LAW No. 9613, OF MARCH 3, 1998
This law addresses the crimes of money laundering or concealment of assets, rights, and valuables; the measures designed to prevent the misuse of the financial system for illicit actions as described in this law; it creates the Council for Financial Activities Control (COAF); and addresses other matters.
THE PRESIDENT OF THE REPUBLIC
I hereby state that the National Congress has decreed and I sign the following Law:
Crimes of money laundering or concealment of assets, rights, and valuables Section 1 To conceal or disguise the true nature, origin, location, disposition, movement, or ownership of assets, rights and valuables that result directly or indirectly from the following crimes:
I. Illicit trafficking in narcotic substances or similar drugs;
III. Smuggling or trafficking in weapons, munitions or materials used for their production;
IV. Extortion through kidnapping;
V. Acts against the public administration, including direct or indirect demands, on behalf of oneself or others, of benefits, as a condition or price for the performance or the omission of any administrative act;
VI. Acts against the national financial system;
VII. Acts committed by a criminal organization.
Sentence: incarceration (1) for a period of 3 (three) to 10 (ten) years and a fine.
Paragraph 1 The same punishment shall apply to anyone who, in order to conceal or disguise the use of the assets, rights and valuables resulting from the crimes set forth in this article:
I. Converts them into licit assets;
II. Acquires, receives, exchanges, trades, gives or receives as guarantee, keeps, stores, moves, or transfers any such assets, rights and valuables;
III. Imports or exports goods at prices that do not correspond to their true value;
Paragraph 2 The same penalty also applies to anyone who:
I. Through economic or financial activity, makes use of any assets, rights and valuables that he/she knows are derived from the crimes referred to in this article;
II. Knowingly takes part in any group, association, or office set up for the principal or secondary purpose of committing crimes referred to in this Law.
Paragraph 3 The attempts at committing any of the crimes referred to in this Law are punishable in accordance with the provisions set forth in article 14, sole paragraph, of the Criminal Code.
Paragraph 4 The sentence shall be increased by one to two-thirds, in any of the instances contemplated in items I to VI of this article when the crime follows a constant pattern or is committed by a criminal organization.
Paragraph 5 In the event that the accused or his/her accomplice, freely agrees to cooperate with the authorities by providing information that lead to the detection of a crime and the identification of those responsible for it, or to the discovery of assets, rights and valuables that were the object of the crime, the sentence may be reduced by one or two-thirds. The accused may also be allowed to start serving it in an open system of imprisonment(2). The judge may also decide whether to apply the penalty or substitute it for the restriction of rights.
Special Procedural Provisions
Section 2 The judicial proceedings and sentencing of the crimes referred to in this Law:
I. Shall be subject to the same provisions that apply to crimes punishable by extended incarceration, and that are under the jurisdiction of a an order court;
II. Are not dependent on the judicial proceedings and sentencing applicable to antecedent crimes referred to in the previous article, even if these crimes were committed abroad;
III. Shall be subject to federal court jurisdiction in the following instances:
a) In the event of crimes against the financial system and the economic-financial order or detrimental to assets, services or interests of the Union or any of its autarchic entities or government companies(3);
b) In the event the antecedent crime is subject to federal court jurisdiction.
Paragraph 1 The charge shall include sufficient indications of the existence of the antecedent crime. The criminal acts referred to in this Law shall be punishable even when the offender in the antecedent crime is unknown or exempt from punishment.
Paragraph 2 The provisions of section 366 of the Criminal Procedure Code shall not apply to the judicial process pertaining to the crimes referred to in this Law.
Section 3 The crimes referred to in this Law shall not be subject to bail or temporary release, and, in the event of a conviction, the judge shall accordingly decide if the defendant may be released pending appeal.
Section 4 During investigations or judicial proceedings, upon request made by the prosecutor or the competent police authority, after consulting the prosecutor within twenty-four hours, and with sufficient evidence, the judge may order the seizure or detention of assets, rights and valuables that constitute the object of the crimes referred to in this Law, and belong to or are registered under the defendant’s name. This process shall take place in the form provided for in sections 125 to 144 of Decree-Law No. 3689 of October 3, 1941 – Criminal Procedure Code.
Paragraph 1 The provisional measures referred to in this section shall be suspended if the criminal lawsuit is not initiated within a period of 120 (one hundred and twenty) days, counted from the date the judicial proceedings are concluded.
