Financial Control Board publishes resolution on money laundering and financing of terrorism

On March 10, 2021, Brazil’s Financial Activities Control Board (Coaf) published Coaf Resolution No. 36/2021, establishing new requirements, procedures and internal controls for preventing and combatting both money laundering and the financing of terrorism. These new obligations complement those previously imposed by Law No. 9,613/1998 (Money Laundering Prevention Law) and will take effect as of June 1, 2021.

Coaf Resolution No. 36/2021 applies to all individuals and companies subject to Coaf regulations, who will now be obliged to adopt policies to counter money laundering and the financing of terrorism. Policies must be compatible with the size and volume of operations, while also proportional to the risks involved.

Obligations and necessary procedures

Among the main obligations in developing such policy, Coaf Resolution No. 36/2021 stipulates:

• Procedures for the prior evaluation of new products and services;
• Internal risk assessment;
• Analysis based on money laundering and financing of terrorism risks in the hiring employees and third-party service providers, as well as in establishing partnerships; and
• Procedures for the continuous training of employees.

The resolution also determines the need to implement procedures for mitigating related risks, including:

• For identifying clients, final beneficiaries, employees, third-party service providers and partners of the business;
• For collecting, verifying, validating and updating registration data with due diligence, so as to be better aware of employees, third-party service providers and partners; and
• For monitoring and analyzing suspicious and atypical activity.

All of the procedures established within the policy must take the risk profiles of employees, third-party service providers and partners into account, so that risk is assigned in accordance with each one’s activities.

As defined in Coaf Resolution No. 36/2021, conglomerates can adopt unique policies for countering money laundering and the financing of terrorism, whether they are controlled either in Brazil or abroad.

New features of Resolution No. 36/2021

In regard to the new features established by Coaf Resolution No. 36/2021, it is worth highlighting the need for risk-based assessment, so as to follow both Brazilian and international standards based on the activities of the Financial Action Task Force.

Furthermore, the resolution establishes that entities with low exposure to money laundering and financing of terrorism risks are exempt from having to comply with the new rules, as long as they are able to demonstrate that this is justified. In other words, entities that believe themselves to be at low exposure to such risk should hold on to any supporting documentation for a minimum of five years, so that it may be presented for inspection if necessary.

Coaf Resolution No. 36/2021 is in line with the rules of other Brazilian regulatory bodies, including the Securities and Exchange Commission (CVM), the Brazilian Central Bank (Bacen) and the Private Insurance Authority (Susep), who have all recently established guidelines on this matter (CVM Instruction No. 617/2019, Bacen Circular No. 3,978/2020 and Susep Circular No. 612/2020, respectively). Therefore, Coaf’s new resolution presents relevant standards for countering money laundering in Brazil.

For more information regarding Coaf Resolution No. 36/2021, contact Mattos Filho’s Compliance practice area.