FINANCIAL ACTION TASK FORCE ON FINANCIAL ACTION TASK FORCE MONEY LAUNDERING IN SOUTH AMERICA Mutual Evaluation Report Anti-Money Laundering and Combating the Financing of Terrorism Federative Republic of Brazil 25 June 2010 Brazil is a member of the Financial Action Task Force (FATF) and the Financial Task Force on Money Laundering in South America (GAFISUD). This joint GAFISUD-FATF evaluation was adopted by the FATF Plenary on 25 June 2010. © 2010 FATF/OECD. All rights reserved. No reproduction or translation of this publication may be made without prior written permission. Requests for permission to further disseminate, reproduce or translate all or part of this publication should be made to the FATF Secretariat, 2 rue André Pascal 75775 Paris Cedex 16, France (fax +33 1 44 30 61 37 or e-mail: [email protected]) Mutual Evaluation Report of Brazil TABLE OF CONTENTS PREFACE INFORMATION AND METHODOLOGY USED FOR THE EVALUATION OF BRAZIL ... 5 MUTUAL EVALUATION REPORT ............................................................................................................. 6 1. GENERAL ............................................................................................................................................ 6 1.1 General information on Brazil ..................................................................................................... 6 1.2 General situation of money laundering and financing of terrorism ........................................... 10 1.3 Overview of the financial sector and DNFBP ........................................................................... 11 1.4 Overview of commercial laws and mechanisms governing legal persons and arrangements ... 16 1.5 Overview of strategy to prevent money laundering and terrorist financing .............................. 18 2. LEGAL SYSTEM AND RELATED INSTITUTIONAL MEASURES ............................................ 28 2.1 Criminalisation of Money Laundering (R.1 & 2) ...................................................................... 28 2.2 Criminalisation of Terrorist Financing (SR.II) .......................................................................... 40 2.3 Confiscation, freezing and seizing of proceeds of crime (R.3) ................................................. 44 2.4 Freezing of funds used for terrorist financing (SR.III) .............................................................. 54 2.5 The Financial Intelligence Unit and its functions (R.26) .......................................................... 60 2.6 Law enforcement, prosecution and other competent authorities – the framework for the investigation and prosecution of offences, and for confiscation and freezing (R. 27 & 28) .................. 72 2.7 Cross Border Declaration or Disclosure (SR.IX) ...................................................................... 82 3. PREVENTIVE MEASURES – FINANCIAL INSTITUTIONS ........................................................ 90 3.1 Risk of money laundering or terrorist financing...................................................................... 101 3.2 Customer due diligence, including enhanced or reduced measures (R.5 to 8) ........................ 101 3.3 Third parties and introduced business (R.9) ............................................................................ 130 3.4 Financial institution secrecy or confidentiality (R.4) .............................................................. 130 3.5 Record keeping and wire transfer rules (R.10 & SR.VII) ....................................................... 132 3.6 Monitoring of transactions and relationships (R.11 & 21) ...................................................... 140 3.7 Suspicious transaction reports and other reporting (R.13-14, 19, 25 & SR.IV) ...................... 147 3.8 Internal controls, compliance, audit and foreign branches (R.15 & 22) .................................. 156 3.9 Shell banks (R.18) ................................................................................................................... 161 3.10 The supervisory and oversight system - competent authorities and SROs Role, functions, duties and powers (including sanctions) (R.23, 29, 17 & 25) .............................................................. 163 3.11 Money or value transfer services (SR.VI) ............................................................................... 192 4. PREVENTIVE MEASURES – DESIGNATED NON-FINANCIAL BUSINESSES AND PROFESSIONS ....................................................................................................................................... 195 4.1 Customer due diligence and record-keeping (R.12) ................................................................ 196 4.2 Suspicious transaction reporting (R.16) .................................................................................. 199 4.3 Regulation, supervision and monitoring (R.24-25) ................................................................. 201 4.4 Other non-financial businesses and professions (R.20) ........................................................... 204 5. LEGAL PERSONS AND ARRANGEMENTS & NON-PROFIT ORGANISATIONS ................. 207 5.1 Legal Persons – Access to beneficial ownership and control information (R.33) ................... 207 5.2 Legal Arrangements – Access to beneficial ownership and control information (R.34) ......... 215 5.3 Non-profit organisations (SR.VIII) ......................................................................................... 216 6. NATIONAL AND INTERNATIONAL CO-OPERATION ............................................................ 221 © 2010 FATF/OECD - 3 Mutual Evaluation Report of Brazil 6.1 National co-operation and co-ordination (R.31) ...................................................................... 221 6.2 The Conventions and UN Special Resolutions (R.35 & SR.I) ................................................ 227 6.3 Mutual Legal Assistance (R.36-38, SR.V) .............................................................................. 230 6.4 Extradition (R.37, 39, SR.V) ................................................................................................... 243 6.5 Other Forms of International Co-operation (R.40 & SR.V) .................................................... 250 7. OTHER ISSUES ............................................................................................................................... 257 7.1 Resources and statistics ........................................................................................................... 257 7.2 Other relevant AML/CFT measures or issues ......................................................................... 257 7.3 General framework for AML/CFT system (see also section 1.1)............................................ 257 TABLES ...................................................................................................................................................... 259 Table 1. Ratings of Compliance with FATF Recommendations ....................................................... 259 Table 2. Recommended Action Plan to Improve the AML/CFT System .......................................... 270 ANNEX 1: Abbreviations ...................................................................................................................... 284 ANNEX 2: All bodies met during the on-site visit ................................................................................. 288 ANNEX 3: Provisions of key laws, regulations and other measures ..................................................... 289 ANNEX 4: List of all laws, regulations and other material received ..................................................... 305 ANNEX 5: COAF training statistics ...................................................................................................... 309 ANNEX 6: BACEN – Training on AML/CFT for employees in the supervision area .......................... 316 ANNEX 7: BACEN: International training on AML/CFT for employees in the supervision area ........ 320 4 - © 2010 FATF/OECD Mutual Evaluation Report of Brazil PREFACE INFORMATION AND METHODOLOGY USED FOR THE EVALUATION OF BRAZIL 1. The evaluation of the anti-money laundering (AML) and combating the financing of terrorism (CFT) regime of the Federative Republic of Brazil (hereinafter Brazil) was based on the Forty Recommendations 2003 and the Nine Special Recommendations on Terrorist Financing 2001 of the Financial Action Task Force (FATF), and was prepared using the Methodology for Assessing Compliance with the FATF 40 Recommendations and the FATF 9 Special Recommendations, 27 February 2004 (updated as at February 2009). As Brazil is a member of both the FATF and the Grupo de Acción Financiera de Sudamérica (GAFISUD), this evaluation was conducted jointly by both bodies. The evaluation was based on the laws, regulations and other materials supplied by Brazil, and information obtained by the evaluation team during its on-site visit to Brazil from 26 October to 7 November 2009, and subsequently. During the on-site the evaluation team met with officials and representatives of all relevant government agencies and the private sector. A list of the bodies met is set out in Annex 2 to the mutual evaluation report. 2. The evaluation was conducted by an assessment team, which consisted of members of the FATF and GAFISUD Secretariats and FATF and GAFISUD experts in criminal law, law enforcement and regulatory issues: Ms. Valerie Schilling and Ms.