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OFFICIAL GAZETTE (DOU) OF MARCH 4, 1998
Law n°. 9.613 of 03/03/98
Pertains to the crimes of laundering or concealment of
assets, rights, and valuables[ 1 ] (sets forth) measures designed to
prevent the misuse of the financial system for illicit actions as
described in the Law: creates the financial Activities Control
Council - COAF[ 2, ] and deals with other
matters.
The President of the Republic
I hereby state that the National Congress has decreed and I
signed the following Law:
To hide or disguise the true nature, origin, site, disposition,
movement, or ownership of assets, rights and valuables which are
known to be directly or indirectly the result of the (following
types of) crimes:
I - of illicit trafficking in narcotic substances or
similar drugs;
II - of terrorism;
III - of smuggling or trafficking in weapons, munitions
or materials used for their production;
IV - of extortion, through kidnapping
V - against the public administration, including by
direct or indirect demands for payment, for the benefit of the
demanding party or for any other party, in exchange for the
performance of any administrative act, or the omission of any
act;
VI - against the national financial system;
VII - committed by a criminal organization.
Sentence: (strict imprisonment) jail term[ 3 ] of 3 (three) to
l0 (tem) years and a fine
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- The same punishment applies to any party who, in order to hide
or conceal the use of the assets, rights and valuables resulting
from the crimes set forth in the section:
I - converts them into licit assets;
II - acquires, receives, exchanges, trades in, gives or
receives them as guarantee, keeps, stores, moves, or transfers any
(such assets, rights and valuables);
IlI - imports or exports goods at prices which do not
correspond to their actual values;
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- The same penalty applies also to anyone who:
I - make use of any assets, rights and valuables, which
are known to be derived from the crimes mentioned in this Section,
in the economic or financial activity;
II - knowingly takes part in (any) group, association, or
office set up for the purpose of hiding or concealing assets,
rights and valuables derived from (any of) the crimes dealt with in
this Law.
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- The attempts at committing (any of the above) crimes are
punishable in the manner prescribed in section 14, sole paragraph,
of the Criminal Code.
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- The sentence shall be increased by one to two-thirds, in any
of the instances contemplated in items I to VI of this section when
the crime follows a constant pattern or is committed by a criminal
organization.
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- In the event that the accused or his accomplice, freely agree
to cooperate with the authorities by providing information leading
to the uncovering of a crime and the determination of those
responsible therefore or to the finding of assets, rights and
valuables which were the object of the crime, the sentence may be
reduced by one or two-thirds and (the accused) may be allowed to
start serving it in an open system of imprisonment[ 4. ]
- (The following provisions apply with regard to) (judicial)
proceedings and sentencing in the case of the criminal offences
encompassed by this Law:
I - the (procedural) rules that apply are those that
apply to felonies punishable by extended jail term
("reclusão"). under the jurisdiction of a singular
judge.
II - The proceedings pertaining to the crimes
(contemplated hereunder) are in no way dependent on the proceedings
applicable to any of the criminal offences mentioned in the
preceding section, which give origin to the crimes dealt with in
this Law, even when such offences originate in another country:
III - the federal courts shall have jurisdiction over
such crimes in the following instances.
a) in the event of crimes against the financial system and the
economic-financial order or detrimental to assets, services or
interests of the (Federal) Union[ 5 ] or any of its autarchic entities and
government companies[ 6 ] ;
b) in the event the originating crime is subject to the
jurisdiction of the federal courts.
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- The indictment shall include sufficient indications of the
existence of the previous (or originating) crime. The (criminal)
acts described in this Law are punishable even when the offender in
the originating crime is unknown or exempt from punishment.
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- The provision contained in Sec. 366 of the Code of Criminal
Procedure will not apply to the judicial process pertaining to the
crimes contemplated in this Law.
- In the event that the judge deems it appropriate to deny
defendants the right to post bond, or to obtain release during the
appeal and provides justification for preventive detention,
defendants will be denied such benefits, even in the case of
first-offenders with a clean record.
- In the course of the police investigation or of the court
proceedings, the judge, upon the request of the police authorities
or the prosecutor, may order the seizure or freezing of assets,
rights and valuables, which constitute the object of the crimes
dealt with under this Law, and belong to the accused or are
registered under his name, in accordance with the procedure set
forth in sections 125 to 144 of Decree-Law n° 3.689 of October
3, 1941 - Code of Criminal Procedure.
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- The preventive measures contemplated in this section will be
suspended, in the event that the criminal lawsuit is not initiated
within a period of 120 (one hundred and twenty) days, counted from
the date the judicial proceedings are concluded.
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- Once the legality of the origin of seized or frozen assets,
rights and valuables is established, the judge will order their
liberation.
