19 August 2024 , 20:27
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Police in São Paulo have frozen bank accounts holding over a billion dollars in an anti-money laundering operation that highlights the growing use of cryptocurrency by Brazil’s most powerful prison gang, the First Capital Command (Primeiro Comando da Capital – PCC).
The first leads in the investigation came after authorities arrested Fabiana Manzini in October 2023 for guarding a drug stash in the metropolitan region of São Paulo. Manzini is the wife of Anderson Manzini, a member of the PCC leadership, and seemed to be passing communication between criminals on the streets and in prison.
The arrest led to the launch of Operation Decurio on August 6, in which authorities arrested 13 suspects and seized 25,000 reais (US$4,600), as well as several luxury watches.
But the real hit to the organization occurred at the banks. Authorities froze more than 8 billion reais ($1.4 billion) from the accounts of people under investigation.
The police operation uncovered a PCC money laundering scheme that used a company that was functioning as a cryptocurrency broker and virtual bank to hide drug trafficking profits. The company is believed to have made transactions of around 500 million reais ($89.7 million) of criminal proceeds.
“We identified that the criminal group built a banking structure that was not authorized by the Central Bank and operated as if it was a broker. Their idea was to turn this company into a real bank,” Fabrício Intelizano, a police chief from the São Paulo state Civil Police, told InSight Crime. In Brazil, banks are responsible for reporting atypical transactions to inspection bodies. If the PCC had successfully transformed the broking structure into a real bank, the group would not need to report its financial transactions, which would hinder supervision, he explained.
This is at least the third major money laundering scheme involving cryptocurrencies that Brazilian authorities have dismantled this year. Another recent operation unveiled the cryptocurrency activities of Ronald Roland, who was arrested on July 2 as the leader of a scheme that used cryptocurrency investments to launder criminal profits. His gang allegedly moved more than 5 billion reais (around $1 billion) in five years.
Before that, the Federal Police conducted a January operation that arrested an individual suspected of laundering gains from drug trafficking and other crimes with crypto investments in Brazil and other countries. One of the companies that the suspect headed moved more than 13 billion reais (around $2.3 billion) in five years.
InSight Crime Analysis
The PCC’s money laundering methods reflect a trend in Brazil, where criminals are increasingly using cryptocurrencies to hide criminal profits.
Before this year, the largest number of crypto-based money laundering cases Federal Police investigated in a year was nine in 2021, according to events reported in the government’s official website. But in just six months in 2024, the Federal Police have already investigated eight cases. As well as the Federal Police, local police agencies conduct their own investigations.
While the number of operations against the use of cryptocurrencies to launder crime profits rises, the difficulty of tracing this method of money laundering still hinders investigations.
“It is very difficult to attach a virtual asset to its owner, which facilitates the use of cryptoassets for money laundering,” Pierpaolo Cruz Bottini, a lawyer and criminology expert, told InSight Crime.
An individual can trade crypto assets internationally very quickly, and criminals make these transactions using internet addresses that cannot be linked to them directly, Bottini explained. Some trading platforms, known as crypto tumblers, also offer services that mix up virtual assets and redistribute them randomly to owners, making it even more difficult to define who is the holder.
“Organized crime and those who commit virtual crimes take advantage of these characteristics to hide their resources,” Bottini said.
The use of cryptocurrency has not only risen in Brazil’s criminal circles, but also among the entire population. Brazil ranks as the sixth country worldwide with the highest cryptocurrency ownership rate in 2024, with 17.5% of Brazilians owning some sort of cryptocurrency according to a report by the company Triple-A. This is a jump from just 4.9% of people in Brazil in 2020.
The high amount of virtual assets circulating in the economy makes it easier for criminal groups using the crypto market to hide among legitimate transactions. And as Brazil’s cryptocurrency market has grown, its regulations have struggled to keep up.
The Central Bank is responsible for controlling operations, but there are no regulations governing cryptocurrencies, making supervision flawed. The country stands at an intersection where the law exists, the activity is licit, people are operating, but the market is not yet regulated.
“We are in a very unsafe situation for crime prevention,” Bottini told InSight Crime. The Central Bank is working on a regulation that would make it tougher to launder money using the crypto market, which is expected to be launched in the second half of this year.