Paragraph 2 The judge shall order the liberation of seized or detained assets, rights and valuables after the legality of their origin has been established.
Paragraph 3 No request for the liberation of any assets, rights, and valuables shall be accepted without the presence of the accused. The judge may order that action be taken in order to preserve any assets, rights or valuables in the instances referred to in Sec. 366 of the Criminal Procedure Code.
Paragraph 4 In the event that the immediate implementation of the preventive measures referred to herein may compromise the investigations, the judge—upon consultation with the prosecutor—may issue an order suspending an arrest warrant or the seizure or detention of assets, rights or valuables.
Paragraph 5 Whenever the circumstances justify it, the judge, upon consultation with the prosecutor, shall appoint a receiver—a qualified person to manage the assets, rights or valuables that were seized or detained, and this manager shall execute a deed of undertaking (4).
Section 6 The receiver:
I. Shall be entitled to receive remuneration for his services, which shall be paid with proceeds of the assets under his/her management;
II. Acting in response to a court order, shall provide periodic information on the status of the assets under his/her management as well as explanations and details about investment and reinvestment operations he/she may have executed;
Sole paragraph The actions pertaining to the management of the assets seized or detained shall be communicated to the prosecutor, who may file any request before the court that he deems appropriate.
The effects of a guilty verdict
Section 7 In addition to the results set forth in the Criminal Code, a guilty sentence entails the following:
I. The forfeiture, in favor of the Union, of any assets, rights and valuables resulting from any of the crimes referred to in this Law, due provision being made for safeguarding the rights of a victim or those of a third party in good faith;
II. The suspension of the right to hold positions of any nature in the public service, positions as directors, members of management councils(5) or managers of any of the legal entities referred to in Sec. 9, for a period equal to double the imprisonment term stipulated by the judicial sentence;
Assets, rights or valuables resulting from crimes committed abroad
Section 8 In the event that there is an international treaty or convention dealing with the matters referred to in this Law and upon request of a competent foreign authority, the judge shall order the seizure or detention of assets, rights and valuables resulting from the crimes referred to in section 1 and committed abroad.
Paragraph 1 These provisions shall also apply, regardless of the existence of an international treaty or convention, provided the government of the foreign country in question undertakes to grant reciprocity of treatment to Brazil.
Paragraph 2 In the absence of an international treaty or convention, the assets, rights or valuables seized or detained upon request of a competent foreign authority or the proceeds resulting from their detention shall be evenly divided between the requesting State and Brazil, safeguarding the rights of victims or third parties in good faith.
Legal Entities subject to this Law
Section 9 The obligations set forth in sections 10 and 11 hereof shall apply to any legal entity that engages on a permanent or temporary basis, as a principal or secondary activity, together or separately, in any of the following activities:
I. Receiving, acting as brokers and investing third parties’ funds, in national or foreign currency;
II. Purchase and sale of foreign currency or gold as a financial asset;
III. Acting as securities custodian, issuer, distributor, clearer, negotiator, broker, or manager;
Sole paragraph The same obligations shall apply to the following:
I. Stock, commodities, and futures exchanges;
II. Insurance companies, insurance brokers, and institutions involved with private pension plans or social security;
III. Payment or credit card administrators and consórcios (consumer funds commonly held and managed for the acquisition of consumer goods);
IV. Administrators or companies that use cards or any other electronic, magnetic or similar means, that allow the transferal of funds;
V. Companies that engage in leasing and factoring;
VI. Companies that distribute any kind of property (including cash, real estate, and goods) or the rendering of services, or give discounts for their acquisition by means of lotteries or other similar methods;
VII. Branches or representatives of foreign entities that engage in any of the activities referred to in this section, which take place in Brazil, even if occasionally;
VIII. All other legal entities engaged in the performance of activities that are dependent upon an authorization from the agencies that regulate the stock, exchange, financial, and insurance markets;
IX. Any and all national or foreign individuals or entities, who operate in Brazil in the capacity of agents, managers, representatives or proxies, commission agents, or who represent in any other way the interests of foreign legal entities that engage in any of the activities set forth in this section;
X. Legal entities that engage in activities pertaining to real estate, including the promotion, purchase and sale of properties;
XI. Individuals or legal entities that engage in the commerce of jewelry, precious stones and metals, objects of art, and antiques.