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- No request for the liberation of any assets, rights and
valuables shall be granted without the presence of the accused. The
judge may order that actions be taken in order to preserve any
assets, rights or valuables in the instances contemplated under
Sec. 366 of the Code of Criminal Procedure.
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- In the event that the immediate implementation of the
preventive measures (contemplated herein) may compromise the
investigations, the judge, acting upon a request from the police
authorities, and after hearing the prosecutor, may issue an order
suspending an arrest warrant or the seizure of assets, rights or
valuables.
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- Whenever the circumstances warrant it, the judge, acting on a
recommendation of the public prosecutor, may appoint a qualified
person to manage the assets, fights or valuables seized or attached
and (this manager) shall execute a deed of undertaking[ 7 ]
- The manager of the assets:
I - will be entitled to receive compensation (for his
services), which shall be paid from proceeds of the assets under
management;
II - acting in response to a court order, will provide
periodic information about the status of the assets under his
management as well as explanations and detail about investment and
reinvestment operations (that may have been) made by him;
Sole paragraph - The actions pertaining to the
management of the assets seized or attached shall be communicated
to the prosecutor, who may file any request before (the court) that
he deems appropriate.
- In addition to the results set forth in the Criminal Code, a
guilty sentence entails the following:
I - The forfeiture, in favor of the Union, of any assets,
rights and valuables resulting from any of the crimes described in
this Law, due provision being made for safeguarding the rights of a
victim or those of a third party in good faith;
II - The suspension of the right to hold positions of
director, member of the management council[ 8 ] or manager of any
of the entities set forth in Sec. 9 th,for a period
equal to double the jail term stipulated by the (court's)
sentence;
- In the event that there is an international treaty or
convention (dealing with the matters encompassed by this Law), the
judge will order the seizure or freezing of assets, rights and
valuables resulting from crimes committed abroad provided they
pertain to (any of the) crimes listed in Section 1 st
hereof, and that the foreign authorities (in question) have
requested such seizure.
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- The above provision will be applied also in situations where
there is no international treaty or convention, provided the
government of the foreign country in question undertakes to grant
reciprocity of treatment to Brazil.
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- In the absence of an international treaty or convention, the
assets, rights or valuables seized or frozen by request of a
foreign official or the funds resulting from their disposal shall
be evenly divided between the requesting State and Brazil, due
protection being given to the rights of a victim or of a
third-party in good faith.
- The requirements contained in sections 10 and 11 hereof are
applicable to any legal entities which engage, either on a
permanent or a temporary basis, and whether or not in a cumulative
manner, in any of the following activities as their main or
secondary activity:
I - receiving, acting as brokers and investing third
parties funds, in national or foreign currency;
II - purchasing and selling foreign currency as a
financial asset;
III - acting as securities custodian, issuer,
distributor, negotiator, broker, or manager;
Sole paragraph -The same requirements apply (to the
following):
I - stock, commodities, and futures exchanges;
II - insurance companies, insurance brokers, institutions
involved with private or official social security (business);
III - credit card managers and managers of consumers
consortia for the acquisition of goods and services;
IV - managers of companies that use magnetic cards, or
any other instrument, for the transfer of funds.
V - companies that engage in leasing and factoring;
VI - companies that give out discounts for the
acquisition of goods or which hand out or provide cash or chattels,
real estate, goods or services by means of drawings or by other
similar methods:
VII - branches or proxies of foreign entities which
engage in any of the above-mentioned activities
VIII - all other legal entities engaged in the
performance of activities which are dependent upon an authorization
from the agencies that regulate the stock, exchange, financial, and
insurance markets:
IX - any and all national or foreign individuals or
entities, who operate in Brazil and act in the capacity of agents,
managers, representatives or proxies, commission agents, or who, in
any other manner, represent the interests of foreign legal entities
that engage in the performance of any of the activities set forth
in this section;
X - legal entities which engage in the performance of
activities pertaining to real estate, including the promotion,
purchase and sale (of such properties);
XI - individuals or legal entities engage in the commerce
of jewelry, precious stones and metals, objects of art, and
antiques.
- The parties mentioned in Section 9 th hereof
shall:
I - identify their clients and maintain an updated
registry, in a manner such as will be determined in instructions to
be issued by the appropriate authorities;
II - keep an up-to-date registry, setting forth, in a
specific and itemized manner, all transactions in national and
foreign currency, or involving securities and bonds, credit
instruments, metals, or any assets that may be converted into cash
and which exceeds an amount set forth by the competent authority,
as prescribed in the provided instructions to be issued by the
latter;
III - comply with notices sent by the Council established
under Section 14 th hereof, within the time period set
by the appropriate judicial authority. The judicial proceedings
pertaining (to such matters) shall be conducted in a confidential
manner.
