Doing Business in Brazil: A Criminal Law Perspective

Doing business in Brazil is fraught with complications – from red tape and intricate tax structures to stringent regulatory demands. Together, these complexities present a formidable challenge for any company, and a lack of proper understanding and management can expose companies to significant risks. In this context, expert advice in criminal law becomes indispensable.

Critical areas that entrepreneurs must focus on while doing business in Brazil include (i) anti-money laundering regulations; (ii) administrative, environmental, and tax compliance; and (iii) the broad scope of Brazilian jurisdiction.

Brazil boasts some of the most modern anti-money laundering laws, compliant with the latest FATF regulations. These laws permit thorough investigations of activities both before and after suspected money laundering events, while requiring a comparatively low burden of proof for convictions.

This legislative rigour translates into stringent oversight policies for businesses operating on Brazilian soil. Companies must adhere to real-time and retrospective control measures, requiring strict supervision of transactions undertaken by both in-house staff and external intermediary agents.

The prevailing “Know Your Client” and “Know Your Agent” policies dictate that companies must enforce compliance standards uniformly, from directors to agents, across all business sectors. For instance, specific and detailed rules for areas like imports and exports can easily slip under the radar, presenting a risk for unwary companies.

Conversely, this heightened scrutiny, particularly in financial sectors, has led some companies into the realm of over-compliance. This excessive caution has resulted in various operational issues and needless delays. For instance, banks have sometimes refused services to individuals based on perceived sensitivities that are actually unrelated to money laundering.

The category of “politically exposed persons” has expanded to include “potentially exposed persons”. While this over-caution is not entirely unfounded, given banks’ natural inclination towards risk aversion, it can sometimes be taken to extremes.

The bureaucratic requirements, which were already extensive, have swelled to monumental proportions, necessitating adequate preparation and a great deal of patience.

The issue of over-compliance has certainly not gone unnoticed; it has spurred important conversations. While adhering to rules and regulations is undeniably crucial, it is equally vital to ensure that these legalities do not impede the smooth operation of businesses. The challenge lies in finding a balance between meeting legal obligations and maintaining operational efficiency.

For entrepreneurs accustomed to a VAT system, Brazil’s tax landscape can appear exceedingly complex. Even with tax reform on the horizon aimed at simplification, the myriad taxes – no fewer than five – affect every stage of production. This necessitates vigilant oversight from company leadership, especially given that non-payment of taxes can lead to investigations and criminal proceedings.

Recent changes in environmental policy have ushered in stricter oversight, especially concerning the traceability of product origins. This has given rise to a “Know Your Supplier” mandate that calls for meticulous attention to both the products sourced and the labour conditions of outsourced workers. It is important to note that the criminal penalties for environmental infractions are particularly severe.

Brazil’s jurisdictional rules are expansive, extending the possibility of investigation and prosecution to foreign companies and individuals who act on their behalf. Any action, even if executed abroad, can fall under Brazilian jurisdiction if it has effects within the country. The lessons learned from foreign companies embroiled in “Operação Lava Jato” serve as a stark reminder of this reach.

Given this multifaceted legal landscape, expert advice in criminal law is indispensable, ideally sought in collaboration with specialists from other areas. This comprehensive approach ensures not only regulatory compliance but also the safer and more efficient operation of businesses in Brazil.