Brazil's Senate Commission Approves Law Project on Bank Secrecy


Brazil's Senate Commission Approves Law Project on Bank Secrecy


Originally published in the April 14 edition of World Tax Daily (Copyrights Tax Analysts)

Brazil’s Senate Commission of Economic Affairs (CEA) on March 30 approved a law project that would make taxpayer information protected by bank secrecy regulations more accessible to public authorities.

The project would allow taxpayers’ financial information that has been accessed under a court order to be transferred from one authority to another without further authorization by that court or another court.

The CEA reviewed law projects 418/2003 and 49/2005 and drafted a combined proposal to revoke Complementary Law 105/2001, the 2001 Bank Secrecy Act. Under the proposal, financial institutions are defined to include:

  • banks of any kind;
  • stock and securities distributors;
  • stock, securities, and currency brokers;
  • credit, financing, and investment societies;
  • real estate credit companies;
  • credit card companies;
  • leasing companies;
  • managers of over-the-counter markets;
  • credit cooperatives;
  • savings and loan associations;
  • stock, merchandise, and futures exchanges;
  • clearing and liquidation houses; and
  • any other company that the National Monetary Council deems a financial institution.

Under article 2 of the law project, any court order granting an authority access to information subject to bank secrecy laws would have the effect of automatically allowing the transfer of that information to all public authorities with investigative powers that may have an interest in the party or circumstances under investigation.

Also, the court order would apply to the entire investigation, so there will be no need to renew the request if, during the investigation, new persons, assets, or values are deemed to warrant further investigation. The investigating authority would be required only to notify the original court that a further breach of bank secrecy is being performed. This eliminates the right to a judicial review of the appropriateness of the additional breach.

The following authorities could receive taxpayers’ financial information under further court orders:

  • the Federal Revenue Department;
  • the Central Bank of Brazil;
  • the Federal Audit Court (Tribunal de Contas da União);
  • the Federal Police;
  • the Securities and Exchange Commission;
  • the Brazilian Intelligence Agency;
  • the Council for the Control of Financial Activities (Conselho de Controle de Atividades Financeiras, or COAF);
  • the offices of the federal and state attorney generals;
  • legislative investigation commissions;
  • the secretary of private pension funds; and
  • the superintendent of private insurance.

The following would no longer be considered confidential and could be freely transferred among public authorities:

  • name, address, and ID number;
  • the names of financial institutions where the person under investigation holds bank accounts and investments, and the branch and account number;
  • information verifying whether someone is financially capable of carrying out certain transactions;
  • financial transactions carried out by the person under investigation;
  • verification that disclosure has been consented to by the party under investigation;
  • information collected in internal audits carried out by financial institutions; and
  • all data involving movement of resources from governmental sources or from financial institutions where the government can name most of the members of the board or managers.

Public authorities and financial institutions would have to notify the attorney general’s office of any transaction that might indicate a crime. The notification would not require any evidence but only an explanation of why a crime is suspected. The attorney general’s office may freeze accounts for up to 120 days without a court order.

Financial institutions could not raise bank secrecy arguments to prevent disclosure of specific financial information to the Central Bank. Also, public agents — such as the president; ministers; state governors and secretaries; elected members of the legislative branch; and high officials of the executive, judicial, and legislative branches — would file a semiannual return with COAF reporting their assets and investments held in Brazil and abroad. Another return would be required from federal, state, and local direct and indirect administrations regarding transactions exceeding 200 times the monthly minimum wage (currently, transactions exceeding BRL 102,000, or about $57,800).

The project would also create a 30-year statute of limitations for keeping financial and tax records and files on electronic media and would immediately revoke the 2001 Bank Secrecy Act.

The project now goes to the Senate Commission of Constitution and Justice. If approved, it will be submitted for review and a vote by the full Senate before being forwarded to the House of Representatives.

David Roberto R. Soares da Silva