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Brazil’s Central Bank Fights Corruption with Withdrawal Limits

Brazil’s Central Bank Fights Corruption with Withdrawal Limits

Brazil’s balance of international payments had a surplus of US$600 million in May 2017. While that seems like a lot, it is a drastic reduction from its US$3.7 billion balance in May 2016. After releasing the numbers, the Brazilian Central Bank announced an updated policy for cash withdrawals.

Under the new policy, customers will need to give banks more advance notice before making withdrawals. While one day’s notice is the current standard, after the implementation of the amended Central Bank regulation, customers will be required to give banks three days’ notice before making large withdrawals.

Another change is that customers will be required to register large cash withdrawals with the Financial Activities Control Council (COAF). According to the current policy, customers withdrawing amounts over 100,000 reais (approximately US$30,000) must register their withdrawal with COAF. However, after the implementation of the new policy, any cash withdrawal over 50,000 reais (approximately US$15,000) will need to be registered.

The changes to the Central Bank regulation are an attempt to fight money laundering by requiring the registration of withdrawals of large amounts of cash.

Banks are also responsible for reporting any suspicious activity involving the request or actual withdrawal of large quantities of cash. In 2016, there was a 20 percent increase in the reporting of suspicious activities. In addition to cash, the sale of jewels, precious stones, and precious metals valuing over 30,000 reais must also be reported.

In 2016, the number of large-sum payments almost doubled in Brazil. So too did the number of reports of suspected money laundering. These investigations led to the freezing of 140 million reais both in Brazil and abroad.

The government hopes that by strengthening its regulations, it can combat money laundering. But serious doubt exists as to whether more stringent banking regulations will, in fact, lead to less corruption. The worry from the business community, and in particular foreign investors, is whether the changes will result in more hurdles for those wanting to do business in Brazil.