The Brazilian institutional apparatus for preventing and combating money laundering quickly converged to international standards and is above most other nations, but is practically null in terms of concrete results. The conclusion, highly worrying, is part of the master's thesis recently defended by Gerson Luís Romantini at Unicamp's Institute of Economics (IE). According to him, between 1998, the year in which the Brazilian “anti-laundering law” was enacted, and until October 2002, 18.610 reports of suspicious transactions were sent to the Financial Activities Control Council (Coaf), a body linked to the Ministry of Finance. In the same period, only 666 police investigations were opened and 149 people were indicted. To date, however, no one has been arrested and not a penny of the approximately US$17 billion laundered annually has been recovered. According to international studies, the country occupies the 20th position in the ranking of the largest “laundries” in the world.
Paradoxically, the fight against money laundering encounters obstacles in the very institutional apparatus created to facilitate criminal prosecution, according to Romantini. “Brazil is exemplary in creating institutions to combat this type of crime. The problem is that they don’t work,” he says. The critical point of ineffectiveness, as the author of the research pointed out, is in Coaf, a financial intelligence unit (FIU, in English) created according to international standards by law 9.613/98. Its purpose is to “discipline, apply administrative penalties, receive, examine and identify suspected occurrences of illicit activities related to money laundering”. Despite these duties, the agency has sent an insignificant number of suspected cases to the Police or the Public Ministry (MP), according to the study.
This happens, in Romantini's opinion, mainly because of Coaf's lack of structure. Although it has several responsibilities, including being in contact and cooperating with FIUs from other countries, the Council had only 18 employees until February 2002. “In addition, this staff is made up of people seconded by other administrative units, which does not guarantee the development of a staff with long-term commitments to the organization. This also creates problems with technical qualifications and even continuity of activities,” he explains.
Just to get an idea of the bottleneck created within the scope of Coaf, Romantini found that of the more than 18 thousand notifications of suspicious operations received by the body between 1998 and 2002, only two had been forwarded to the Federal Police (until November 31, 2002) and none to the Public Ministry (until August 29 of the same year). Detail: the two institutions in question are located in São Paulo, precisely the state that generated the most communications. Coaf, however, has released positive numbers about its own performance. On its home page, the organization maintains that it has obtained significant results “in numerous actions to combat the crime of money laundering”.
According to data available on the website, in 2001 Coaf received 6.364 reports of suspicious operations, sent by various economic and financial agents (banks, merchandise exchanges, bingo halls, jewelry stores, antiques stores, closed private pension entities, bingo halls, credit card administrators, etc.). Of these, 99 were referred to the police authorities and the Public Prosecutor's Office, “as they presented serious evidence of committing a money laundering crime”. From 1998 to October 2002, there were reportedly 712 referrals. Based on the information he was able to gather, Romantini says he has reason to doubt these indicators.
According to him, the discrepancy between the volume of communications and the number of referrals to the Police and the MP indicates that, in addition to the body's structural problem, Coaf's activities could be contaminated by political criteria. “By definition, it is not up to the Council to select communications. Its function is to receive them, cross-reference them with other data and then send them to the competent authorities, which will then identify which are or are not linked to illicit acts”, he explains.
The current Brazilian government, he says, has shown concern about improving actions to combat money laundering. At the beginning of June, the Minister of Justice, Márcio Thomaz Bastos, announced some measures in this regard. The main one was the creation of the Illicit Asset Recovery Department, which will try to recover the money involved in organized crime actions. Furthermore, the minister also informed that Coaf will be restructured, which involves hiring new employees and investing in technology. In Romantini's opinion, if these measures are actually implemented, Coaf could finally become a highly valuable body in the fight against organized crime and money laundering, as occurs in other countries.
History – Money laundering is closely linked to organized crime, especially drug trafficking. The practice of hiding or disguising the illicit origin of assets obtained through crime is ancient, but large-scale money laundering in international financial markets is a relatively recent phenomenon (dating back to the 1980s), which has aroused growing concern among international community. So much so, that the matter is no longer dealt with solely in the legal sphere and is now also analyzed from an economic point of view. According to Gerson Luís Romantini, the laundering process consists of giving a legal appearance to resources originating from criminal activities.
To achieve this, launderers do not respect borders and use a series of tricks, including sophisticated financial and commercial operations. According to the IMF, an organization that has been paying attention to the matter, the size of the annual flow of money laundering in the world can be estimated as something between 2% and 5% of the world's GDP.
Using 2001 statistics, these percentages indicate that criminals handled resources in the order of US$600 billion to US$1,5 trillion annually.
