20 September 2022 –
A new civil society report authored by Transparency International – Brazil finds that while Brazil has advanced in the implementation of articles of Chapter II (Preventive Measures) and Chapter V (Asset Recovery) provisions of the United Nations Convention against Corruption (UNCAC), it still needs to further develop institutions, policies and practices, and must fight risks to democracy and rule of law and revert recent setbacks that harm previous developments. The CSO produced its report, which is intended as a contribution to the UNCAC implementation review process in its second cycle, with technical and financial support from the UNCAC Coalition.
Brazil has advanced in relation to preventive anti-corruption policies and practices by consolidating several anti-corruption bodies and creating the National Strategy Against Corruption and Money Laundering (ENCCLA), an effort to foster cooperation among agencies. This forum published its first Anti-Corruption Action Plan in 2018, which was an important measure that still lacks specificity and clear responsibilities. In addition, ENCCLA has made efforts to advance in the connection of anti-corruption actions and the broader fight against organized crime, including in relation to environmental crimes. Besides the difficulty in effectively coordinating anti-corruption bodies and actions, ENCCLA has also suffered from a lack of institutionalization, since its structure and functioning are not established in law. Brazil’s anti-corruption body, the Office of the Comptroller General (CGU), has helped with the development of integrity measures within the government structure and has been replicated in states and municipalities. The CGU, however, is still understaffed and lacks legal footing granting the necessary institutional autonomy, making it vulnerable to undue interference. Furthermore, Brazil needs to implement effective whistleblowing mechanisms and protection measures, reinforce budget transparency, publish beneficial ownership data, enforce its access to information legislation and advance the availability and use of open data.
After years of institutional anti-corruption development with the consolidation of both preventive and sanctioning practices, the country now faces setbacks that compromise democracy, rule of law and human rights. Since 2019, legal and institutional anti-corruption frameworks in Brazil have suffered several blows, with political interference in agencies, eroding or limiting the scope of practices and policies, such as the Administrative Improbity Act, conflicts between branches of government and threats to civil society and the media. Due to such recent developments, Brazil’s compliance with the UNCAC is at risk, despite the developments seen in the past and now registered in this report.
The official UNCAC review process in Brazil was scheduled to begin in 2019. The government has filled out and submitted its self-assessment checklist, but the country visit initially scheduled for March 2020 was postponed due to the ongoing Covid-19 pandemic and happened in May 2022. Civil society organizations have not been sufficiently consulted in the review process, aside from a meeting with reviewing states on May 12, 2022. The review documents will be available on Brazil’s UNODC country profile page once they are finalized.
The following are some of the main findings according to topic:
Public sector employment
Brazil has a consolidated public service, especially concerning the access and stability of effective positions. However, important gaps remain when it comes to freely nominated positions, which are often subject to nepotism, embezzlement, logrolling and other irregular practices. The country lacks legal references to fight these practices, which negatively affects the enforcement of anti-corruption standards. Oversight mechanisms, risk assessments, clear hiring standards and selection procedures for some offices would be important measures to tackle this issue.
Brazil has advanced in the transparency of legal donations and in its capacity to identify illegal contributions, but shortcomings in political financing remain. The Superior Electoral Court has strived to increase transparency, accountability and the use of open data, monitoring resources and expenditures during and after elections. However, there are still gaps in relation to the use of slush funds (“caixa dois”) by political parties and electoral campaigns, a practice that was widely uncovered by Operation Carwash. The criminalization of “caixa dois” could be a way to more efficiently identify and fight this practice, as well as a way to transfer of criminal competence from the Electoral Justice to courts of general jurisdiction. In addition, the Supreme Court decision that prohibited donations from legal entities helped balance access to resources during elections, but created a rush to increase the amount of public funds available to candidates and parties – another issue that must be tackled.
Codes of conduct, conflicts of interest and asset declarations
Brazil has also implemented codes of conduct, mechanisms to prevent conflicts of interest and some monitoring of asset declarations for civil servants. The Clean Record Act, currently at risk, was an important improvement to regulate the right to run for office in electoral procedures, not allowing individuals who were convicted to run in two instances. Besides, the federal government and many subnational governments have adopted codes of conduct and the Office of the Comptroller General monitors the evolution of asset declarations for federal civil servants. However, there is still a lack of a systematized effort to monitor conflicts of interest in the Legislative and in the Judiciary, whereas the existing Federal Administration’s policy on this issue is poorly enforced.
