The Council for Financial Activities Control Shifts to Ministry of Justice and Public Security under new Organization Rules

Since 1998 — when Law No. 9.613/98 came into force as the Brazilian Anti-Money Laundering Rule — all the activities attributed to the Council for Financial Activities Control (“COAF”) used to be performed on the grounds of the regulatory norms approved under Decree No. 2.799/1998.

Such Decree, however, was repealed upon the enactment of Decree No. 9.663, dated January 1, 2019. The repeal is directly related to the new administrative organization of the Presidency of the Republic and the related Ministries, which has now tied COAF into the administrative competence of the Ministry of Justice and Public Security, in accordance with Article 72 of Provisional Measure 870, dated January 1, 2019.

As a result, Decree No. 9.663/19 sanctions COAF’s regulatory norms as part of a new Regulation whose provisions will now govern the Council’s reformulated activities. The adoption of the new Regulation shall be pivotal to furthering the implementation of the Council’s activities.

It is anticipated that the changes to COAF’s internal purview as well as to the processing of potentially illicit activities and financial movements within the regulated markets shall provide a higher degree of effectiveness in the Council’s regulatory, supervisory and sanctioning activities.

Considering COAF’s absorption into the structure of the Ministry of Justice and Public Security, it is worth noting that the respective Minister Sérgio Moro — former federal judge presiding over the criminal processes related to the “Operation Car Wash” investigations — has already appointed as COAF’s president Roberto Leonel de Oliveira Lima, who acquired extensive experience as Chief of Intelligence of the Federal Revenue Service during the Car Wash investigations.

The issuance of Decree No. 9.663/19 introduces a number of significant innovations, among which we highlight the following:

  • Reorganization of internal competences, including the creation of (i) the Supervision Office, which will be responsible for the performance of both administrative and operational activities, such as decisions on the archiving of any preliminary investigations or on the institution of a punitive administrative process and (ii) the Financial Intelligence Office, which will be responsible for managing, analyzing and requesting data and information in relation to occurrences subject to the Anti-Money Laundering Law;
  • Execution of technical cooperation agreements with public and private entities related to anti-money laundering and terrorist financing matters. Furthermore, COAF becomes permanently entitled to coordinate the articulation among the Federal Administration agencies tasked to supervise the regulated markets and on measures related to the abovementioned matters;
  • COAF’s President becomes authorized to unilaterally deliberate on urgent and relevant matters within the competence of COAF’s Plenary;
  • The competence of COAF’s Plenary has also been revised and shall include: (i) establishment of parameters for the application of penalties provided for in the Anti-Money Laundering Law; (ii) regulation of situations in which the fast-track procedure is to be applied and (iii) delegation to COAF’s President of the competence to judge the merits of the punitive administrative proceedings;
  • The Brazilian Intelligence Agency and the National Superintendence of Complemetary Pensions (“PREVIC”) have also been made part of COAF’s Plenary ;
  • Regarding restrictions, the Regulation makes clear that COAF’s President, the Plenary members and the acting public servants may not divulge or circulate confidential information that is known or may have been obtained as a result of functional activities;
  • The new Regulation modifies the rules on the system of appeals and has designated the National Financial System Appeals Council (“CRSFN”) as the public entity in charge of revisiting the decisions made by COAF’s Plenary. However, the new Regulation no longer determines the timeframe for the filing of appeals. In contrast, the repealed Decree clearly defined a 15 day deadline for appeal to the Ministry of Finance, calculated from the date on which the involved parties had been notified of the decision;
  • The new Regulation has also updated other terms to be observed for the carrying out of acts within the punitive administrative proceedings, in addition to sallowing for electronic access for following the progress of the process.