Brazil: White Collar Crime

Criminal liability for legal entities is an exception in Brazil. It only applies in cases involving environmental offences (see Question 2 below).

All other offences mentioned in this answer are thus punishable only in relation to individuals involved in their practice. In white-collar crime matters, such involvement requires the wilful intention to commit the crime, or at least wanton disregard of the possibility that one’s action leads to a forbidden conduct.

Financial crime offences are punished under Law 7,492, dated June 16, 1986. The key offences provided under this law are fraudulent and reckless banking, the offering of securities not properly registered with the Brazilian Securities Commission (Comissão de Valores Mobiliários – CVM), the undertaking of unauthorised foreign exchange operations and the operation of financial institutions not properly licensed. As a rule, only managers and the controlling shareholders may be held liable, as set forth in article 25 of Law 7,492/86. The Brazilian Penal Code, however, provides that everyone who contributes to a crime may be held liable as a collaborator, even if he or she does not hold a management position, and the Brazilian courts accept prosecutions based on this rule.

Money laundering is also a key offence in Brazil, primarily associated with domestic crimes. Such offence is punished according to Law 9,613, dated March 3, 1998. In 2012, the range of predicate offences to money laundering was broadened to include any criminal violation that generates proceeds.

Capital market criminal offences, such as market manipulation through deceptive techniques and insider trading (articles 27-C and 27-D of Law 6,385, dated December 7, 1976) are important too. An interesting feature of the latter is that it applies also to the mere transmission of information by persons that acquired them during a fiduciary relation with the company, such as an attorney, even in the absence of evidence of actual use for profit.

In the last few years, corruption scandals led to important prosecutions for schemes in the Brazilian state-controlled company Petrobras, affecting also financial institutions. Such violations are criminal offences punished under articles 317 and 333 of the Brazilian Penal Code. As for corruption in the private sector, it is not presently established as a crime under Brazilian law, except for specific situations involving competitors and the negotiation of votes in corporate meetings.

Finally, after the enactment of Law 12,850, dated August 2, 2013, being part of a criminal organisation became a key offence too, because of its broad definition, which is frequently used to cover legitimate businesses. According to the Brazilian law, ‘a criminal organisation is the association of four or more people structurally ordered and characterised by the division of tasks, even informally, with the intention to obtain, directly or indirectly, an advantage of any nature, through the perpetration of criminal offences with a maximum penalty of more than four years of incarceration or with a transnational nature’ (article 1, §1).

Corporations may be held criminally liable only in cases involving environmental offences. Law 9,605, dated February 12, 1998, provides that corporate criminal liability applies if the offence is committed by decision of a legal or contractual representative of the legal entity, or of their collegiate body, in the interest or benefit of the entity.

Corruption and money laundering became quite common in the last few years because of Lava Jato (see Question 25 below). Being part of a criminal organisation is also a commonly prosecuted offence, due to its broad definition, as seen on Question 1 above. Another commonly prosecuted offence is fraud, which may be charged either in its original form (the obtention of an illicit advantage, to the detriment of others, by inducing or keeping someone in error through a fraudulent mean) or as a specific offence, such as fraudulent banking and false accounting.

Prosecution of financial crimes provided under Law 7,492/86 is led by the Federal Prosecution Office and the investigation is conducted by the Federal Police. While still unusual, prosecutors are also allowed to conduct investigations in Brazil.

Financial crime cases are heard by a federal judge. Appeals are directed to the courts indicated in the answer to Question 23. Trials by jury only occur in case of intentional crimes against life in Brazil.

Police investigation frequently starts by a discretionary decision of a police commissioner, at judge’s or public prosecutor’s request, at the victim’s request or at any citizen’s request for that matter. It may also start after someone is found in the act of committing an offence (flagrante delicto) or because of information released by the press. Another possibility is reporting the crime to the police, which can be done by anyone: once the central unit of the Federal Police is notified, they send the information to the General Administrative Department to analyse and distribute the case to the competent unit.

Raids became common in the last few years, but they must be authorised by a judge, as most compulsory document production proceedings in Brazil. People under investigation are not compelled to produce evidence that may incriminate themselves, which includes not only the right to remain silent, but also the right not to present evidence within their power.

The authorities may summon people to be interviewed. If they are not interviewed as witnesses, interviewees are allowed to remain silent or answer only specific questions. Perjury is not punished by the Brazilian law if the person is not a witness. Witnesses, however, are subject to perjury charges and they are compelled to answer all questions within their knowledge.

Interviewees not appearing as mere witnesses have the right to be represented by a lawyer, to remain silent (or answer specific questions) and to have full access to the files. Only unrecorded ongoing evidence production may be kept from the interviewees, such as wiretapping proceedings still in progress. Witnesses, on the other hand, are not allowed to remain silent or to have access to the files, though they also may be accompanied by a lawyer at interviews.

