How to Beat Fraud and Still Make Money Doing Business in Brazil

    Doing business in Brazil

    Doing business in Brazil As more companies are expanding their operations and staking claim in the Latin American business market, the corporate climate in Brazil has transformed accordingly. The awareness of an increased corporate presence is apparent and local business executives and federal authorities in Brazil have been forced to respond to these changes.

    Within the last four months, the Brazilian federal police have exposed two instances of fraud that have had substantial ramifications on the multi-national corporations involved. In October 2007, the Brazilian authorities arrested 40 people involved in an alleged tax fraud scheme relating to under-pricing imports of Cisco items. The people arrested included some top officers within the Cisco company.

    Tax fraud, currency fraud and money laundering have been prevalent problems in Brazil. Other variants of fraud, such as ATM fraud and bank robberies, have dissipated slightly. According to a survey from Unisys in 2005, and reported in IT Digest and other publications, Brazil was ranked third in the number of banking identity theft frauds.

    The study sampled bank fraud in Mexico, Australia, USA, France, England, Hong Kong, Germany and Brazil. This dilemma has received enough attention that Brazilian banks have begun to implement stricter security policies in response to previous problems.

    The tax and currency fraud issues stem from discrepancies in how products/goods are imported into, or out of, the country. Companies that engage in these fraudulent activities seek to skirt paying Brazilian taxes on these items by falsely lowering the cost of the product on documents provided to the government thus allowing them to pay fewer monies to the authorities than they would otherwise be required.

    Such was the case with Cisco. These tax and currency fraud issues also occur when money is spent offshore. Companies have been known to smuggle merchandise into Brazil so as not to pay proper duties.

    In a similar incident, just a month after the Cisco scandal, in November 2007, Brazilian federal police arrested 19 people for allegedly partaking in a tax fraud scheme that allowed multinational corporations with offices in Brazil to evade government taxes. According to news reports, these companies would launder the money through Swiss and US banks, such as UBS, AIG and Credit Suisse.

    Money laundering is a severe problem in Brazil. Multinational banks, like the ones reportedly involved in the situation described above, have been known to set up tax havens so the Brazilian government cannot access the actual transactions that occur. Increasingly, the Brazilian federal police have been focusing on these multinational companies in an effort to deter these instances of tax fraud and money laundering.

    Based on the knowledge that such activities are still common in the Brazilian business community, it is prudent to protect your interests in Brazil to ensure you are neither the victim of, nor perpetrator in, these scandals.

    There are companies that promise to ensure that financial transactions are performed in accordance with appropriate Brazilian law. They are also equipped with the necessary knowledge to safeguard merchandise from smugglers when a company brings merchandise in or out of the Brazilian borders.

    The key to a successful importing relationship in Brazil is to simply follow Brazilian customs requirements on the import. Those willing to invest in the country should conduct appropriate research on Brazilian companies with which they intend to do business.

    This not only provides information on the customer or vendor but also helps to prevent somebody from engaging in a relationship with companies that have a history of tax/currency fraud or other adverse business transactions.

    As with any country that is undergoing developmental and economic growth, there are risks associated with conducting business in Brazil. However, as noted above, there are intelligent strategies available to avoid any reputational or monetary losses. 

    Kenneth Springer is a former FBI agent and Certified Fraud Examiner. Ken founded Corporate Resolutions Inc. in 1991. Corporate Resolutions is a business intelligence firm based in New York, with additional offices in Boston, Miami and London. The firm conducts background checks and corporate investigations throughout Europe, Asia and the Americas.

    Keith Prager heads up the Miami Office of Corporate Resolutions. Keith retired from the U.S. Customs Service as the Assistant Special Agent-in-Charge. After retiring, Mr. Prager was Managing Director for an international security consulting firm, responsible for business development and operations in Latin America, Central America, the Caribbean and Florida.

    Service:

    Corporate Resolutions – www.corporateresolutions.com.

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    • Show Comments (4)

    • bo

      Wow….
      Ch.C….amazing isn’t it? How a people can so blatently thumb their nose to the face of justice.