The country has adopted insufficient actions to implement effective and safe reporting mechanisms and whistleblower protection measures. Brazil has no centralized system for the collection of corruption reports, but the Office of the Comptroller General offers a platform regarding cases in the federal administration (www.Fala.br), even anonymously. Law No. 13,608/2018 fosters the adoption of reporting mechanisms in Brazilian states and municipalities, a role that is normally supervised by local ombudspersons or comptrollers. However, enforcement remains insufficient, which aggravates in light of the lack of effective protection measures. Furthermore, Brazil has failed to implement a coordinated national system to foster whistleblowing and protect whistleblowers, currently relying on sparse initiatives without proper legal footing. This is especially worrying due to the perils faced by those who decide to report wrongdoings and violations in the country.
In September 2018, Brazil signed the Regional Agreement on Access to Information, Public Participation and Justice in Environmental Matters in Latin America and the Caribbean, also known as the Escazú Agreement, which, among other things, creates protections to environmental activists. While the agreement entered into force in April 2021, Brazil is yet to ratify it, since President Bolsonaro has still not submitted the agreement to Congress’s approval.
Brazil has a complex procurement system in place, which is guided by multiple rules that concentrate regulation on the federal level. Transparency and integrity have been increasing, with good levels of access to information due to transparency portals. The Covid-19 pandemic, however, represented a challenge to access to information, with laxer oversight mechanisms and higher risks of corruption. In 2021, Brazil approved Law No. 14,133/2021, promoting a wide reform of procurement legislation. Among the changes to modernize the sector, this piece of legislation inaugurated a National Platform of Public Procurement, created the role of “procurement officer” within the administration, introduced the obligation that companies have compliance and integrity programs to bid for certain contracts, instituted performance bonds and increased criminal penalties for procurement-related crimes. Nevertheless, a lack of efforts to advance open data in procurement on the side of the federal government is notable.
Legislation on the management of public finances has been generally enforced since the Fiscal Responsibility Act, approved in 2000, and the Federal Court of Accounts has built important expertise in this area, despite the fact that its councilors have political ties and lack the necessary independence. One relevant deadlock in Brazil’s finances regards the use of parliamentary amendments to the budget as currency for political support. In 2021, it was revealed that the government was using a so-called ‘secret budget’ to grant support in the Legislative. In exchange for the power to define the use of resources, members of Congress would vote within the government’s interests. This is a serious violation of transparency and integrity in the management of public finances and puts the national budget at stake.
Access to information and participation of society
Access to information and participation of society have increased since the Constitution of 1988 came into force, but obstacles remain. The Access to Information Act was an important achievement to civil society and the media. Although it increased social oversight of government bodies, it still lacks measures to grant the necessary independence to access to information authorities on each federative level and to regulate exceptions to publicity – an aspect that recently became an opening to excessive secrecy. Public participation has also advanced throughout the years, but developments in the past years have led to a massive extinction of collegiate bodies by the Brazilian government. Environmental bodies are among the most affected ones, as the space for civil society in that area has been seriously constrained.
Independence in the judiciary
In Brazil, both the Judiciary and prosecution services are independent institutions with functional and administrative autonomy. They are overseen by specific bodies, namely the National Council of Justice (CNJ) and the National Council of the Public Prosecutor’s Offices (CNMP), created in 2004 to increase transparency, efficiency and integrity within both institutions. The councils, however, still lack a robust integrity program, reliable reporting mechanisms and effective sanctions for wrongdoings. Besides, high-level authorities in the Judiciary and the Public Prosecution have been questioned for having connections with politicians and for lacking the necessary independence to perform their duties.
