Brazil is facing the possibility of being the first country ever to be suspended from the Financial Action Task Force on Money Laundering (FATF), the intergovernmental organization to promote anti-money laundering policies. The threat rides on Congress’ approval of a bill which alters Brazil’s money laundering legislation to comply with United Nations recommendations.

The FATF, based in France, was formed in 1989 to help fight money laundering by studying trends and issuing recommendations to its members and the global community as a whole. It currently has 37 members (Brazil has been a member since 2000) and while it does maintain a blacklist of so-called “non-cooperative countries of terrorists,” the FATF has never suspended one of its existing members.

The organization conducted a visit to Brazil in 2009 and the following year established a series of recommendations to the country, primarily to criminalize terrorist financing and money laundering “in a manner consistent with the international requirements.”

In a meeting in June this year, the FATF recognized that Brazil has “taken further steps to improve its counterterrorist financing regime,” however, “deficiencies remain” and the country is not meeting the deadlines established in the 2010 FATF action plan. The task force stated this would be a “membership issue” come the February 2019 meeting.

Repercussions for Brazil

Suspension from the group would be a huge blow to Brazil’s image. As reported by financial newspaper Valor, the Central Bank is greatly worried about the possibility of Brazil being removed from the FATF, fearing an exit of capital and a decrease in new investments.

Not being a member of the FATF or featuring on its blacklist does not bring about any concrete sanctions, but it is sure to change perceptions of the global community on Brazil. In the United States, banks are fined for carrying out transactions with countries on the FATF blacklist.

The bill in question concerns the immediate execution of sanctions imposed by resolutions of the United Nations Security Council, including the freezing of assets of those accused of committing or financing terrorism.

Opponents to the bill fear that its wording is vague and that it may be used to target Brazilian social movements, such as the Landless Workers’ Movement (MST) and Homeless Workers’ Movement (MTST). The bill says that immediate sanctions may be carried out “at the request of the Brazilian authorities, in the case of the individual or entity being the object of national designation.”

President-elect Jair Bolsonaro has pledged to define the MST and MTST as terrorist organizations. However, the current government understands that the new bill would only apply to people and organizations classed as terrorists by the UN Security Council.

Will the bill pass in time?

The bill is currently in the lower house and has been assigned to the committees of Constitution and Justice, and Finance and Tax, but has yet to have been assigned rapporteurs in either committee.

If the law is not passed before the end of the legislative year (December 21), Brazil is set to be suspended by the FATF at its next meeting scheduled for February.

Brazil’s Congress returns to work in February, but seldom few bills are voted on in the first month, with the parliament’s focus occupied by the elections for House Speaker and Senate President, as well as the distribution of permanent committees.

With the added pressure from the future government, the processing of the all-important bill should quicken this week. However, approaching the end of the year, and without unanimous backing, it will be difficult to push the proposal through the lower house, then the Senate, in time for the FATF’s next meeting.

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MoneyDec 03, 2018

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BY Euan Marshall

Euan Marshall is a Scottish journalist living in São Paulo. He is co-author of A to Zico: An Alphabet of Brazilian Football.