Anti-money laundering and financial crime prevention

Requirements

What are the main anti-money laundering and financial crime prevention requirements for private banking and wealth management in your jurisdiction?

There are no specific anti-money laundering and financial crime prevention requirements for private banking and wealth management but rather to financial institutions in general. Similar requirements also exist for asset managers and securities advisers.

Such requirements are mainly the following:

  • identification of clients and know your client procedures;
  • keeping updated client records, which allow the identification of compatibility between the transactions, the economic activity and financial capacity of its client, the origin of the funds, and the final beneficiaries of transactions;
  • keeping records of any transactions exceeding the limits set forth under Brazilian regulation;
  • adoption of policies, internal procedures and controls adequate to the amount and volume of the transactions entered; and
  • reporting suspicious transactions to the Council for Financial Activities Control (COAF).
Politically exposed persons

What is the definition of a politically exposed person (PEP) in local law? Are there increased due diligence requirements for establishing a private banking relationship for a PEP?

In summary, politically exposed persons (PEP) are defined under Brazilian law as any government officials who have held or been entrusted with, during the previous five years, in Brazil or in foreign countries, territories and jurisdictions, any prominent government position, employment or function, as well as their representatives, relatives and close associates.

Whenever dealing with PEPs, financial institutions shall adopt enhanced due diligence procedures, which encompass the following measures:

  • ongoing enhanced monitoring by adopting more stringent procedures to investigate into suspicious activities;
  • analysis to verify the need of reporting suspicious transactions pursuant to the Brazilian regulations; and
  • assessment by senior management regarding the interest in initiating or maintaining a customer relationship.
Documentation requirements

What is the minimum identification documentation required for account opening? Describe the customary level of due diligence and information required to establish a private banking relationship in your jurisdiction.

Financial institutions are required to collect and keep up-to-date record data on their regular customers, including, among others:

  • full client identification:
  • complete residential and business addresses;
  • telephone number;
  • monthly income and wealth (for individuals) and average monthly revenues for the past 12-month period (for legal entities); and
  • a signed statement regarding the purposes and type of the business relationship with the institution in question.

 

Asset managers and securities advisers are also required to keep records of customer data, which shall contain customers’ full identification and appropriate documents.

Tax offence

Are tax offences predicate offences for money laundering? What is the definition and scope of the main predicate offences?

Brazilian legislation establishes tax fraud and money laundering as different criminal offences.

The characterisation of a tax fraud depends on the wilful act of evading taxes through false statements, omission of information, falsification of documents and other similar procedures.

On the other hand, money laundering crimes are verified upon the concealment or dissimulation as to the true nature, origin, location, availability, transaction or ownership of assets, rights or valuables that are connected to any criminal activity.

Individuals involved in tax fraud are subject to the penalty of imprisonment from two to five years plus fine. In the case of money laundering crimes, the penalty is imprisonment from three to 10 years plus fine. Given that these are separate crimes under Brazilian law, the penalties may be aggregated.

In the case of tax fraud, that the Brazilian tax authorities may initiate an administrative proceeding leading to a tax assessment of the uncollected tax increased by fine of up to 150 per cent plus interest.

Compliance verification

What is the minimum compliance verification required from financial intermediaries in connection to tax compliance of their clients?

As a general rule, financial intermediaries are required to maintain a proper identification of their clients and to adopt adequate and updated record keeping systems for this client information, as well as afford special attention to transactions that may serve as substantial indicia of crimes.

Considering the recent attention to private banking transactions with non-declared funds by Brazilian residents, it is advisable that financial institutions also request to their clients proper documentation evidencing that the client funds are in compliance with tax reporting obligations.

Liability

What is the liability for failing to comply with money laundering or financial crime rules?

Non-compliance with Brazilian anti-money laundering rules may generally be subject to the following penalties to be assessed on a case-by-case basis:

  • warning;
  • a variable fine not exceeding: twice the transaction value, twice the actual profit obtained or conceivably obtainable from the transaction, or 20 million reais;
  • temporary disqualification of the involved officers and employees of the company for a period of up to 10 years; and
  • cancellation or suspension of the authorisation or licence to operate.

Law stated date

Correct on

Give the date on which the information above is accurate.

3 July 2020.