Brazil: Money Laundering
| Pages | 365-371 |
| Published date | 01 February 1999 |
| DOI | https://doi.org/10.1108/eb027203 |
| Date | 01 February 1999 |
| Author | George Henry Millard |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control — Vol. 2 No. 4
Brazil:
Money Laundering
George Henry Millard
Those Brazilians reading São Paulo's newspapers
over breakfast on 23rd November, 1991, discovered
with surprise that their country was playing a signi-
ficant role on the international money-laundering
circuit.
The day before, USS4.5m were taken during a
Federal Police raid focused on an executive Learjet
aircraft and its passenger-owner, a young Brazilian
businessman, just as described by John Grisham in
his book The Firm. At that time the final police
report stated:
'The participation by all to a lesser or greater
degree, was clearly demonstrated. They belonged
to an organisation dedicated to laundering money
originating from international drug trafficking.
The activity was to buy gold and precious gems
in our country and smuggle them out to countries
where a simple declaration justifies and legalises its
possession. They also used financial mechanisms,
such as deposits on banks situated in financial
havens, and countries with plenty of cover with
regard to bank secrecy.'
The importance of this case was not only due to the
millions discovered in cardboard boxes — although
not really impressive compared to international
standards — but to the fact that for the first time
the Brazilian authorities seized money clearly con-
nected to laundering activities before it was funnelled
to the underground banking system.
After the arrest of Mr Morbach Neto, the private
jet airplane's distinguished passenger, connections
with cartels, the Mafia and other organised crime
syndicates were established by the press, and a
number of questions were raised. And up to now,
several years later, the same questions remain without
definite answers. Among these, the main ones refer to
the amounts. 'How much dirty money passes
through Brazil?', and of course, the inevitable ones
dealing with the mechanisms used here for launder-
ing. To make it clear, the definition is that the term
money laundering refers, in its broadest sense, to all
activities designed to conceal the existence, nature
and final disposition of funds gained through illicit
activities, assuming also, like the US Treasury, that
money laundering is the conversion of the monetary
proceeds of a criminal activity into funds from an
apparently legal source.2
Trying to match these definitions with official
figures has turned out to be an impossible task, as
Brazil has no idea how much money is being
laundered here. In data released in Brazil a few
years ago by the United Nations Drug Control
Programme (UNDCP), it was suggested the
amount of money being laundered was between
USS4-10bn annually.3
With it being apparently impossible to obtain reli-
able data, a survey was initiated to evaluate the scope
of this activity in Brazil. Bankers were interviewed
and, as expected, nothing new was added to the
area of transactions involving illicit funds, since
these originated from criminal activities.
However, a glimpse was caught of another
segment involving significant amounts. It is that
hard-to-quantify problem well known to all — tax
evasion. It is the bypass of legality, not considered a
criminal activity by some, but rather only the sin of
not offering the government its share or any partici-
pation in it. Whether the source is illegal or immoral
is a matter of opinion that can change geographically,
and questions related to this subject will raise another
discussion as large as
itself.
In Brazil's case there are certain characteristics
which must be understood. An enormous facilitator
is the existence of a first-class technological banking
system, making use of unusual resources. It might
be useful to point out here that the system is more
efficient than that of the USA, as it relies on instant
national online integration. Cheques, for example,
take at the most five days to be paid anywhere in
the country.
This quality of service has improved transactions
enormously via home banking, with the possibility
of instant transfers to or from any part of the country.
As well as this, there is the large volume, that is, the
critical mass of high-value transactions which take
place without drawing suspicion. 'Brazil has size
enough for large operations to go unnoticed.'4
A more recent example being felt by all is the
current crisis in the stock markets worldwide. Early
in September 1998, USS8bn left the country in
Page 365
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