In the last days of December, Brazil’s Central Bank issued a regulation that determines close monitoring, by financial institutions, of financial transactions of politically exposed persons (PEPs). The purpose of the regulation is to prevent and fight corruption and money laundering.
Brazil’s official gazette of December 27 published Central Bank Circular No. 3,339, which establishes procedures to be followed by financial institutions with respect to financial transactions of PEPs. The Circular includes as PEPs both Brazilian nationals and foreign individuals. With respect to the first, PEP includes public servants who hold, or have held in the last five years, public positions and jobs, in Brazil or abroad, as well as their representatives, relatives and other persons of their close relationship.
Among Brazilian PEPs are those:
- holding elective positions in the federal executive and legislative branches;
- federal ministers and equivalent public servants;
- presidents, vice-presidents and offices of state-owned companies, public foundations, autarchies and other public bodies;
- members of the National Council of Justice, Supreme Court and superior courts;
members of the National Council of the Attorney General Office, the Attorney General, the Vice-Attorney General, the Labor Attorney General, the Military Justice Attorney General, the states’ Attoney General, among other similar positions; - members of Brazil’s Court of Audit;
state governors and members of the state courts of appeal, state assemblies, state and municipal courts of audit; - mayors and presidents of municipal assemblies
For foreign PEPs, the Circular allows financial institutions to use more than one method to assess the PEP condition of potential clients, such as, requesting a statement from the client, research on available public information, research on PEPs electronic databases and, follow the FATF/GAFI’s Forty Recommendations.
The Circular also establishes that financial institutions’ internal procedures must be structured in a way to clearly identify PEPs and the origin of their funds. It also provides the following rules regarding Brazilian and foreign PEPs:
- it is mandatory the authorization from high management to begin or continue a business relationship with persons who are considered, or who become, PEPs;
- financial institutions must adopt continuing surveillance measures with respect to their business relationship with PEPs;
- special attention is required for new relationships and transactions with PEPs arriving from countries with which Brazil have significant business or financial transactions, common borders, and ethnical, political or language proximity.
For foreign PEPs, the circular allows that control and monitoring be made by a foreign financial institution with whom the PEPs maintains business relationship, to the extent that such an institution is subject to government jurisdiction similar to Brazil’s Central Bank and provide access of PEPs’ information to such a government body.
The new requirements introduced by Circular 3,339 are effective only as of July 2, 2007.
David Roberto R. Soares da Silva