Fintechs, Banks Targeted in Brazil Crackdown on Money Laundering

(Bloomberg) – São Paulo’s financial center of Brazil Faria Lima Boulevard entered a high alarm on Thursday, allegedly attached to a large penalty plan raided by the police.

While the inspectors were looking for offices linked to a crime group accused of using investment funds to hide illegal assets, they surrounded the country’s buildings in the region known as Wall Street.

The police investigation included the penetration of the organized crime to the fuel distribution business, but also investigated the way the crime gangs enter the rapidly growing segments of the financial industry.

According to the documents seen by Bloomberg News, the funds controlled by Banco Genial SA were among the targets. As of March, 4.1 billion Reais ($ 760 million) assets and São Paulo, Rio de Janeiro and offices in New York, the bank, including the ethanol facilities, including the alleged documents used to control fuel assets.

According to the documents, the Brazilian Central Bank authorized by the Central Bank of Brazil in November, the BK Instituição de Pagamento and the Central Bank authorized by the investigation were among the targets of the investigation. Inspectors said that the BK, which has 9.1 million Reais capital when it was authorized, was used by Ethanol manufacturers and fuel distributors on Primeiro Cando in the Capital crime group.

The investigation pointed out the irregularities determined in many stages of fuel production and distribution chain in Brazil. According to the researchers, the profits and the revenues of laundering were hidden to hide their real owners in investment funds. Authorities said the criminal organization controls at least 40 investment funds with 30 billion Reais in assets.

The probes reflect a disturbing truth: the organized crime in Brazil seizes the rapid expansion of digital financial platforms to move illegal money in an alarming way. From the widespread use of mule accounts to the sophisticated operation of their fintechs, criminal groups are buried deeper into the rapidly changing financial landscape of the country by overcoming traditional surveillance and prevention efforts to prevent laundering.

“FinTechs play a vital role in bringing people to the financial system, but many of them have been exploited for organized crime to move, hide and wash, Rob “These plans are increasingly using more sophisticated tools such as investment funds.”

BK lawyer said that the company was surprised that the company was included in the investigation and that it was authorized by the Central Bank and that it was organized. The lawyer said the company is affiliated with the law and that it can cooperate with investigations.

Banco Genial also said he was surprised by reports and was not officially informed. In a statement, his operations followed “the highest governance, ethical and compliance standards”.

A lawyer for Bankrow said that the company has been audited by the Central Bank by monitoring daily transactions and did not see the documents called.

The increase in criminal activity has emerged as one of the biggest challenges for the Brazilian financial sector, and the executives in Fintechs, banks and industry groups have given Bloomberg to Bloomberg in the last two months. The increase in fraud increases costs, erodes competition and breaks down in consumer trust.

According to a study by Think Tank Esfera Institute, the number of fintech in Brazil reached 1,592 in 2024 – about 60% of everyone in Latin America. Their increases were a turning point for the country’s financial system, which was competed, innovation and included in a market dominated by a handful of large banks.

However, the expansion of digital service products provided an incorrectly efficient ground for criminal groups. Fast Tempo has not been matched with the supervision of regulators, public security institutions or fintechs and banks. According to the study, only 334 or 21%of the fintechs in Brazil were organized by the Central Bank as of March and produced gray areas where the crime spiral won.

The cash flows of the penalty groups, the dismantling of the money laundering through the action targeted, is at the center of Brazil’s struggle for organized crime, the Ministry of Justice National Public Security Secretary Mario Luiz Sarrubobo, said in an interview.

The Brazil Central Bank opened the market to Fintechs more than ten years ago and allowed payment institutions to access the Brazilian payment system. Before that, only more traditional financial companies had such access. The movement created an explosion in the sector and enabled large players, including Nubank. Years later, the Central Bank required the official accreditation of new FinTechs, while the existing ones were given a gradual time schedule based on transaction volume.

The Central Bank did not respond to the request for comments.

In the study by the Esfera Institute, the Brazil’s financial intelligence unit COAF, from 2015 to 2024, showed an increase of 766% in the suspected transaction reports marked to Coaf.

Fernando Haddad said to journalists in Brasilia, Fernando, said, “Some Fintechs were used and served as a tool for organized crime for laundering. The tax agency will force FinTech to meet the same compliance obligations with large banks.

While researchers and financial criminal experts point to the lack of supervision of both regulators and finance companies, industry leaders argue that this is not only a regulatory gap, but a public security crisis that worsened from the slow pace of Brazil’s efforts to eliminate the organized crime.

Diego Perez, President of the Brazilian Fintech Association, who represents more than 800 companies in Brazil, said, “Fintechs authorized by the Central Bank is a part of the solution while using embedded vehicles such as trading and opposite party identity. Fintechs sharpens the risk models and compatibility.

Esfera Institute Academic Director Fernando Meneguin, “the difficulty of the state, to establish a sensitive balance, to encourage innovation without drowning, at the same time abuse is to tighten the net,” he said.

-Rachel Gamarski, Giovanna Serafim, Andrew Rosati, Martha Beck and Gabriel Diniz Tavares’ten help.

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