Private Sector transparency
The approval of the Clean Company Act (Law No. 12,846/2013) represented a major stride to prevent corruption in the private sector, having led to the conclusion of leniency agreements, the imposition of sanctions and the adoption of integrity programs. Nevertheless, it has raised some doubts regarding the ability of enforcement agencies to implement the law, since one of the main challenges concerns the uncertain extent of powers attributed to them and their general lack of coordination. Also, Brazil still lacks effective measures to promote beneficial ownership transparency, although there are already rules on the collection of such data.
Law No. 9,613/1998 represented an important advance in anti-money laundering, creating a comprehensive legal framework and originating the Council for the Control of Financial Activities (COAF). The law was amended in 2012 to expand the scope of predicate crimes, increase procedural efficiency, impose obligations to new entities and expand those that apply to financial and non-financial institutions. Nevertheless, some issues remain, such as the need to regulate anti-money laundering obligations of political parties and law firms. Besides, there is an increasing need to improve regulation of money laundering connected to environmental crimes, as well as in sectors such as factoring, precious metals and jewels, virtual asset service providers, among others. Furthermore, Brazil’s financial intelligence unit, COAF, lacks the resources to adequately perform its wide-ranging functions and has suffered recent attacks to its independence and efficacy from the Executive and the Supreme Court.
In addition, financial services are under robust regulation from different institutions: the Central Bank of Brazil (BACEN) supervises financial institutions and monitors the financial system, the Securities and Exchange Commission (CVM) supervises the securities and exchange market and the Superintendence of Private Insurance (SUSEP) supervises the insurance, reinsurance, pension plans and capitalization markets. Although regulation in this sector seems to meet international standards, there is a lack of data on the actual enforcement performed by such agencies.
Brazilian legislation allows other states to directly pursue the recovery of assets through national courts, although no concrete case was found. The same applies to the possibility of proactively sharing information with foreign states: although there is no prohibition in law, no example of such practice was identified.
Brazil’s efforts to foster international cooperation for the purpose of confiscation are based on its anti-money laundering legislation, signed treaties and recent legal developments, such as the mechanism of “expanded confiscation” (confisco alargado). The country’s main authority on international cooperation is the Department for Asset Recovery and International Cooperation (DRCI), a division within the structure of the Ministry of Justice created in 2004 that largely draws its members from the Federal Police. The DRCI, although responsible for important advances during the Car Wash investigations, still lacks adequate resources and staff to perform its duties and has low institutional independence, being vulnerable to political interference as in recent episodes.
In its report, Transparency International – Brazil makes several key recommendations for priority actions to be taken to ensure the full implementation of the UNCAC in Brazil, for example:
- Strengthen institutional guarantees for anti-corruption bodies, such as ENCCLA, the Federal Police and the CGU, and protect them from external interference, ensuring legal footing, autonomy, financial stability and the staff needed to pursue their activities;
- Leverage the capacities and the experience of anti-corruption and anti-money laundering institutions to tackle environmental crimes;
- Develop an integrated national program specifically dedicated to corruption reports and to the protection of whistleblowers, including land and environmental defenders, providing safe channels and publishing updated and transparent data on their efficiency;
- Revoke the Special Fund for Campaign Financing or approve limitations to the amount of resources directed to it and to how parties and campaigns can deploy them;
- Redistribute criminal attributions in cases connected with electoral crimes from the Electoral Justice to the Federal Justice, so that electoral courts, judges and prosecutors may focus on monitoring campaign and party accounts and organizing elections;
- Improve transparency and auditing practices over the approval and execution of parliamentarian amendments to the budget;
- Approve rules creating a cooling-off period for the nomination of individuals to public offices, such as the Supreme Federal Court, the Office of the Prosecutor General, the Federal Court of Accounts and other national and subnational institutions;
- Develop stricter accountability mechanisms for judges and prosecutors, respectively, at the National Council of Justice and the National Council of the Public Prosecution;
- Ensure the disclosure of all data of public interest – including environmental – when possible in open format, and respect deadlines and legal requirements for responses to freedom of information requests;
- Revert measures undertaken by the current administration that extinguished councils and reduced civil society participation from public collegiate bodies;
- Enforce rules on the registration of beneficial ownership and grant the transparency of such data;
- Protect the anti-money laundering system against external interference and increase its integration with Brazil’s multiple anti-corruption bodies.