Strengthening the Anti-Money Laundering Framework in Brazil: A Civil Society Impact Story

14 June 2024 –

With support from the UNCAC Coalition, civil society in Brazil is involved in strengthening the national anti-money laundering framework.

How are civil society voices making a difference in the fight against corruption? Stories like this one from our affiliated organization in Brazil is one way we can measure impact.

While much of our work as a Coalition is internationally focused, having an impact at a national level is a top priority as an organization dedicated to fighting corruption. Our priority is to strengthen the implementation of the UN Convention against Corruption (UNCAC) around the world.

Strengthening the legal framework on anti-money laundering is the aim of advocacy efforts by Transparency International Brazil (TI Brazil), a civil society affiliated organization of the UNCAC Coalition. By mapping legislative proposals on anti-money laundering (AML), identifying progressive ones and those that would weaken AML efforts, and drafting tailored recommendations, TI Brazil was perfectly equipped to advocate for strong legislation, addressing weaknesses and gaps, and strengthening existing measures, through meetings with parliamentarians. TI Brazil was able to raise awareness of the gaps in the country’s AML framework and gain allies in their efforts to strengthen anti-money laundering in the country. The evaluation process of Brazil by the Financial Action Task Force presented a window of opportunity for putting forward proposals to strengthen AML measures, which TI Brazil took advantage of to further advance discussions in Congress.

These efforts are part of an initiative from the UNCAC Coalition, funding civil society organizations to act on recommendations they developed through civil society parallel reports on UNCAC implementation. This initiative enables our members and affiliates to advocate for reforms in their countries. See other examples here.

In analyzing the implementation and compliance (or lack thereof) of the UNCAC in Brazil, TI Brazil identified key areas for improvement. The research informed the development of a civil society parallel report, with the UNCAC Coalition’s support to provide a civil society perspective to accompany the government’s own report on compliance. TI Brazil’s parallel report was published in September 2022 and provided detailed recommendations to address gaps in the legal framework and promote implementation on the ground. In July 2023, the organization began follow-up activities to promote key recommendations laid out in the report.

Goals of the project

Drawing on its analysis of the state of anti-corruption and UNCAC implementation in Brazil, TI Brazil set out to promote good governance, transparency and accountability through three key objectives: 

  1. Monitor and map the proposals currently under discussion in the National Congress concerning anti-money laundering (AML) issues to gain a better understanding of which proposals intend to strengthen and which ones intend to weaken the current AML framework. In its parallel report, TI Brazil found several deficiencies in Brazil’s implementation of the UNCAC provisions related to AML. This included a lack of regulation of Virtual Assets Service Providers, high vulnerability of the currency exchange market, insufficient resources for Brazil’s Financial Intelligence Unit – the Financial Activities Control Council (COAF) to adequately perform its wide-ranging functions, and a lack of information on AML investigations and criminal prosecutions, undermining evidence-based policymaking.
  2. Produce legislative proposals and achieve amendments to bills to ensure that TI Brazil’s priorities are given due consideration within the legislative process. Two key recommendations in their parallel report related to AML were to protect the anti-money laundering system against external interference and increase its integration within anti-corruption bodies; and to adopt and implement specific anti-money laundering regulations for environmental goods.
  3. Engage with parliamentarians and other key stakeholders to advocate for the inclusion of stronger proposals in bills already under consideration/analysis in Congress. Through meetings with parliamentarians and officials within the executive branch of the federal government, especially the COAF and the Ministry of Justice and Public Security, TI Brazil provided their expert opinion on ways of strengthening bills on AML. They also contributed to the public debate and strived to engage journalists around this topic if and when opportunities would arise. 

