Brazilian authorities said they have detained a police officer who also owned a bank believed to be one of the financial institutions laundering money for a major criminal organization.
Brazil's Federal Police and the Special Action Group for Combating Organized Crime (GAECO) of the São Paulo Public Prosecutor's Office launched Operation Hydra on Tuesday, targeting fintechs used by the First Capital Command (PCC) to launder illicit proceeds.
The investigation found that 2GO Bank and Invbank were used to move illicit funds for the criminal group.
“Shell accounts were opened, and individuals with no financial capacity were used to carry out large transactions,” prosecutor Fábio Bechara of GAECO told OCCRP.
The probe began after a plea bargain testimony from businessman Antônio Vinicius Lopes Gritzbach, who was accused of laundering money for criminals. Gritzbach revealed to the Public Prosecutor’s Office how fintechs were being exploited to launder proceeds from illegal activities.
The whistleblower was shot dead with a rifle at Guarulhos International Airport in November last year. Authorities suspect that corrupt police officers were involved in his murder.
The detained police officer is Cyllas Salerno Elia Júnior, owner of 2GO Bank. Officers also executed ten search and seizure warrants.
“What really troubles us, and caused a lot of concern, is the infiltration of organized crime into state structures. Without this infiltration, the PCC would not have reached the level it has today,” prosecutor Lincoln Gakiya of GAECO said at a press conference.
Elia Júnior had already been investigated by the Federal Police last November during Operation Tai-Pan, which examined financial crimes involving billions of dollars. He is also suspected of laundering money for Chinese businessman Tao Li, who allegedly committed tax evasion in Brazil.
Elia Júnior’s lawyer, Márcio Sayeg, told OCCRP that “the case is under absolute secrecy, and in due time, we will prove his innocence."
Calls to Invbank went unanswered.
Regarding Elia Júnior, São Paulo’s Civil Police stated in a note to OCCRP that they are “investigating the conduct of the officer mentioned in the report and emphasize that they do not condone misconduct by their agents, punishing those who violate the law and disobey the Institution’s protocols.”
The statement also noted that “the Civil Police's Internal Affairs Division is monitoring the developments of the operation launched on Tuesday and is available to the Federal Police and GAECO to assist in the investigation.”
Regulatory Gaps Facilitate Money Laundering
The number of financial platforms in Brazil has skyrocketed. “Brazil now has more than 1,500 fintechs. We have nearly 58% of all fintechs in Latin America,” said prosecutor Gakiya.
Kleber Cabral, a tax auditor for Brazil’s Federal Revenue Service and vice president of the National Association of Tax Auditors (Unafisco), pointed out that the country lacks specific regulations for the fintech sector.
According to him, this has been one of the key factors enabling money laundering by criminal organizations.
He explained that, unlike traditional banks, fintechs are not required by the Central Bank to report their financial activities to the Federal Revenue Service.
“So, the country is blind to those who want to exploit this legal and regulatory loophole to commit crimes.”
Cabral also noted that Brazil is failing to comply with the United Nations Convention Against Corruption, known as the Merida Convention, which the country has been a signatory to since 2003. “This also complicates Brazil’s standing in terms of international treaties.”
In January, a Federal Revenue Service regulation came into effect requiring the monitoring of financial transactions starting at BRL 5,000 (less than $900), including those carried out by digital banks and fintechs.
However, the measure was revoked by the government after a video by opposition congressman Nikolas Ferreira went viral on social media. The footage, which has more than 327 million views on Instagram alone, claimed that the government wanted to monitor informal workers as if they were “major tax evaders.”
“The Federal Revenue Service itself communicated very poorly. There was all that controversy surrounding the idea that this was meant to tax the poor, but in reality, it wasn’t. But, well, that’s another issue,” said auditor Cabral.
