Brazil Revives Consideration of Fintech Reporting Rules to Combat Money Laundering

Brazil is considering reinstating transaction reporting requirements for fintech companies amid concerns that they may be used for money laundering. The head of the tax revenue service highlighted the urgency for stricter controls after a previous attempt to introduce mandatory reporting faced significant public backlash and was subsequently suspended.

Brazil is contemplating the resumption of discussions regarding the mandatory reporting of transaction values by financial technology companies to the tax revenue service. This assertion was made by Robinson Barreirinhas, the agency’s head, during a Senate hearing, where he highlighted strong evidence suggesting that some lesser-known payment institutions are being exploited for money laundering activities.

Barreirinhas noted that the tax revenue service possesses the requisite intelligence capabilities to track transactions, capabilities that the government plans to extend to fintechs. However, progress towards this goal was halted after a public backlash against previously announced plans.

While emphasizing that he does not wish to vilify fintechs, Barreirinhas acknowledged that the relative ease of opening accounts at these institutions can lead to their misuse for illegal transactions. He advocated for implementing stricter controls on account openings to prevent such activities.

In September, a mandate requiring fintechs to report transactions, including those conducted via the popular Pix instant payment system, was issued by Brazil’s tax revenue service, with the enforcement intended to commence in January. This measure aimed to equate the reporting obligations of fintechs to those of traditional banks.

However, opposition to President Luiz Inacio Lula da Silva’s administration characterized the reporting requirement as an effort to impose additional taxes on workers. Consequently, the administration decided to suspend the initiative in January, coinciding with a notable drop in the president’s approval ratings.

Barreirinhas expressed concern regarding the funding of organized crime in Brazil—Latin America’s most populous country—highlighting smuggling activities involving cigarettes and e-cigarettes, as well as the role of cryptocurrencies and online betting in financing crime.

In summary, Brazil is revisiting the necessity of enforcing transaction reporting rules for fintechs as a response to growing concerns about money laundering. Enhanced oversight aims to mitigate the risks associated with organized crime financing. The initial regulatory efforts faced public opposition, leading to their suspension, yet the government remains focused on addressing these critical issues within the fintech sector.

Original Source: www.usnews.com