Brazil - Prosecutors are aggressively taking down crypto criminals in Latin America’s largest economy
The FBI and the Brazilian police are joining forces. And the Brazilian police are getting trained by Binance.
When Brazil’s top prosecutor Sergio Moro’s team called Bitcoin ‘collective insanity’ last year, it seemed that the Minister of Justice might turn hell bent on criminalizing crypto assets no matter what the use case, no matter what the firm’s compliance.
But Brazil is now attempting to take a balanced approach, weighing the benefits of financial innovation with stepped-up law enforcement operations against crypto- related crime.
Nowhere is this more apparent than its relationship with Binance. In June, Binance CEO CZ said the Brazilian police were being trained by the crypto exchange’s staff on crypto markets and blockchain investigations. That’s a significant pivot. Afterall, Binance’s Country Manager resigned last year because of Binance’s loose compliance standards.
The United States FBI and Brazilian intelligence agencies are reportedly working together to attack financial crimes involving crypto currencies. To strengthen the prevention of fraud involving bitcoin and other cryptocurrencies, 80 Brazilian law enforcement officers are working together with US agents.
Brazil is important for the Biden administration’s and EU governments’ global anti-corruption and anti-money laundering efforts. In 2015, a Brazilian construction firm’s CEO was arrested for bribery by the DOJ and Brazilian law enforcement. The scandal spread across the region of Latin America, proving that what happens in Brazil can have magnificent ripple effects elsewhere.
Since many Latin America’s crypto firms are Brazil-based and regional in nature (e.g. Bitso, Nubank, MercadoPago, etc.), how Brazil tames the money laundering activity on these exchanges is key for combating organized crime.
In Brazil, there have been several high-profile crypto asset seizures in since 2019 that are related to drug-trafficking, illegal mining and crypto ponzi fraudsters. The PCC, an organized crime syndicate on par with Mexico’s Sinaloa, has grown increasingly powerful in Brazil over the past several years. Brazil’s Federal Police Chief of the Organized Crime Division, Elvis Secco, says that Brazilian gangs like the PCC are increasingly turning to crypto currencies for laundering their criminal profits.
Brazil’s crypto crackdown won’t solve crime alone though. Money launderers will likely stick with traditional businesses fit for laundering cash, like restaurants and gas stations, and crypto will be another tool in their toolkit. Still, exchanges like Binance, Bitso and companies like Nubank and MercadoPago will likely need to increase compliance measures, like KYC checks, in order to avoid Federal police accusing their exchanges of being hotbeds for criminal activity.
Since the Tornado Cash sanctions, the US Department of Justice is likely to press law enforcement in key jurisdictions, like Brazil and Mexico, to up the fight against terrorist financing using crypto technology. After Odebrecht, the DOJ found a significant ally in Brazil. And while Moro’s characterization of crypto as ‘collective insanity’ might be hyperbolic, Brazil’s Federal Police are growing better prepared to strip criminal insanity out of crypto, especially if the FBI makes this South American economy a priority.