The United States’ decision to classify the PCC (First Command of the Capital) and the Red Command as “Specially Designated Global Terrorists” is expected to increase pressure on banks and financial institutions operating in Brazil.
Experts assess that the measure tends to increase the level of demand in areas such as compliancepreventing money laundering and monitoring suspicious transactions.
The change alters the risk pattern for the financial system, according to Servulo Mendonça, chairman of Holding SM.
According to the expert in compliancethe impact does not mean that Brazilian banks are automatically exposed to sanctions, but it represents an increase in the level of diligence required by the authorities.
“O compliance It stopped being just a good internal practice and became a condition of access to the global financial market”, says Mendonça.
The measure has the potential to significantly increase the regulatory risk for Brazilian companies with exposure to the international financial system or with commercial relations with the United States, according to Pedro Henrique Rezende, partner specializing in Compliance and Investigations at Aroeira Salles Advogados.
“It is important that companies of all sectors and sizes, especially those that have businesses with ties to the USA, make additional efforts to evaluate the third parties with which they contract, knowing, in depth, their final beneficiaries, in order to identify possible relationships with said groups [PCC e CV]”he explains.
He warns, above all, of the fact that “the insertion and capillarity of criminal organizations such as the PCC and the CV in the Brazilian formal economy is increasingly evident, even operating in markets subject to strong regulation.”
“There is the possibility of companies finding themselves faced with a situation that, from the point of view of domestic Brazilian law, does not constitute terrorist financing, but, from the perspective of American legislation, does, attracting the risk of sanctions at the international level”, he adds.
For economist Robson Gonçalves, from FGV (Fundação Getulio Vargas), despite frequent operations by the Federal Police against money laundering and organized crime, there are still weaknesses in the control mechanisms.
“The fact is that compliance is not working properly. It would be necessary to greatly increase compliance levels to prevent customers from suffering undue sanctions, even if corrected later”, he states.
O chairman from Holding SM also highlighted that, when an organization becomes classified by the United States as a target of sanctions, any institution that processes or fails to identify financial flows linked to these groups may enter an area of regulatory risk.
Even institutions that claim ignorance may suffer consequences if authorities identify flaws in the mechanisms for preventing money laundering, monitoring final beneficiaries or reporting suspicious transactions to the competent bodies.
“Ignorance may even mitigate liability in some cases, but it does not eliminate the duty of diligence”, explains Mendonça. “Banks are required to know their customers, understand the origin of funds and monitor patterns that are incompatible with their declared activity.”
Practical sanctions
Among the market’s main fears is the possibility of restrictions in the relationship with the North American financial system. Rezende highlights that “the accusation of supporting or financing a terrorist group can have serious consequences for organizations and their leaders, such as freezing assets and other sanctions, which demonstrates the importance of the issue and the associated risks.”
This is because the classification of foreign terrorist organizations by the United States also follows economic sanctions applied by the US Treasury.
The designation makes it unlawful for a person in the country or subject to its jurisdiction to “knowingly” provide material support or resources to a designated foreign organization.
Among the various items listed under “material support or resources,” U.S. law includes money, securities, and financial services.
Additionally, any financial institution operating in the US that becomes aware of funds linked to a foreign terrorist organization in its possession must take control of those funds and report them to the US Treasury Department’s Office of Foreign Assets Control (OFAC). The Treasury Secretary may also require .
And in addition to terrorist groups, the designation can also affect individuals and entities, and groups or people may be designated that are considered “controlled by” a terrorist group or that have “assisted, sponsored or provided financial, material or technological support” or “services of another nature”.
“Foreign financial institutions may also be subject to correspondent banking and payment account sanctions if they knowingly facilitate significant transactions for or on behalf of” Specially Designated Global Terrorists, it concludes.
In this way, the Donald Trump government’s decision to consider the PCC and the CV as terrorist groups should generate, he stated to the CNN Moneyin March, Lincoln Gakiya, prosecutor considered one of the main names working against organized crime in Brazil.
“If the US classifies the PCC as a terrorist organization, they can say that all financial institutions that sold or will also be sanctioned”, he exemplified, remembering that these two institutions are being investigated for allegedly serving as a vehicle for PCC resources.
Although considered an extreme measure, the loss of access to dollar clearing is seen as one of the most severe sanctions for any financial institution, as the majority of international transactions pass through the United States system.
Even without formal punishments, Mendonça states that reputational risk can lead foreign correspondent banks to reduce operating limits, terminate commercial relationships or demand additional controls from Brazilian institutions.
“The effect is not just legal. It is operational and reputational”, he states.
For Gustavo Niskier, partner at Chalfin Goldberg Vainboim Advogados, the impact of the measure goes beyond the banking sector and affects any Brazilian company exposed to the international market.
“Banks, financial institutions and any Brazilian company that operates internationally, whether using the dollar, importing or exporting goods and services, will need increasingly robust compliance programs”, says the lawyer.
According to Niskier, the potential consequences include blocking of resources, imposition of fines, restrictions on access to the dollar and even loss of connection with international exchange systems.
In the expert’s assessment, the central point for the Brazilian financial market will not only be proving lack of knowledge about possible operations linked to the PCC or Comando Vermelho, but demonstrating that there were sufficient controls to identify risks.
“The relevant question is not just whether the institution knew, but whether it had adequate mechanisms to know. This is what will separate the most protected institutions from the most vulnerable if Washington asks questions”, says the lawyer.
Niskier further assesses that, after , any transaction with a direct or indirect link to these structures could be classified as a violation of US law.
“American terrorism legislation is much more severe and less flexible than a general sanctions regime. This creates a chain effect, because a bank may have operated with a fund that operated with another intermediary linked to individuals under investigation,” he explains.