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- In the event that the (above mentioned) client is a legal
entity, the identification mentioned in item I of this Section must
comprise the individuals who are their authorized representatives,
as well as their owners.
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- The reference files and registries mentioned in items I and II
of this Section must be kept during a minimum period of five years,
counted from the (date of the) closing of the account or of the
date of conclusion of a transaction This period of time may be
extended by a (decision of the) official having jurisdiction over
the matter.
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- The registration required under item II of this Section shall
be likewise required whenever an individual or legal entity, an any
(individuals or legal entities) connected with them, enter into
more than one financial transaction with the same individual, legal
entity, conglomerate or group, the aggregate amount of which
exceeds the limit (or ceiling) set (for such cases) by the
authority having jurisdiction over such matters
- The parties mentioned in Section 9 th hereof:
I - must pay special attention to any transactions which,
pursuant to instructions issued by the appropriate officials may be
meaningful indications of occurrence of (any of) the crimes defined
hereunder, or which may have a relationship therewith;
II - must give notice to the appropriate officials,
within a period of twenty-four hours, and abstain from informing
their clients of this action, in connection with any of the
following:
a) any and all transactions listed in item II of Section 10
which entail an amount which exceeds a ceiling established by the
same officials in accordance with terms and conditions (likewise)
set by those officials;
b) a transaction which fits the description contained in item I
of this section, or a proposal regarding the (entering into such a
transaction).
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- The officials having jurisdiction over the above matters will
include in the instructions mentioned in item I hereof a list of
transactions which could characterize the kind of operation
contemplated in that item, by reason either of the (nature of) the
parties, or the assets, or due to the type of instruments used to
implement (the transaction), or because of the lack of economic or
legal justification (for carrying out such a transaction).
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- Information imparted in good faith, in the manner prescribed
in this Section, shall not generate any civil or administrative
liability.
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- If any parties are not subject to specific control or
oversight agency, they will be required to send the reports
contemplated in this Section to the Financial Activities Control
Council - COAF, in the manner prescribed by the Council.
- The parties mentioned in Section 9 th,as well as
the managers of legal entities which fail to comply with the
determinations set forth in sections l0 and 11 shall be subject to
the following sanctions, which will be applied singly or
cumulatively, by the appropriate authorities
I - warning;
II - monetary fine of variable amount, ranging from one
percent to double the amount of the transaction, or up to two
hundred percent of the profits derived therefrom or which would
have been presumably obtained, as a result of the transaction, or a
fine of up to R$ 200.000,00 (two hundred thousand
reais);
III - temporary prohibition against holding any position
in the management of (any of the) legal entities set forth in the
sole paragraph to section 9 th,within a period of until
10 (ten) years;
VI - cancellation of the authorization to operate;
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- The sanction of warning will be applied in the event of
failure to adequately comply with the instructions contained in
items I and II of Section 10.
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- A fine shall be applied whenever any of the parties mentioned
in Section 9th, acting negligently or maliciously:
I - fail to cure the irregularities which gave cause to
the issuance of the warning, within the required time period, (as
ordered) by the appropriate officials;
II - fail to carry out the identification or registration
contemplated in items I and II of Section 10;
III - fails to comply, within the prescribed time period,
with the requirement contained in item III of Section 10;
IV - disregards the prohibition set forth in action II,
or fails to make the communication contemplated therein.
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- The (penalty) of temporary suspension activities shall be
applied whenever it is found that serious breaches of this Law have
occurred or whenever there is an specific, duly ascertained,
recurrence of a previous transgression which was punished with the
application of a fine.
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- The penalty of cancellation of the authorization to operate
shall he applied in instances of specific recurrence of
transgressions which were previously punished with the application
of the penalty set forth in item III of the initial portion of this
Section
- The procedure for the application of the sanctions
contemplated in this Chapter will be regulated by a decree which
will ensure the right of rebuttal and ample rights of defense to
the (interested) parties.
- The Financial Activities control Council - COAF - is hereby
instituted, under the jurisdiction of the Treasury Ministry, for
the purpose of disciplining applying administrative sanctions,
examining and identifying, any activities that raise suspicion of
occurrence of any of the illegal acts contemplated in this Law, and
receiving (all pertinent information) (The action of COAF) will not
conflict with the regulatory powers of other agencies.
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- COAF shall be the agency responsible for issuing the
instructions mentioned in Section 9 th, to the parties
which do not come under any (specific) regulatory agency, as well
as for applying the sanctions set forth in Section 12.
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- COAF shall also be responsible for coordinating and advancing
suggestions for (the adoption of) systems of cooperation and
exchange of information designed to bring about a rapid and
efficient response in the struggle against the (practice of) hiding
or concealment of assets, rights and valuables.