Advocacy activities

To build support for these issues, TI Brazil:

  • Mapped legislative proposals concerning AML in Congress, harnessing the capabilities of the Inteligov digital legislative monitoring platform, employing keyword-based criteria to meticulously select legislative initiatives that could potentially advance or impose setbacks in the fight against money laundering in Brazil. Initially, TI Brazil identified 67 related bills of law of significance to AML efforts.
  • Selected and analyzed the 17 most relevant legislative proposals, among which 14 would amount to positive reforms, while three would weaken the Brazilian anti-money laundering framework. 
  • Drafted amendments to the bills of law already under consideration and held meetings with parliamentarians in TI Brazil’s Advocacy Register to advocate for them to push for these changes, focusing on three bills to maximize their impact:
  1. Bill PL 2914/2022, focusing on regulating lobbying activities, which underwent significant changes after its approval in the Chamber of Deputies in 2022. Notably, Chapter VII was introduced, defining Politically Exposed Persons (PEPs), which incorporated the language from Brazil’s Financial Intelligence Unit’s (FIU) regulation but omitted the recommendation for monitoring of close collaborators and family members. If passed into law, this would revoke the FIU’s regulation, threatening efforts to prevent AML and terrorist financing in the activities of PEPs. TI Brazil had meetings with parliamentarians, as registered in their advocacy log, to advocate for the presentation of an amendment, which would preserve the FIU’s original regulation; and also met with the rapporteur’s staff. Additionally, they advocated for this amendment in a public hearing at the Senate, and sought the government’s support for this (and other) improvement to the bill through meetings with the Office of the Comptroller General (CGU).
  2. Bill PL 2720/2023, aiming to criminalize what was called ‘discrimination’ against politically exposed persons (PEPs), which would significantly weaken financial institutions’ ability to monitor and prevent money laundering of PEPs. This bill was hastily approved in the House of Representatives. There was no possibility of limiting or amending this bill to reduce its negative impact, so TI Brazil engaged in efforts to raise awareness about the implications of the bill in terms of reducing financial institutions’ ability to comply with international standards on PEPs.
  3. Bills PL 3951/2019 and PL 5272/2023, both seeking to reduce the possibility of cash transfers, which would create increased risks of money laundering. TI Brazil engaged with parliamentarians to discuss possible ways to move forward with approving these bills.
  • Provided the FATF evaluators with information on risks and potential weaknesses that could undermine Brazil’s AML framework that should be prevented in the framework of Brazil’s 2023 AML evaluation, including efforts by members of Congress to loosen restrictions on AML. 

Success and results

Through its mapping and advocacy activities, TI Brazil was able to raise awareness amongst several parliamentarians on the existing gaps in the country’s anti-money laundering framework, and push for reforms to strengthen the laws and their enforcement in practice. One of the major challenges was the extremely difficult overall political context for advancing anti-corruption proposals in Congress. Nevertheless, this project supported TI Brazil’s efforts in preventing further setbacks to Brazil’s anti-corruption legal and institutional framework. Concrete successes of these follow-up activities were that TI Brazil:

  • Created a working papers, mapping the relevant AML legislative proposals, which helped them identify which proposals to focus their advocacy efforts on;
  • Provided essential input to the Financial Action Task Force (FATF) to register concern regarding threats of  Brazil’s AML framework backsliding, and impunity in cases of corruption and money laundering, in the context of the country’s FATF review;
  • Provided a parliamentarian with suggestions of amendments to a bill on AML which a senator presented in Congress, and which is pending analysis by the bill’s rapporteur.
  • Putting a hold on the advancement of bill PL 2720/2023 by publicly denouncing it as a significant threat on Brazil’s biggest daily news show Jornal Nacional and in the country’s biggest newspapers O Globo (see here and here). This public pressure on parliamentarians led the bill to be held up in the Senate after quickly passing the House.
  • Fostered multi-stakeholder discussions about anti-money laundering in Brazil among civil society partners, who expressed interest in collaborating and actively engaging in advocacy efforts around this issue, including in actions related to regulating lobbying.

Next steps

TI Brazil’s activities and advocacy have increased visibility of the need to strengthen Brazil’s anti-money laundering framework. Although the current political context makes advancing positive reforms very challenging, TI Brazil’s recommendations to FATF and parliamentarians have contributed to discussions on existing loopholes and how to address them.  With a stronger coalition of interested civil society stakeholders, TI Brazil will continue to advocate for strengthening the anti-money laundering framework and enforcement, as well as preventing further setbacks to the anti-corruption and institutional framework in Brazil.