ‘Uncovered Designated Non-Financial Businesses and Professions’. Such Uncovered DNFBPs are not subject to any AML/CFT obligations as is required by the FATF Recommendations.

It can be concluded that:

  • There is a total failure to comply with recommendations 5-6, 8-11, 13-15, 21;

  • As lawyers and notaries are not yet subject to AML/CFT requirements, they are also not being monitored or supervised for compliance.

For a full Mutual Evaluation Report of Brazil click here.

For an Executive Summary of the Mutual Evaluation Report click here.


Information provided by:

Horacio Bernardes Neto and
Bruno Oliveira Maggi

Xavier, Bernardes, Bragança Sociedade de Advogados
Av. Brasil, 1008
Jardim América
01430-000 - São Paulo, SP
Brasil

E-mails:  horaciobernardes@xbb.com.br   
               brunomaggi@xbb.com.br  
Website: www.xbb.com.br  


Sources:

eStandards Forum
Council for Financial Activities Control
GAFISUD
Mutual Evaluation Report
US Department of State