LatinFinance - November/December 2017 - 16

Source: Reuters

The lobbyist and concert promoter Adir Assad has said his good
relationships with banks allowed him to access large amounts of cash
to pay bribes. Luiz Eduardo da Rocha Soares, who handled illicit
payments for the local engineering firm Odebrecht, has said the local
banks' "somewhat flawed" compliance standards made it easier

CRACKING DOWN: Brazilian authorities are strengthening measures
designed to combat money laundering

to circulate dirty money in Brazil than in the United States. The
currency trader Luccas Pace has said he worked with four local
banks that willingly ignored transactions with shell companies
and fake bank accounts. In 2015, a manager at state-owned lender
Banco do Brasil received jail time for helping the dollar trader
Nelma Kodama launder some $300,000 per day.
According to local press reports, the Lava Jato investigators are
now looking into the roles that Brazil's financial institutions played
in the corruption schemes.
"One thing is to have controls in place," Carli says. "Another
thing is to enforce them."
Cost of compliance
Brazil passed its first anti-money laundering law in 1998. The law
has been updated over the past few years, widening the number of
activities that banks have to report to 106 from 43.
As a result, the Council for Financial Activities Control,
or COAF, the division of the Finance Ministry that leads the
government's activities to combat money laundering, produced
5,662 case reports in 2016, compared to 1,149 in 2010. The
council was already close to passing last year's totals by the end of
August this year.
The rise in COAF cases can be traced in part to increased
investments in compliance procedures by Brazil's financial
institutions, according to the local banking association Febraban.
In a statement to LatinFinance, Febraban said its member
institutions reported 56,000 suspicious transactions to COAF last
year and 34,000 between January and July of this year.
Brazil's banks have expanded their compliance teams and
invested in technology to screen illicit activity. Alexandre da
Silva Gluher, the chief risk officer at Bradesco, says Brazil's

16 L ATINFINA NCE.COM - November/December 2017

second largest privately-owned bank has added 300 people to
the compliance and ethics department in the past year, bringing
the total to 1,600 employees involved in the prevention of money
laundering.
Even as Brazil's banks increase their efforts to combat corruption,
government regulators are not likely to apply less pressure anytime
soon. "The central bank is looking at banks very closely, especially
now that revelations are coming from all parties involved," says
Maria Balbina Martins de Rizzo, an independent consultant who
advises banks on to how to identify and avoid money laundering.
The central bank has performed 200 audits in the past three years
to determine if local banks are doing enough to prevent money
laundering, the bank said in an email to LatinFinance.
New regulations keep coming and compliance costs keep rising.
The central bank's national monetary council, or CMN, has ruled
that local financial institutions must implement new mandatory
compliance guidelines by the end of the year. The securities
commission CVM is preparing its own compliance guidelines for the
organizations it supervises, many of which belong to banking groups.
Carli points out that Brazil's highly regulated financial system
makes it simple to implement additional controls, but some banks
have griped that the rules are piling up and some of them appear to
replicate demands already in place.
Among the more rigorous new standards, the central bank will
require banks to report any cash withdrawals above 50,000 reais,
down from the current trigger at 100,000 reais. Customers will also
have to inform banks of large transaction three days in advance,
instead of the 24-hour notice now required.
Absurd levels
In a September raid in Salvador, the state capital of Bahia, Brazil's
Federal Police found several suitcases and cardboard boxes stuffed
with 51 million reais in cash. The stash, which included more than
$8 million in dollars, was tied to Geddel Vieira Lima, a former
member of congress who had also been a minister in the Temer
administration.
"It's not that we weren't worried before about the comings and
goings of bags full of money," says Claudio Damasceno, head of the
tax auditors' labor union Sindifisco. "But this case has shown us that
we have stepped up to absurd levels."
Even if banks adhere to all the new rules, some skeptics do not
expect that much will change. "No compliance tool can prevent a
dishonest employee from opening the doors of the bank to a money
laundering professional," Rizzo says. "Banks' internal audits and
control systems make it likely that irregularities will be spotted
eventually. But for a while an employee can get away with it."

CARLA DE CARLI, MPF

"THE COLOSSAL AMOUNTS OF
MONEY THAT HAVE BEEN
LAUNDERED IN THE PAST DECADE
WOULD NOT HAVE BEEN POSSIBLE
WITHOUT A DEGREE OF LENIENCY
FROM CERTAIN FINANCIAL
INSTITUTIONS"
http://www.LATINFINANCE.COM
Table of Contents for the Digital Edition of LatinFinance - November/December 2017
