Action of the State and the Role of the Central Bank of Brazil

 

In the nineteen eighties, preventing money laundering became a prior strategy on fighting criminal organizations, specially those involved on drug trafficking. Many countries and international organizations started promoting the adoption of measures to inhibit the increase of such crime. In 1988, after the Vienna Convention, under the United Nations scope, many international agreements were signed. The Convention were ratified in Brazil under the Decree 154/1991 which aimed at promoting international cooperation in the matters related to the drug trafficking.

In 1989, it was created the Financial Action on Money Laundering Group (FAML/ FATF) under the Organization for Cooperation and Economic Development. The main purpose of FAML/FATF is to develop and promote policies, both at national and international levels, to combat money laundering and terrorist financing. In that matter, the FAML/ FATF published a total of 40 recommendations to prevent and fight money laundering and afterwards another nine recommendations targeting anti terrorism funding. Brazil became part as an observer of FAML/FATF in 1999 and became an actual member in 2000.

At the same time, it was noticed the need for international cooperation and for the settlement of a mutual support forum to exchange information about suspicious transactions through a high security network. For that reason, in 1995 it was formed the Egmont Group that brought together Financial Intelligence Units (FIUs) of many countries.

In the Brazilian state structure of money laundering prevention, the COAF took the spotlight. It is an intelligence unit within the scope of the Ministry of Finance, established under the Law 9.613/98 and organized under the Decree 2.799/98. It is a collective resolution organ which plenary is comprised of representatives of the Central Bank of Brazil (BACEN), The Securities and Exchange Commission of Brazil (CVM), Superintendence of Private Insurance (SUSEP), Federal Revenue Attorney General's Office (PGFN), Secretariat of the Federal Revenue of Brazil , Brazilian Intelligence Agency ( ABIN), Federal Police Department (DPF), Ministry of External Relations (MRE), Controller General of the Federal Government, Ministry of Social Security and Ministry of Justice - Department of Assets' Recovery and International Legal Cooperation (DRCI).

The COAF competences are:

  1. Coordinate and suggest instruments of cooperation and information exchange which allows immediate and efficient actions to prevent and fight the concealing of goods, rights and values;
  2. Receive, analyze and identify suspicious occurrences of illegal activities foreseen by law;
  3. Discipline and apply administrative punishment to companies linked to the sector that do not have a self regulatory body or their own supervision and;
  4. Communicate to the competent authorities seeking for the appropriate procedures when evidences of the practice of money laundering or any other crime are found.

Another highlight is the Department of Assets Recovery and International Legal Cooperation (DRCI) created by the Decree 4.991 on the 18th February 2004, under the National Secretary of Justice (SNJ) from the Ministry of Justice. The Department has as its main role the scenario analysis, the identification of treats, the definition of effective and efficient policies and the development of a culture of combating money laundering.

These roles aim at reclaim assets sent abroad illegally as well as those which are the result of criminal activities such as drug trafficking, trafficking of illegal weapons, corruption and the deviation of public money. Furthermore, the DRCI is responsible for international agreements of international legal cooperation, both in penal and civil matters, acting as the main authority in Brazil for the exchange of information and international judicial requests.

As one of the administrative authorities in charge of applying the Law 9.613/1998, the Central Bank of Brazil published a series of norms establishing that all financial institutions under its regulation must: keep their customers' records updated; keep internal controls in order to verify either the appropriate customer's identification, the compatibility between the corresponding resources movements, the economic activity and financial capacity from the users of the national financial system; keep operations' records; inform operations or suspicious situations to the Central Bank of Brazil; promote training to their employees and; implement internal procedures to detect suspicious operations.

In this scenario, the role of the Central Bank is to assess the internal controls of each supervised institution in order to prevent illegal financial trades, money laundering and terrorism funding. The aim of the supervision is to verify the adequacy and the quality of the procedures implemented in order to restrain the use of the financial system for illegal practices and to guarantee the observance of law and regulation in their activities.

Finally, we highlight the National Strategy of Anti Corruption and Money Laundering (ENCCLA) created in 2003 to coordinate the strategy to fight money laundering, to provide training and qualification programs to public agents, and to provide access to data.

To be able to create a strategy, the leaders of the organizations involved with this matter identify the existing problems and define the aims of anti money laundering system.