- COAF: shall notify the appropriate officials whenever
it finds evidence of the existence of any of the crimes defined in
this Law, or of the existence of clear indications of the
occurrence of any such crimes or of any other illicit activity, so
as to enable such officials to take appropriate measures.
- The members of COAF shall be civil servants of outstanding
reputation and capability, appointed by act of the Minister of the
Treasury and (chosen) from the ranks of career personnel of the
Central Bank of Brazil, the Insurance, the Office of the Public
Attorney for the National Treasury, the Internal Revenue
Secretariat, an intelligence agency of the Executive Branch, the
Federal Police Department, and the Ministry of Foreign Affairs. In
the latter three cases, the members shall be nominated by the
Ministers (having jurisdiction over each such entity).
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- The President of the Council shall be appointed by the
President of the Republic, acting on a recommendation of the
Treasury Minister.
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- The decisions of COAF regarding the application of
administrative sanctions may be appealed to the Minister of the
Treasury.
- The (internal) organization and manner of operation of COAF
will be set forth in by-law, which will be approved by a decree of
the Executive Branch.
- This Law shall come into effect on the date of its
publication.
Brasilia, March 03, 1998; the 177 thyear of
Independence and 110 th year of the Republic.
FERNANDO HENRIQUE CARDOSO
IRIS REZENDE
LUIZ FELIPE LAMPREIA
PEDRO MALAN
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1 Translation note: Thc original.
Portuguese-language text is somewhat redundant. In the expression
-"bens. dircitos c valores", the word "bens" corresponds to
"assets" in English and "valores" may also be translated as
"assets" - though it is more commonly indicative of financial
assets, such as cash and papers (securities. bonds, etc) It also
encompasses thc notion of precious metals (gold) and gems. We
adopted the word "valuables", because it is sufficiently broad to
fit the case.
15
2 Translation note: A better translation, and
one more attuned to American usage, might have been Financial
Activities Control Board. in which case the members of such body
would be called board members. On the other hand. the use of the
word Council is more in line with Brazilian custom and more
literal, thus closer to the Portuguese - language original
Moreover. it goes better with the abbreviation for the new entity,
which is COAF: in the original language.
20
3 Trans. & explanatory note: The original
text refers to a sentence of "reclusão" (reclusion) which
under the Brazilian Penal Code. (Dccree-Law2848 of December 7.
1940). corresponds to a harsher for of imprisonment, involving some
form of solitary confinement for a minimum period of time and
limitation of the right of parole, as distinguished from the
sentence of "detenção". which designates a less
rigorous form of incarceration, which involves no solitary
confinement
30
4 Tans. &: Explanatory Note: An "open
system" type of imprisonment" is one that, under certain
conditions, may be converted into a restriction of rights, which
may involve features of US systems such as work release and
community service.
35
5 The word "União". used in the original text
pertains to the Federal Union as in "the state of the Union
address". Henceforth, it shall be used solely in that sense and. as
such, without the need of the adjective "federal".
40
6 Under Brazilian law. in addition to agencies and
government instrumentalities, them are three distinct types of
entities controlled by the State. which enjoy a greater or lesser
degree of administrative autonomy, as follows: autarchical
entities. public companies, and mixed-economy companies.
Autarchical entities (from the "Greek autárkeia") is
the condition of self-sufficiency, esp Economic. as applied to a
state..." Webster's Encyclopaedic Unabridged Dictionary of thc
English Language (Portland House- New York) 1989 Ed.) arc those
which have the power of raising revenues through fees charged to
the public As such. they are not exclusively dependent on fund
allocations in the federal budget for funding their operations
There are federal, state, and municipal "autarquias". A typical
example is the social security entity. Public companies are
those which operate in the private sector, just as any private
concern, but whose shares are wholly owned by the state A good
example is INFRAERO. the company that operates the country's major
airports. Mixed-economy companies differ from public
companies in that they. have private shareholders, in addition to
the government. Petrobrás. the national oil company, is a
prime example of a federal mixed-economy company.
45
7 The original expression translated here as "deed of
undertaking" is "termo de compromisso", which is a signed document
someone entrusted with the performance of a job or a task formally
accepts such obligation, promises to perform it in accordance with
a predetermined set of prescriptions or instructions, and agrees to
be penalised or held accountable for failure to conduct himself in
the manner set forth in that document. It is the equivalent of an
oath of office.
50
8 "Management Council" is used as a translation of
the Portuguese original item "Conselho de
Administração". which, pursuant to the corporation
law, is the highest management board in a Brazilian corporation.
The expression Management (or Managing) Board was avoided because
many local companies have both a "Management Board'' (called
"Diretoria Executiva". or simply "Diretoria") and a higher board
known as "Conselho de Administração". which is the
term used here.
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