Brazil criticised for backtracking on terror funding fight

Brazil is facing a backlash from global anti-money laundering authorities after lawmakers stripped a key financial crimes unit of the power to report on terrorist financing.

The decision to curb the activities of the Council for Financial Activities Control, which reports on financial crimes, was sparked by opposition lawmakers’ fears that Jair Bolsonaro’s administration could turn its powers against social activists who the rightwing president has equated with terrorists.

But the move by legislators has infuriated US officials while experts said it was likely to prompt a rebuke from the international Financial Action Task Force, which over the past decade has repeatedly warned Brazil over its compliance with global anti-money laundering standards.

Some said Brazil was at risk of being placed on a “grey list” of countries with problematic anti-money laundering and anti-terror funding standards.

Jorge Lasmar, a money laundering expert at the Pontifical Catholic University of Minas Gerais, said the decision by lawmakers will create a “serious problem” for Brazil ahead of a new evaluation report by the FATF.

“Brazil has already been in the hot seat, and this year it will have this assessment. When the FATF arrives and sees that Coaf cannot report [on terrorist financing], Brazil will have a serious problem and is likely to be placed on the grey list. That would be a huge setback,” said Mr Lasmar.


“Being on the list will have a direct impact on the financial system itself . . . [institutions] will charge more for transactions with Brazil.”

Another official with knowledge of the matter said: “For sure FATF and international organisations will criticise this limitation [on terrorist financing] because it was clear this was the intention of congress.”

Brazil’s opposition Workers’ party spearheaded the changes to Coaf’s mandate out of concern over the increasingly authoritarianism rhetoric of Mr Bolsonaro, who compared anti-government protesters in Chile with terrorists. Mr Bolsonaro’s influential son, Eduardo, also said repressive laws from Brazil’s military-era government should be reenacted if “the left radicalises”.

“When it comes to governments like Bolsonaro’s, they can consider social movements as terrorists,” said Enio Verri, the leader of the opposition Workers’ party in the lower house of Congress. “They could use this power [of reporting on terrorist financing] to create more restrictions and more arguments against social organisations. Our concern was for these bodies.”

In a statement, Coaf insisted it would “undoubtedly continue to produce reports on terrorist financing . . . as well as on any other illegal act. This has not been altered by the fact that there is no specific mention of a crime such as terrorist financing in the [new law].”

However critics of the decision to pare back Coaf’s mandate said it could affect the agency’s ability to act and pave the way for legal challenges to investigations.

The FATF declined to comment.

After years of increasingly vocal lobbying from the FATF, Brazil in 2016 passed an anti-terror law and has since won plaudits for gradually improving its anti-money laundering regime.

Fresh concerns arose, however, when a supreme court judge last year banned Coaf from passing suspicious financial data to prosecutors without obtaining judicial approval. Justice Dias Toffoli said the move was aimed at protecting civil liberties.

The ban was subsequently reversed but it was flagged as a “serious concern” in a FATF report late last year.

US officials have for years warned over the presence of Hizbollah in Latin America, claiming that Lebanese communities in Brazil and Paraguay provided a “significant amount” to a group that Washington — but not Brasília — deems a terrorist organisation.

In September, the US Treasury department also claimed Brazil was home to at least one al-Qaeda member, who was providing “facilitation support” and “material support” to the terror group.

Source: https://www.ft.com/content/1fa9e73c-3ec5-11ea-a01a-bae547046735