FCPAméricas Blog
Brazil’s New Anti-Money Laundering Law
9.05.2012
Guest Blog Post — Today FCPAméricas features Henrique da Silva Ayres, a Brazilian attorney at Trench, Rossi e Watanabe Advogados, associated with Baker & McKenzie, in São Paulo, Brazil. Carlos also co-chairs the Brazilian Institute of Business Law (IBRADEMP) Anti-Corruption and Compliance Committee. He holds a law degree from PUC/SP, a post graduate degree in law from GVLaw and an LL.M in comparative law from University of Florida.
Congress recently made major changes to Brazil’s anti-money laundering legislation in response to international recommendations. As of July 10, 2012, Law No. 12.683/2012 amends the existing legislation, incorporating the following main changes:
a) Predicate offenses broadened. The new legislation broadens the predicate offenses to encompass any criminal offense, including misdemeanors. The former money laundering legislation included only eight predicate offenses: drug dealing, terrorism, kidnapping, financial crimes, traffic of weapons, and corruption of national and foreign officials. This expansion seemed necessary because, previously, the proceeds of many serious offenses were not covered.
The fact that the new law treats not only misdemeanors but also less serious offenses as predicates has received much criticism in the local legal community. Some complain that the treatment is disproportionate. While misdemeanors are punished with fines and/or incarceration, less serious offenses are often converted into other kinds of sanctions so that the individual, ultimately, does not have to serve time in jail. But the sanction for money laundering applies equally to both categories and includes incarceration of 3 to 10 years, plus a fine.
The United Nations Convention Against Transnational Organized Crimes, to which Brazil is a signatory, addresses this issue. It provides that “each State Party shall include as predicate offences all serious crime“, and defines serious crimes as “an offence punishable by a maximum deprivation of liberty of at least four years or a more serious penalty“.
Some think the Brazilian Congress established such a broad definition of “predicate offense” in response to recent scandals involving illegal gambling operations. One such scandal has triggered a Parliamentary Investigation Commission presently ongoing before the Congress. Illegal gambling is a misdemeanor, and the new anti-money laundering law would reach it. But some say that if, in fact, this was Congress’s real intention, it should have turned illegal gambling into a felony and avoided the problem of disproportionate treatment under the new anti-money laundering law.
b) Persons obligated to report suspicious activities broadened. The new law broadens the list of individuals and legal persons obligated to report suspicious activities (“obligated persons”). It includes individuals and legal person who: (i) promote, serve as intermediary or negotiate athletes’ transfer rights, artists or fairs, exhibitions or similar events; and (ii) commercialize goods of high value from rural or animal origin or that facilitate such commerce.
One of the most controversial aspects of the new law is that it requires individuals and legal entities that provide advisory, consulting, accounting, auditing or assistance of any kind, even on a sporadic basis, to report suspicious activities in connection with the following operations: (a) sale and purchase of real state, including commercial or industrial establishment or equity participation of any kind; (b) management of funds, securities or other assets; (c) opening or management of bank accounts, savings accounts, investments or securities; (d) incorporation, exploration or management of any kind of company, foundation, trust or similar structure; (e) financial, corporate or real state transactions; and (f) sale or acquisition of rights on contracts related to professional sports or artistic activities.
This provision has raised several questions about professional secrecy. Depending on the interpretation given to this new feature of the law by the courts, attorneys might even be obligated to report suspicious activities. Entities obligated to report are also required to identify their clients and maintain and update their clients’ records.
c) Fines increased. The new law dramatically increases fines on obligated persons who fail to report suspicious activities or comply with other obligations under the law (e.g., identification and maintenance of updated client records) from R$ 200,000 (around one hundred thousand U.S. dollars) to R$ 20,000,000 (around ten million U.S. dollars). Under the former law, depending on the circumstances, it was common for some obligated persons to take the risk of not being caught. Under the new law, the calculation changes.
d) Actual knowledge addressed. The former law required actual knowledge of the illicit origin of funds. It defined money laundering as the act of those who “use, in economic or financial activity, assets, rights and valuables that are known” to be the result of a predicate offense. The new law removes the word “known.” Some interpret this to mean that those who consciously disregard or deliberately ignore known circumstances about the origin of funds might also be prosecuted. On the other hand, there are other legal arguments against such an interpretation.
Brazil’s new anti-money laundering law leaves several open questions for the courts. Judicial interpretation will play a key role in shaping the new legislation. Despite those interpretations, the new framework should cause individuals and companies to have a heightened degree of caution. In corporate compliance regimes, anti-money laundering policies and procedures are of growing importance.
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© 2013 Matteson Ellis Law, PLLC
Post authored by Carlos Henrique da Silva Ayres, FCPAméricas Contributor
Comments
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