Brazil’s Finance Ministry has urged the country’s central bank to tighten regulations that it says allow criminal suspects and tax evaders to hide assets through certain banking structures, undermining court-ordered freezes designed to recover public funds, according to two sources and a document reviewed by Reuters.
The ministry warned that recent regulatory changes have failed to fully address risks linked to pooled and escrow accounts, mechanisms that have surfaced in police investigations involving organized crime groups and fintech companies. These accounts, officials argue, have been used to bypass systems meant to identify and freeze assets tied to individuals and firms under investigation.
According to the document, pooled accounts — which aggregate funds belonging to multiple beneficiaries — and escrow accounts, originally intended as temporary pass-through structures, have been exploited to circumvent Brazil’s judicial asset-freezing framework. Because these accounts often obscure the identity of the ultimate beneficiary, investigators face difficulties tracing ownership and enforcing court orders.
The Central Bank of Brazil strengthened oversight of fintechs and virtual asset operators in November, requiring pooled accounts to be closed when clients use them to offer unauthorized financial services or to conceal assets. However, the Finance Ministry said this step merely reduces risks rather than eliminating them altogether.
In its submission to the central bank, the ministry said pooled accounts continue to hinder the collection of public debt, limit transparency and weaken efforts to combat money laundering. Sources said these accounts remain problematic because they do not disclose final beneficiaries through the national financial registry and cannot be frozen using the judiciary’s asset-blocking system.
Escrow accounts pose similar challenges, officials said. Increasingly offered by fintech firms as de facto current accounts, they also fall outside standard freeze mechanisms, making it harder for authorities to track and restrain suspect funds.
Investigators are also examining possible asset concealment linked to Refinaria de Petroleos de Manguinhos, known as Refit, which is under investigation for alleged multibillion-real tax fraud. Authorities believe the company may control resources beyond the 1.2 billion reais (about $229 million) already frozen, but have so far been unable to locate the additional funds.
Neither the Brazil Finance Ministry nor the central bank commented on the matter. Refit did not immediately respond to a request for comment.
The findings underscore growing concerns within Brazil’s financial authorities that gaps in oversight of newer banking structures could continue to be exploited unless regulations and enforcement tools are updated to keep pace with evolving financial practices.