    • ch.c.

      Joao !
      Please read again :
      “Brazil was ranked third in the number of banking identity theft frauds. “

      Another Brazilian Top Ranking ?????????

      And as to money laudering outside Brazil, WHY BRAZILIANS POLITICIANS HAVE VOTED NOT TO OPEN AN INVESTIGATION, IN DECEMBER 2004, BECAUSE WELL OVER 150 BILLIONS REALS HAVE BEEN LAUNDERED BETWEEN 1998 TO 2002 ????????

      The reason is quite simple : because 90 Brazilians politicians were named…in the accusations report !!!!!

      If you dont trust me…..just scroll the news on this site for the second half of 2004. Many articles have been published !!!!!!!

      Funny……it did not involve foreign banks but brazilians banks. And most of the money was laundered to banks in NEW YORK, USA.

      NYC Judge Morgentau IS still in charge, because curiously USA is looking—-not Brazil ! Guess Why !
      .

      An example within many
      “Manhattan District Attorney Robert M. Morgenthau, along with New York State Banking Superintendent Diana L. Taylor and Federal Deposit Insurance Corporation (À¢€œFDICÀ¢€Â) Acting Chairman Martin J. Gruenberg, announced today that a joint settlement had been reached with Israel Discount Bank of New York (À¢€œIDBNYÀ¢€Â) relating to IDBNYÀ¢€™s deficiencies in its anti-money laundering policies and controls. As a result of these deficiencies, IDBNY failed to monitor the risks that customers were engaged in illegal activity and enabled certain bank customers to move funds illegally from Brazil into IDBNYÀ¢€™s New York office, located at 511 Fifth Avenue in Manhattan.
      Mr. Morgenthau said that $2.2 billion was moved by illegal Brazilian money transmitters through IDBNY over the five-year period from 2000 to the present.

      THE ABOVE WERE JUST A FEW…within many many many more !!!!!

      AND THE CHERRY ON THE CAKE :
      “This is almost folkloric as this man has as many lives as a cat. But this past week, with acquiescence of the supposedly clean PT, a motion to instigate a congressional investigation into money laundering amounting to as much as $30 billion by the Banco do Estado do ParanÀƒ¡ through its Foz do IguaÀƒ§u and Paraguayan branches and a subsidiary, was removed from the agenda. The excuse was that since politicians may have been involved, disclosure of wrong doings by these statesmen might hamper the passage of the reforms that the government has proposed. “

      THIS IS ONE BRAZILIAN BANK….ONLY…WITHIN MANY !!!!

      I remind you that later ALL the names were published in a report for your Congress…..and they voted on December 18, 2004…
      NOT TO OPEN A FORMAL INVESTIGATION !!!!

      iS IT NOT funny that one small branch of a bank has been allowed to launder us$ 30 billion….AND NO ONE SAW ANYTHING…..AT YOUR FAMOUS CENTRAL BANK ?????????

      LAUGH::::LAUGH::::LAUGH:::::LAUGH:::::LAUGH::::LAUGH

    • forrest allen brown

      not bad but
      how about you not saying having too pay the customs agents holding your goods up till you are willing to pay there bribe .

      the highway patrol holding up your shipment as they feel your papers are not correct , yet another bribe .

      the grate ibama comes buy and finds something wrong even though it is right by all other inspectors , yet more money .

      brasilian laws are set up to where if you are running your business by one set of rules , you are in violation of a set from yet another agence , more money

      you hire workers , they get fired for not showing up , drunk on the job , drugs , taking thing from work , you have to go to labor court , at least 2 times
      before you have to pay any way even though you were right , in the braqsilian courts you are the gringo , and the grate satin , the money to make all rich
      all that has to be done is shake the money tree .

      and then when it is empty go find another one to by the beer , chase women , and get money from

    • João da Silva

      Ch.c
      I am sure that our fellow bloggers as well as the authors of this article will be very pleased to hear your witty and entertaining comments. Hopefully you will not disappoint us.

      BTW, a well written article and I would like to congratulate the authors.

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