04 Feb 2020
Brazil is facing criticism after stripping its national financial intelligence unit (FIU) of the power to report on terrorist financing, the Financial Times said on Monday.
Opposition lawmakers amended the mandate of the Council for Financial Activities Control, or Coaf, over concerns that the government of President Jair Bolsonaro would use the counterterrorism laws at its disposal to target social activists, whom the Brazilian leader has compared to terrorists, the FT said.
In a statement to the newspaper, Coaf said it would “undoubtedly continue to produce reports on terrorist financing… 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].”
But the decision to remove references to terrorist funding in the FIU’s mandate has angered US officials and is expected to draw strong criticism from the Financial Action Task Force (FATF), sources told the news outlet. Some believe that FATF could place Brazil on its “grey list” of nations with poor anti-money laundering and counterterrorism financing standards.
“Brazil has already been in the hot seat, and this year it will have this assessment,” Jorge Lasmar, a money laundering expert at the Pontifical Catholic University of Minas Gerais, told the FT. “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,” he told the newspaper. “Being on the list will have a direct impact on the financial system itself . . . [institutions] will charge more for transactions with Brazil.”
An unnamed official with knowledge of the matter told the FT that FATF and other international organizations will criticize Brazil “for sure” over the legislative change, “because it was clear this was the intention of congress.”
Critics of the move have also suggested that the revised mandate could hinder Coaf’s ability to act and open the way for legal challenges against the agency, according to the report.
Following years of lobbying from FATF, Brazil enacted a counterterrorism law in 2016 that took aim at the financiers of terrorist groups.
Last year, Brazilian Supreme Court Justice Dias Toffoli barred Coaf from turning over data on suspicious financial activity to Brazilian prosecutors without first obtaining judicial approval. The ban was ultimately reversed after FATF characterized the decision as a “serious concern,” the FT said.
US officials have previously alleged that Lebanese communities in Brazil have provided funding to Hezbollah, which the United States has designated a “foreign terrorist organization” since 1997.
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