Brazil is reconsidering regulations requiring fintechs to report transaction values due to money laundering concerns. Head of the tax revenue service, Robinson Barreirinhas, revealed that lesser-known payment institutions are suspected of such activities. A previous rule mandating reporting was suspended after public backlash, yet concerns about organized crime remain significant.
BRASILIA (Reuters) – Brazil is preparing to revisit the requirement for financial technology companies, or fintechs, to report transaction values to the tax revenue service, according to the agency’s head, Robinson Barreirinhas. During a Senate hearing, he expressed significant concern over lesser-known payment institutions being involved in money laundering operations.
Barreirinhas highlighted that the tax revenue service possesses the necessary intelligence capabilities for tracking transactions, an initiative that is still intended for fintechs despite a previous suspension due to public backlash. He emphasized, “I do not want to demonize fintechs… but the truth is that many end up being used (for illicit transactions) due to the ease of opening accounts,” asserting that stricter account opening controls are essential.
In September, the tax revenue service mandated that fintechs must report transactions, including those via the Pix instant payment system, starting January. This move was intended to align fintechs with banks. However, the opposition criticized the measure as a targeted effort to impose taxes on workers, prompting the government to pause the initiative in mid-January, amidst falling approval ratings for President Luiz Inacio Lula da Silva.
Barreirinhas expressed apprehension regarding how organized crime finances its operations in Brazil through various means, including smuggled goods, cryptocurrencies, and online betting platforms. This issue continues to be a critical concern for Brazil as it seeks to regulate the fintech landscape more effectively.
In conclusion, Brazil’s tax revenue service is contemplating the reinstatement of transaction reporting requirements for fintechs in response to rising money laundering concerns. Current discussions emphasize the necessity for stricter controls in account openings to mitigate illicit activities. The government’s previous efforts to align fintech reporting with that of banks faced public backlash, leading to a suspension, but the risks associated with organized crime financing remain a pressing challenge for regulators.
Original Source: www.marketscreener.com