Interviews may be recorded, but such proceeding is not mandatory. Usually, the police commissioner takes notes during the interview, and the interviewee signs a document with his/her declaration at the end.

Yes.

Brazilian law regarding financial crimes applies extraterritorially not only to nationals, but unconditionally to anyone who commits a crime against the property or public faith of the Union, federal district, or of any state, territory, municipality, public company, mixed capital company, autarchy or foundation instituted by the Brazilian Public Power.

If the crime is foreseen in an international treaty to which Brazil is a signatory or is committed by a Brazilian national, the law applies if five cumulative conditions are met: (i) the agent enters the national territory; (ii) the fact is a criminal violation also in the place where it was committed; (iii) the crime is included among those for which Brazilian law authorises extradition; (iv) the agent has not been acquitted abroad or served his/her sentence there; and (v) the agent has neither been pardoned abroad nor has punishment been extinguished under the applicable law.

Yes.

Brazil signed a few bilateral and multilateral agreements with foreign authorities, based on which they may request or send information directly to a central authority. In 2005, for instance, Brazil signed a Mutual Legal Assistance Treaty in Criminal Matters with the Government of the United Kingdom of Great Britain and Northern Ireland, which ‘includes any measure or step taken in connection with the investigation or prosecution of criminal offences, including the restraint, seizure or confiscation of proceeds of crime and, in accordance with the domestic law of the Requested Party, instrumentalities of crime’. Under such agreements Brazilian authorities may take the testimony or statements of persons (including by videoconference or television), provide documents, records, and other evidentiary material, locate and transfer persons in custody, seize assets and execute requests for search and seizure, among other measures.

Other agreements with similar content have been executed with Switzerland, Spain, U.S.A., Canada, and Panama.

Cooperation may also be obtained through international letters rogatory, that differ from the mechanics above since they require the assistance of judges in both the requesting and requested country. Because of that, they usually take an exceedingly long time to yield evidence.

Legal professional privilege is protected by Law 8,906, dated July 4, 1994, which provides that lawyers have the right to ‘the inviolability of their office or place of work, as well as their work instruments, their written, electronic, telephone and telematic correspondence, provided that they relate to the practice of law’ (article 7, insert II). However, this provision may be disregarded in case there is ‘evidence of authorship and materiality of the practice of a crime by a lawyer’, in which case the competent judicial authority may decree a breach of the inviolability. Even in such case, the use in criminal proceedings of documents, media and objects subject to client-attorney privilege is prohibited, unless the client to which the material refers is a participant in the crime (article 7, §§ 6 and 7).

In general, only people under investigation may have access to the case files, but judicial decisions (such as those that authorise raids) are not covered by the same rule, unless ‘the protection of intimacy or social interest so requires’ (article 5, insert LX, of the Brazilian Federal Constitution). Such constitutional provision may be used to protect documents such as bank statements, correspondences and declarations made to the Federal Revenue Service.

Corporate criminal liability is limited in Brazil to environmental offences. Hence, there is no established doctrine to assess successor criminal liability. A few decisions, however, have already been issued ruling that successor entities may not be held responsible because criminal liability is personal.

Prosecuting authorities have no discretion to decide whether to charge. As long as there is evidence of a crime and of its perpetration, prosecuting authorities must charge, unless the agent entered into a deal to avoid prosecution, as described on Question 17 below.

There is no evidential standard legally required, though many judges consider that the crime must be proven beyond a reasonable doubt. In the Brazilian legal system, the judge is free to assess the evidence and come to a conclusion based on objective criteria.

On the other hand, Article 386 of the Brazilian Criminal Procedure Code provides that the judge must acquit the defendant if he/she recognizes that (i) it is proven the nonexistence of the fact deemed to be a crime; (ii) there is no evidence of the existence of such fact; (iii) the fact does not constitute a criminal offence; (iv) it is proven that the defendant did not contribute to the criminal offence; (v) there is no evidence that the defendant contributed to the criminal offence; (vi) there are circumstances that exclude the crime or exempt the defendant from punishment; and (vii) there is not enough evidence for a conviction.

Yes.

Except for racism and actions of armed groups against the constitutional order and the democratic state, all crimes are subject to a statute of limitations. The enforcement-limitation period is two years for crimes punished by fines, and from three to 20 years for crimes punished with incarceration (articles 109 and 114 of the Brazilian Penal Code).

Yes.

