At long last, major Brazilian banks set to go through the Car Wash

Among the recurring criticisms of Operation Car Wash—Brazil’s sweeping corruption investigation which for the last five years has caused untold damage to the country’s state-owned companies and construction firms—is that it has never gone after banks, despite the massive amounts of money laundering involved in many of Car Wash’s criminal cases.

However, it appears that this may have changed, with Wednesday’s news that Car Wash investigations have identified accounts opened in Brazil’s five biggest banks were used to launder a total of BRL 1.3 billion. Prosecutors are now attempting to determine whether failures in control systems at Itaú, Banco do Brasil, Bradesco, Caixa, and Santander could lead to the criminal liability of these major financial institutions.

News of Car Wash’s offensive against banks saw São Paulo’s benchmark stock index fall 2.90 percent on Wednesday, with share prices of major financial institutions also taking a dip. Bradesco dropped 3.86 percent, Santander, 3.44%, Banco do Brasil, 3.4%, and Itaú Unibanco, 2.75%.

The first time Car Wash pursued any financial institution was in May this year, when our Daily Briefing covered the launch of an investigation into middle-market bank Banco Paulista, indicting...