In November, the Central Bank of Brazil (Bacen) issued Circular No. 3,858, which sets forth regulations on the criteria for applying the administrative penalties provided for in Law No. 9,613/98 (Money Laundering Prevention Law) applicable to (i) financial institutions; (ii) other institutions under the supervision of Bacen; (iii) members of the Brazilian Payment System; and (iv) individuals who act as officers of financial institutions and other institutions authorized by Bacen.

 

The rule complements Bacen Circular No. 3,857/17 (which regulates administrative sanctioning proceedings, the application of penalties, consent orders, injunctive measures, fines, and administrative settlements in supervisory proceedings provided for in Law No. 13,506/17) with respect to violations of the Money Laundering Prevention Law.

 

The new rule provides for the application (cumulative or otherwise) of the following penalties for those who commit the infractions set forth in the law: (i) a warning; (ii) a fine, limited to (a) twice the value of the corresponding transaction; (b) double the actual profit obtained or presumably obtained from the transaction; or (c) the amount of R$ 20,000,000; (iii) disqualification for a term of up to 10 years from the exercise of the position of officer (when the infraction is considered serious or when specific recidivism occurs, duly characterized as a violation previously punished with a fine); and (iv) cancellation of operating authorization (which is to be applied in cases of specific recidivism of infractions previously punished with temporary disqualification).

 

The calculation of penalties will take into account (i) the economic capacity of the offender; (ii) the degree of injury or danger of injury to the National Financial System, the Consortium System, the Brazilian Payment System, the institution, or third parties; (iii) the reprehensibility of the offender's conduct; (iv) the amounts involved in the irregular transactions; and (v) the duration of the infraction.

 

In addition to providing for aggravating circumstances (such as repeated practices and the representativeness of irregular transactions), which will result in a 20% increase in the fine and a one year in the disqualification penalty for established aggravating factors, the new rule also includes mitigating circumstances, such as the offender's collaboration in identifying others involved in the infraction and bringing the conduct into good standing before its detection by Bacen. Each mitigating factor established will reduce the amount of the fine by 20% and the penalty of disqualification by one year.

 

In cases of infractions that compel the institution to implement recovery plans or adopt measures to avoid its intervention or liquidation, as well as the execution of an intervention, extrajudicial liquidation, or special temporary administrative regime (RAET), the penalty may be increased up to 100%.

 

The rule also provides for the following basic penalties (not considered mitigating or aggravating factors) for irregularities related to:

 

  • know-your-customer rules (KYC), updating of records and maintenance of transaction records: R$ 250,000 to R$ 2,000,000;
  • internal policies, procedures, and controls to prevent money laundering: R$ 500,000 to R$ 6,000,000;
  • reporting to the Financial Activities Control Board (Coaf): 1% to 20% over the total value of the transaction subject to reporting; and
  • reporting to Coaf on the non-occurrence of reportable transactions: R$ 20,000 to R$ 150,000.

 

The new criteria established by Circular No. 3,858/17 came into effect on November 17.