Individuals may enter into an agreement to turn state’s evidence in exchange for a penalty reduction or for not being prosecuted. In any case, article 4 of Law 12,850/13, subjects the benefit to the meeting of at least one of the following requirements: (i) the identification of other co-authors and participants in the criminal organisation and the criminal offences committed by them; (ii) the revelation of the hierarchical structure and division of tasks of the criminal organisation; (iii) the prevention of criminal offences arising from the activities of the criminal organisation; (iv) the total or partial recovery of the product or the profit of the criminal offences committed by the criminal organisation; (v) the location of any victim with their physical integrity preserved. To avoid prosecution, it is also necessary that the agreement refers to an infringement of which the authorities did not have prior knowledge, and that the seeker is not the leader of the criminal organisation. He/she should also be the first to provide effective assistance.

Since December 2019, it is also possible to sign a non-prosecution agreement if the person confesses to the practice of a criminal offence committed without violence or serious threat, and with a minimum penalty of less than four years. A few conditions are established according to article 28-A of the Brazilian Criminal Procedure Code, which may be adjusted cumulatively or alternatively: (i) reparation of the damage or return of the crime product to the victim, except when it is impossible to do so; (ii) voluntary renunciation of assets and rights indicated by the Public Prosecutor’s Office as instruments, proceeds or profit of the crime; (iii) provision of services to the community or public entities for a period corresponding to the minimum penalty established for the offence, reduced by one to two thirds; (iv) payment of a cash benefit to a public or social interest entity; and (v) compliance, for a specified period, with any other condition indicated by the Public Prosecutor’s Office, provided that it is proportional and compatible with the criminal offence committed.

Finally, Law 9,099, dated September 26, 1995, provides that prosecution may be avoided for crimes punished with a minimum penalty of a year or less, regardless of confession, if the defendant is not being prosecuted for another offence, under the following conditions: (i) reparation of the damage, unless it is impossible to do so; (ii) prohibition to frequent certain places; (iii) prohibition to leave the district where the defendant resides without authorisation from a judge; and (iv) personal and mandatory appearance in court, monthly, to inform and justify his/her activities. Most of the financial crimes are punished with a minimum penalty higher than a year, and thus this benefit would not apply. There are, however, certain offences, such as false accounting, operation of a financial institution without authorisation and insider trading, that meet the one-year requirement and would therefore qualify for the benefit.

No.

However, the Brazilian Congress is currently considering a bill to introduce a mechanism for plea bargaining in less serious offences. According to the bill, except for cases tried by a jury or involving domestic violence against women, prosecution and defence may agree to the immediate application of a penalty if the defendant pleads guilty in cases where the offence is punished with a maximum penalty of eight years of incarceration or less.

Corporations are not subject to criminal liability in cases involving financial crimes.

For individuals, however, article 25, § 2, of Law 7,492/86, provides that penalties may be reduced by one to two thirds if the financial crime is committed by a group and the co-author or participant makes a full voluntary disclosure to the authorities. Confession is also a mitigating circumstance under the Brazilian law.

In Brazil, penalties are provided at intervals for each offence. Article 59 of the Brazilian Penal Code provides that ‘the judge, taking into account the culpability, the background, the social conduct, the agent’s personality, the motives, the circumstances and consequences of the crime, as well as the victim’s behaviour, shall establish such penalties as necessary and sufficient for crime sanction and prevention’. After that, mitigating and aggravating circumstances are considered, such as confession and recidivism. Finally, the judge considers causes of decrease and increase of penalty, which are provided specifically in the description of each crime.

Corporate criminal liability is an exception under Brazilian law, and it does not apply in cases involving financial crimes. Effective compliance procedures, however, may be important to prove that directors and officers did not allow crimes to be committed by their omission to implement controls.

With that said, civil and administrative liability (typically heavy fines in the latter case) may be imposed irrespective of fault on corporates involved in corrupt practices according to Law 12,846, dated August 1, 2013 (article 7, insert VIII). Under such law, internal compliance and audit procedures may contribute to decrease penalties.

Criminal liability for legal entities is an exception in Brazil. It only applies in cases involving environmental offences, rather than financial crimes (see Question 2 above).

Penalties for individuals are established based on the criteria mentioned on Question 20 above, and they usually stand near to the minimum for first-time offenders if there is no significant cause for augmentation. According to the Brazilian law, any penalty of up to four years of incarceration may be replaced by non-custodial measures, such as fines and community service orders.