Aware of the micro and macroeconomic impacts, several countries began a joint effort to combat this type of crime. In 1988, a dozen nations, including Brazil, signed an international agreement known as the Vienna Convention, in which they committed to adopting initiatives to criminalize money laundering. Subsequently, within the scope of the Organization for Economic Cooperation and Development (OECD), the Financial Action Group against Money Laundering (GAFI/Fatf) was created, which recommended guidelines and policies for the area. The FATF created a kind of bible with 40 commandments to be followed by the nations involved.
The Group also generated a list of non-cooperative countries and territories, as a way of pressuring them to join the effort, due to the threat of economic marginalization. The international community realized that the actions of organized crime, which at some point lead to money laundering, have a transnational character. In other words, it was clear that if there was no joint action by the states, the problem not only could not be resolved, but would tend to worsen. Brazil, according to the researcher, took three years to ratify the Vienna Convention by the National Congress. In 1996, the government sent a bill to the Legislature criminalizing money laundering and creating the national FIU, Coaf. In 1998, ten years after the movement began, the country finally enacted the anti-laundering law.
The legislation, reinforces Romantini, establishes a series of procedures to prevent and combat money laundering, such as the obligation for banks, stock exchanges, jewelry traders, etc. to report any suspicious operation to Coaf. This has been done regularly, but the information has not reached the Police and the Public Prosecutor's Office in a satisfactory volume, as the research suggests. For now, according to the author of the work, criminals are swimming in the sea of institutional ineffectiveness.
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The washing paths
Money laundering follows, with small variations, the same process throughout the world. According to Gerson Luís Romantini, it was agreed, for analytical and didactic purposes, that the path to giving a legal appearance to resources arising from criminal activities follows three stages: “placement”, “layering” and “integration”. Coaf translated these terms into “placement”, “concealment” and “integration”, respectively. These phases are described as follows in Romantini’s dissertation:
Placing
Also called “conversion” by some authors. After capturing and concentrating the assets arising from the criminal activity, the money launderer seeks to distance the agent who committed the crime from the illicit product obtained by him. The launderer tries to break the link between the criminal and the illicit resources, seeking to insert these assets into the formal economic system. It is at this stage that “dirty” money is most vulnerable to detection and confiscation. One of the assets most commonly obtained through criminal activity is cash. This means of payment brings a great degree of anonymity and, consequently, security for the counterparty of the illicit operation.
However, for the criminal, payment in kind constitutes a major problem. Often, the physical volume of cash, especially in relation to small denomination banknotes obtained from the sale of drugs, can be much greater than the volume of the merchandise sold. To give you an idea, 200.000 denominations of 10 weigh around 18 kilos. Furthermore, cash is more easily lost, stolen or destroyed. In some schemes identified in strong currency countries such as the USA, illicitly obtained cash is smuggled abroad and inserted into the international financial system through financial institutions located in foreign countries, especially “tax havens”.
Concealment
Also called “layering” or “dissimulation” by some. The objective at this stage is to make it difficult to track illicit resources entered into the formal economic system, trying to break the chain of evidence that links these funds to their real origin. Concealment consists of a series of transactions, generally of a financial nature, that aim to cover up or disguise the true origin of resources. This is the most complex phase of the process and also the most international of them. The launderer seeks to move the resources entered into the financial system several times, through electronic transfers within the same country or between different countries, transferring assets to anonymous accounts, dividing the funds into several accounts to concentrate them again later, etc.
Money is preferably moved between countries protected by strict bank secrecy laws, with deficient national anti-laundering control systems or with legal or operational difficulties in judicial and police cooperation. The role played by international financial and legal consultants is worth highlighting. They often create laundering operations, sell their know-how, but do not have any direct contact with the illicit assets or the crime that gave rise to them. It is also worth highlighting that “at this stage the greatest risks of breaching national financial systems arise”.
qIntegration
Assets are formally incorporated into the legal economic system, through investment in legal ventures or through the simple purchase of goods and services. The resources that originated in criminal activity now return to the criminals who generated them, with an appearance of legitimacy. At that moment it can be said that the resources were washed and became “clean”. Once the resources are available again in their hands, criminals can reinvest them in their own illicit activity or diversify them.
Investments in legal activities not only constitute an unsuspected source of income for the criminal, but also facilitate the concealment of new assets that need to be laundered. It is important to highlight that, in this standard model, the steps follow each other over time and are theoretically independent of each other. However, it is not uncommon to find money laundering schemes in which these phases occur at the same time.
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