Brazilian Police Dismantle Massive Money-Laundering Circuit

On Monday, in one of the largest busts of its kind, Brazilian Federal Police broke up a network of four criminal groups accused of laundering more than $4 billion over the last four years. Synchronized raids targeted the network's enterprises in 17 cities across six Brazilian states and the Federal District of Brasilia.

The police operation was codenamed "Lava Jato" ("Car Wash") because the ring used gas stations and laundromats to legitimize illicit funds, in addition to real estate investments, deceptive import and export schemes, and the exchange of luxury goods. Márcio Anselmo, the deputy in charge of the operation, described the breadth of the network's activities as “absurd.”

“This is one of the biggest anti-money laundering operations that we have carried out,” a spokesperson for the Federal Police told VICE News. “The highest leaders are in jail and we have taken a large number of assets into our possession.”

More than 400 officers seized three hotels, an estimated $2.1 million in cash, and 25 luxury vehicles, as well as assorted jewelry, works of art, and other valuables. The Federal Police arrested 28 people suspected of being connected to the network.

“The men who are performing these exchanges have clients who are drug traffickers, businessmen running import-export ventures, people who have misappropriated public funds, and others who are evading taxes,” the Federal Police spokesperson said.

Among those detained in the operation were Alberto Youssef, a well-known money-changer in the state of Paraná who owns the Blue Tree Hotel in Londrina; Carlos Chater, the owner of Brasilia's largest gas station, which includes a laundromat and a currency exchange; and Enivaldo Quadrado, a former stock broker who was previously implicated in the Mensalão, a vote-buying corruption scandal that broke in 2005 and continues to reverberate in Brazil.

The investigations that led to Operation Lava Jato began nine months ago, when the Financial Activities Monitoring Council (COAF) — the financial intelligence unit of the Central Bank of Brazil — reported a series of atypical transactions to the Federal Police. The COAF started monitoring suspicious financial transactions between members of these groups in 2009.

Brazil, which has the world's seventh largest economy, is no stranger to money laundering. Between 2002 and 2011, the country lost an estimated $193 billion to illicit outflows, primarily through money laundering and tax evasion. Drug trafficking and organized crime present the biggest challenge to authorities fighting to dismantle laundering channels.

Even so, the country has made strides in recent years to curb the practice. The Financial Action Task Force on Money Laundering (FATF), an intergovernmental enforcement organization, has applauded changes to the Brazilian judicial system that enhances its ability to prosecute suspects. The number of convictions in these cases remains low, however. Given the sluggishness of Brazil’s judicial system, it might be some time yet before those detained in Operation Lava Jato go to trial.

The coordinated raids produced a major victory for the Federal Police, which is now reviewing financial records seized in the operation for clues about how to proceed. “All of the documents that were confiscated, they will all be analyzed and used to guide our next steps,” the Federal Police spokesperson said. “Operation Lava Jato is part of an ongoing series of investigations that will no doubt continue.”

Follow Eva Hershaw on Twitter: @beets4eva

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