Customer Identification and Record-Keeping
Section 10 The legal entities referred to in Section 9 hereof shall:
I. Identify their customers and maintain an updated record in compliance with the provisions set forth by the competent authorities;
II. Keep an up-to-date record of all transactions, in national and foreign currency, involving securities, bonds, credit instruments, metals, or any asset that may be converted into cash, and that exceeds an amount set forth by the competent authorities and in accordance with the requirements they may issue;
III. Comply with notices sent by the Council established under Section 14 hereof, within the time period stipulated by the competent judicial authority. The judicial proceedings pertaining to such matters shall be conducted in a confidential manner.
Paragraph 1 In the event that the customer is a legal entity, the identification mentioned in item I of this Section shall include the individuals who are legally authorized to represent it, as well as its owners.
Paragraph 2 The reference files and records mentioned in items I and II of this Section shall be kept during a minimum period of five years, counted from the date the account is closed or the date the transaction is concluded. The competent authorities may decide, at their own discretion, to extend this period of time.
Paragraph 3 The registration under item II of this Section shall also be made whenever an individual or legal entity, or their associates execute, during the same calendar month, transactions with the same individual, legal entity, conglomerate or group that exceed, in the aggregate, the limit set forth by the competent authorities.
Reports of Financial Transactions
Section 11 The legal entities referred to in Section 9 hereof:
I. Shall pay special attention to any transaction that, in view of the provisions set forth by the competent authorities, may represent serious indications of the crimes referred to in this law, or that may be related to them;
II. Shall inform the competent authorities, within a period of twenty-four hours, and abstain from advising their customers of this action, of:
a) Any and all transactions listed in item II of Section 10 that entail an amount that exceeds the limits, terms, and conditions set forth by the competent authorities for this purpose;
b) The proposal or the execution of a transaction referred to in item I of this section.
Paragraph 1 The competent authorities referred to in item I hereof shall establish a list of transactions that could characterize the kind of operations contemplated herein, considering their basic features, the parties and amounts involved, the implementation, the means of execution, or the lack of economic or legal justification.
Paragraph 2 Information imparted in good faith, pursuant to the provisions set forth in this Section, shall not generate any civil or administrative liability.
Paragraph 3 The individuals or legal entities that are not subject to a specific control or regulator agency, shall provide the information referred to in this Section to the Council for Financial Activities Control (COAF), in the form provided for by the Council.
Section 12 The legal entities referred to in Section 9, as well as the managers of legal entities who fail to comply with the provisions set forth in sections 10 and 11 shall be subject to the sanctions hereinafter. The competent authorities shall apply, together or separately, the following sanctions:
I. A warning;
II. A monetary fine of an indefinite amount, ranging from one percent to double the amount of the transaction; or up to two hundred percent of the profits derived or presumably obtained as a result of the transaction; or a fine of up to R$200,000.00 (two hundred thousand Reals);
III. A temporary prohibition on holding any position in the management of the legal entities referred to in the sole paragraph in section 9, for a period of up to 10 (ten) years;
IV. Cancellation of the authorization to operate;
Paragraph 1 The warning sanction shall be applied in the event of failure to comply with the provisions set forth in items I and II of Section 10.
Paragraph 2 A fine shall be applied whenever any of the legal entities mentioned in Section 9, acting negligently or harmfully:
I. Fails to correct the irregularities which gave cause to the issuance of the warning, within the time period set forth by the competent authorities;
II. Fails to carry out the identification or the registration referred to in items I and II of Section 10;
III. Fails to comply, within the stipulated time period, with the requirements set forth in item III of Section 10;
IV. Disregards the prohibition or fails to provide the information pursuant to the provisions set forth in section 11.
Paragraph 3 The penalty of temporary suspension of activities shall be applied to those responsible for serious violations of the provisions of this Law or whenever there is a specific and duly ascertained recurrence of previous transgressions that were punished with the application of a fine.
Paragraph 4 The penalty of cancellation of the authorization to operate shall be applied in instances of specific recurrence of transgressions that were previously punished with the application of the penalty set forth in item III of the initial portion of this Section.
Section 13 The procedure for the application of the sanctions set forth in this Chapter shall be regulated by a decree that shall ensure the right of rebuttal and ample rights of defense to the parties concerned.
