Brazil’s Ambitious Push to Close AML Gaps: What BRL 44.2 Million in Fines Reveals

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Brazil continues to overhaul its anti-money laundering and counter-terrorist financing (AML/CFT) framework, responding to both domestic risks and international expectations. Despite a history of enforcement gaps, the country has ramped up penalties, broadened regulatory reach, and taken aim at emerging threats from cryptocurrencies and high-value assets. Still, Brazil’s multi-billion-dollar financial crime risk and persistent weaknesses in supervision keep it under close global scrutiny.

Below, this article offers a comprehensive look at the state of AML/CFT compliance in Brazil, the challenges of regulating a fast-moving financial landscape, the impact of legislative change, and the evolving role of the national financial intelligence unit.

Brazil has long faced elevated financial crime risks, ranking among the world’s top countries in suspicious activity alerts, especially those related to shell companies. The presence of sophisticated networks, lax oversight in certain sectors, and a fast-growing fintech environment create persistent vulnerabilities. According to recent risk analyses, shell companies and complex legal structures remain common tools for laundering proceeds of crime, obscuring beneficial ownership and complicating regulatory oversight.

The country’s official financial intelligence unit, the Council for Financial Activities Control (COAF), recorded over 1.3 million alerts for potential financial crime in 2023 alone, a number that reflects both improved detection and ongoing risk. Many of these alerts stem from sectors outside traditional banking, including luxury goods, precious metals, factoring, and athlete transfer negotiations—areas where regulatory frameworks are often less robust or evolving.

Internationally, the Financial Action Task Force (FATF) has recognized Brazil’s progress, but it continues to urge enhanced interagency cooperation and more effective prosecution. While major banks generally maintain high compliance standards, enforcement remains inconsistent across non-banking sectors and emerging industries such as online betting and crypto asset service providers. These gaps can create safe havens for money laundering activities.

AML Legislation in Brazil: New Penalties and Broader Scope

Brazil’s legislative landscape is actively shifting to address these threats. The National Congress is considering Bill 4398/24, which seeks to stiffen penalties for money laundering offenses. If enacted, the bill would raise the maximum sentence from ten to twelve years, aligning Brazil’s punishments more closely with global best practices. This approach follows a broader international trend emphasizing both deterrence and retribution in the fight against financial crime.

Beyond just harsher penalties, Brazilian lawmakers are also pushing for more extensive regulatory coverage. One of the most significant reforms under discussion is the inclusion of cryptocurrencies and gold transactions within the core AML/CFT regime. This move would bring virtual asset service providers and high-value commodity traders under stricter supervision, reflecting growing awareness of the money laundering risks associated with digital assets and informal gold trading.

At the same time, authorities are reviewing the role and resources of COAF. Historically, COAF has supervised sectors lacking a designated regulatory body—such as factoring, luxury goods trading, and athlete or artist transfer deals. To boost effectiveness, there are calls to expand its staffing, enhance its technological capabilities, and clarify its enforcement mandate. These measures aim to ensure that as new threats emerge, COAF can remain a central pillar in Brazil’s preventive system.

The Role of COAF in Modern AML/CFT Enforcement

COAF’s recent activity provides a window into both the scale of Brazil’s financial crime risk and the evolving enforcement strategy. The agency has shifted towards a risk-based approach, prioritizing oversight and sanctions in sectors where the potential for illicit finance is greatest. This flexible strategy allows for quicker adaptation to new trends and focuses resources where they have the highest impact.

By 2024, COAF was producing close to 19,000 financial intelligence reports annually, up significantly from just under 12,000 in 2020. This increased output reflects both rising transaction volumes and improved detection tools, including advanced electronic compliance assessments that enable rapid, simultaneous reviews across thousands of obliged entities. Such systems allow the FIU to identify anomalies, initiate preliminary investigations, and recommend further action where warranted.

The agency’s enforcement record demonstrates growing assertiveness. In 2024, fines totaling BRL 44.2 million (approximately USD 7.5 million) were levied against legal entities and individuals, particularly in the factoring and luxury goods sectors. This marked an increase from the previous year’s BRL 38.2 million, underlining both improved supervision and a more active penalty regime. Nevertheless, ongoing criticism suggests that without deeper structural reforms—particularly regarding COAF’s resources and statutory powers—enforcement remains uneven.

A persistent challenge is the effective regulation of entities operating on the margins of the financial system. Many sectors, including some online betting operators and cryptocurrency exchanges, have yet to come under the full scrutiny of the AML/CFT regime. As financial innovation accelerates, these gaps are becoming more consequential.

Regulatory Reforms and Future Outlook

The near-term future of Brazil’s AML/CFT landscape will likely be shaped by several regulatory and structural shifts. First, the anticipated passage of legislative reforms to widen the AML/CFT net—especially over virtual assets and precious metals—will bring new classes of entities into compliance programs, expanding the scope of transaction monitoring and customer due diligence.

Second, institutional changes within COAF may provide the agency with enhanced technical tools and additional human capital, improving its ability to conduct large-scale electronic compliance assessments and coordinate intelligence sharing with other authorities. These changes are expected to drive a more effective, risk-oriented approach, aligning Brazil more closely with FATF recommendations.

A major test will be the practical application of these reforms, especially in supervising non-traditional financial sectors. Implementation challenges remain, including the need for clear regulatory guidance, effective training programs, and close cooperation with law enforcement and judicial authorities. Internationally, Brazil’s performance in these areas will continue to be monitored, with FATF and other bodies keen to see measurable improvements in prosecution rates and asset recovery.

Global benchmarks underscore the scale of the challenge. The United Nations Office on Drugs and Crime estimates that between USD 2.2 trillion and USD 5.5 trillion is laundered worldwide each year. Brazil’s share of this illicit flow is substantial, given its economic scale and role as a regional financial hub.

To maintain momentum, the government and private sector must collaborate closely, investing in advanced analytics, cross-border information exchange, and robust compliance cultures. The rise of instant payments, mobile banking, and new investment platforms will require continuous adaptation and vigilance.

Conclusion: Progress, Challenges, and the Road Ahead for Brazil’s AML/CFT Regime

Brazil’s ongoing reforms reflect a serious commitment to building a stronger and more resilient AML/CFT framework. Tougher penalties, broader regulation, and improved supervision signal that the country is moving in the right direction. At the same time, persistent gaps in enforcement and the emergence of new financial crime typologies present ongoing risks that must be addressed.

Future success will depend on effective implementation of legislative changes, sustained investment in regulatory capacity, and the agility to adapt to an ever-changing risk landscape. Brazil’s experience offers important lessons for other emerging economies, showing that while progress is possible, the fight against financial crime is a long-term endeavor.

Source: International News Services, by Andreia Nogueira

Some of FinCrime Central’s articles may have been enriched or edited with the help of AI tools. It may contain unintentional errors.

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