That being said, (i) fraudulent banking is punished with incarceration for a period of three to twelve years, and a fine; (ii) reckless banking is punished with incarceration for a period of two to eight years, and a fine; (iii) the offering of unregistered securities is punished with incarceration for a period of two to eight years, and a fine; (iv) the undertaking of unauthorised foreign exchange operations is punished with incarceration for a period of two to six years, and a fine; (v) the operation of financial institutions not properly licensed is punished with incarceration for a period of one to four years, and a fine; (vi) money laundering is punished with incarceration for a period of three to ten years, and a fine; (vii) corruption is punished with incarceration for a period of two to twelve years, and a fine; (viii) capital markets manipulation is punished with incarceration for a period of one to eight years, and a fine; (ix) insider trading is punished with incarceration for a period of one to five years, and a fine; and (x) being part of a criminal organisation is punished with incarceration for a period of three to eight years, and a fine.

Both defendant and prosecuting authorities may appeal a decision issued by a first instance judge. The appeal is judged by a panel of three second instance judges.

A special appeal may be filed with the Brazilian Superior Court of Justice if the second instance decision (i) contravenes a treaty or federal law or deny their effectiveness; (ii) deems valid a contested local government act under federal law; or (iii) gives the federal law a different interpretation from that of another court.

An extraordinary appeal may be filed with the Brazilian Supreme Court if the second instance decision (i) contravenes a provision of the Brazilian Federal Constitution; (ii) declares the unconstitutionality of a federal treaty or law; (iii) deems valid a law or act of local government challenged under the Constitution; or (iv) deems valid a local law challenged under federal law.

Financial crimes are prosecuted and investigated by federal authorities, which is an exception in the Brazilian legal system. There is an ever-increasing cooperation among the Brazilian Central Bank, the Brazilian Securities Exchange Commission, and the Brazilian Financial Intelligence Unit [COAF] to enhance prosecution. In 2020, there was an increase of more than 70% in reports sent by the Brazilian Securities Exchange Commission to the prosecuting authorities and COAF experienced an increase of almost 100% in communications of suspicious activity. Still, investigations have been significantly hindered by the pandemic.

Brazilian authorities have been particularly focused on Lava Jato in the last five years. Lava Jato is an investigation initiated on March 17, 2014, in the Brazilian state of Paraná by the Federal Police, as authorised by the 13th Federal Court of Curitiba. It was originally meant to investigate black-market money dealers who operated networks to facilitate financial crimes involving public money. Since its start, Lava Jato has greatly expanded and investigated several other issues, including alleged crimes committed within Petrobras and its subsidiaries, especially corruption. Despite important defeats in the last year, Lava Jato has investigated roughly all major political figures in Brazil and became a central part of the public debate, hugely influencing today’s political scenario. It has also expanded beyond Paraná’s justice system and nowadays its effects may be felt in almost all Brazilian states, as well as in the Supreme Court.

Besides Lava Jato, capital markets offences have been receiving more attention from authorities, and the new direction of the Brazilian Federal Police has recently defined two other themes besides corruption to call priority in the next years: combating militias and criminal factions, and environmental crimes.

The pandemic has greatly affected ongoing investigations. Lava Jato is still the most prominent case in Brazil, but, in the past year, it had important defeats in court, with the dismissal of key investigations and the decision of the Supreme Court to move cases from Curitiba to other Brazilian states. Brazil also passed a new bidding law, increasing penalties significantly in cases of fraud and default, which will probably affect the prosecution framework in the next years.

Congress has been discussing a new Criminal Procedure Code that may create a plea bargain mechanism for less serious offences (please refer to the answer to Question 18).

In March 2020, a congressman presented a bill to change Law 7,492/86, decriminalising obsolete offences such as the execution of unauthorised exchange operations.

Yes.

Some of the topics deserving improvement are indicated below (please refer to the answer to Question 1 for further explanation).

Money laundering – Crimes that simply require money in their execution, as corruption, tend also to be cumulatively punished as money laundering under Law 9,613/98. This is incorrect since money laundering should only exist in case financial resources derived from a crime already committed. Failure of courts to enforce this basic principle has generated prosecution on counts of money laundering. This should be corrected in legislation that clearly spells the limits of money laundering.

Unauthorised foreign exchange operations – Foreign exchange operations entered without the participation of financial institutions authorised to deal in foreign exchange are presently considered a crime. But this should be changed, since the net is too wide and leads to the criminalisation of bona fide deals that could be sanctioned by administrative penalties. A sensible way out here would be to limit punishment to professional black-market operators in foreign exchanges. This might be achieved through the abolition of the crime in this topic, being from this moment on black-market operators prosecuted simply for the crime of operating a financial institution without proper registration. The bill of law mentioned at the end of the answer to Question 27 proposes this alteration.

Fraudulent and reckless banking – Such crimes are defined based on the subjective notations of ‘fraudulent’ and ‘reckless’, leading to varied case-law decisions. Both the concept of fraud and that of recklessness should be given an objective legal definition to ensure case-law uniformity and fairness.