Council for Financial Activities Control
Section 14 The Council for Financial Activities Control (COAF) is hereby instituted, under the jurisdiction of the Ministry of Finance, for the purpose of regulating, applying administrative sanctions, receiving pertinent information, examining and identifying any suspicious occurrence of illicit activities set forth in this Law. The actions of COAF shall not conflict with the jurisdiction of other agencies.
Paragraph 1 COAF shall be the agency responsible for issuing the instructions set forth in Section 10 to the legal entities specified in section 9 that are not subject to any specific regulatory or surveillance agency. In these cases, COAF shall also be responsible for defining the entities and applying the sanctions set forth in Section 12.
Paragraph 2 COAF shall also be responsible for coordinating and advancing suggestions for the adoption of systems of cooperation and exchange of information designed to enable rapid and efficient responses in the struggle against the practice of concealment or disguise of assets, rights and valuables.
Section 15 COAF shall notify the competent authorities whenever it finds evidence of the existence of crimes defined in this Law, of clear indications of the occurrence of such crimes, or of any other illicit activity, so as to enable such authorities to take the appropriate measures.
Section 16 The members of COAF shall be civil servants of outstanding reputation and capability, named by act of the Minister of Finance and chosen among the career personnel of the Central Bank of Brazil, the Securities and Exchange Commission, the Superintendence of Private Insurance, the General Attorney Office for the National Treasury, the Secretariat of Federal Revenue, the Brazilian Agency of Intelligence, the Federal Police Department, and the Ministry of Foreign Affairs. In the last three cases, the Ministers having jurisdiction over each such entity shall nominate the members.
Paragraph 1 The Chairperson of the Council shall be appointed by the President of the Republic, acting on a recommendation of the Minister of Finance.
Paragraph 2 The decisions of COAF regarding the application of administrative sanctions may be appealed to the Minister of Finance.
Section 17 COAF’s internal organization and mode of operation shall be set forth in bylaws to be approved by a decree of the Executive Branch. Section 18 This Law shall become effective on the date of its publication.
Brasilia, March 3, 1998, the 177th year of Independence and the 110th year of the Republic.
(1) Trans. & Explanatory Note: The original text refers to a sentence of “reclusão” (reclusion) which, under the Brazilian Penal Code, (Decree-Law No. 2848 of December 7, 1940), corresponds to a harsher form of imprisonment, involving some form of solitary confinement for a minimum period of time and limitation of the right of parole. It differs from the sentence of “detenção”, which designates a less rigorous form of incarceration, which involves no solitary confinement.
(2) Trans. & Explanatory Note: An “open system of imprisonment” is one that, under certain conditions, may be converted into a restriction of rights, which may involve features of US systems such as work release and community service.
(3) Under Brazilian law, in addition to agencies and government institutions, there are three distinct types of entities controlled by the State, which enjoy a greater or lesser degree of administrative autonomy, as follows: autarchical entities, public companies, and mixed economy companies. Autarchical entities (from the “Greek autárkeia”)—the condition of self-sufficiency, especially economic, as applied to a state...” Webster’s Encyclopaedic Unabridged Dictionary of the English Language (Portland House- New York) 1989 Ed.) — are those which have the power of raising revenues through fees charged to the public. As such, they are not exclusively dependent on fund allocations in the federal budget for funding their operations. There are federal, state, and municipal “autarquias”. A typical example is the social security entity. Public companies are those which operate in the private sector, just as any private concern, but whose shares are wholly owned by the state. A good example is INFRAERO, the company that operates the country’s major airports. Mixed economy companies differ from public companies in that they have private shareholders, in addition to the government. Petrobrás, the national Oil Company, is a prime example of a federal mixed-economy company.
(4) The original expression translated here as “deed of undertaking” is “termo de compromisso”, which is a signed document someone entrusted with the performance of a job or a task formally accepts such obligation, promises to perform it in accordance with a predetermined set of instructions, and agrees to be penalised or held accountable for failure to conduct himself in the manner set forth in that document. It is the equivalent of an oath of office.
(5) “Management Council” is used as a translation of the Portuguese original term “Conselho de Administração”, which, pursuant to the corporation law, is the highest management board in a Brazilian corporation. The expression Management Board was avoided because many local companies have both a “Management Board” (called “Diretoria Executiva”, or simply “Diretoria”) and a higher board, known as “Conselho de Administração”, which is the term used here