Money laundering refers to any financial transaction involving an asset or amount originating from an illegal act. Its purpose is to allow proceeds from illegal activities to be used legally. Money laundering therefore inherently involves a previous criminal offense, such as fraud, corruption, terrorism, drug trafficking, human trafficking, tax evasion, fraud, counterfeiting, and piracy. No company is immune to the risk of becoming unintentionally involved with criminal organizations in situations related to money laundering, which may result in their image and reputation being compromised, in addition to the application of penalties.
Financing of terrorism involves the acquisition of resources used to fund terrorist activities. Although the concepts behind the financing of terrorism and money laundering differ in many respects, they are closely linked, as these crimes often take advantage of the same vulnerabilities in order to establish an inappropriate level of anonymity and lack of transparency in operations. Certain countries and international bodies maintain a list of sanctioned countries and individuals (including embargoes, for example) suspected of engaging in activities such as terrorism.
Transpetro is committed to minimizing the risk of money laundering, the financing of terrorism, and violation of sanctions in the entirety of its operations. The company has therefore put a Program for the Prevention of Money Laundering and the Financing of Terrorism in place and has committed itself to maintaining controls and periodically reviewing its strategies and guidelines in accordance with currently legislation and best practices in its sector.
Transpetro's Program for the Prevention of Money Laundering and the Financing of Terrorism (PLDFT) consists of a series of organized and integrated actions, the objectives of which are to ensure that the company does not carry out transactions with companies and/or countries that have committed acts involving money laundering and/or terrorism and have therefore been subject to sanctions[1]. The Program includes, specifically:
- risk assessment
- standardization and training
- verification of sanctions lists
- developing a familiarity with counterparties
- developing a familiarity with employees
- reporting suspicious operations
- monitoring
- reporting
In Transpetro’s case it is necessary to present procedures that adhere to standards and legislation aimed at preventing money laundering and the financing of terrorism that extend beyond the limits of Brazilian jurisdiction. This is due to the fact that, in addition to Brazilian standards that seek to prevent money laundering and the financing of terrorism, including compliance with economic and financial sanctions to which Brazil is bound, Transpetro’s operations involve subsidiaries that have been incorporated in foreign countries, partnerships and transactions carried out with overseas companies, contractual commitments, and international agreements and pacts of which the company is a signatory.
The primary processes that are subject to a risk of money laundering or financing of terrorism at Transpetro include:
- the chartering of ships, vessels, etc.
- international trading operations.
- sale or acquisition of assets or equity interests.
- the supply of goods and services.
- granting of credit to clients and suppliers.
- assignment of receivables to Factoring companies.
- foreign exchange operations.
- the contracting of consulting, advisory, or assistance services.
- the contracting of advertising and publicity agencies.
- the contracting of insurance.
- sponsorships, charitable contributions and agreements with Non-Governmental Organizations (NGOs).
- offshore payments.
- payments carried out manually.
- related-party transactions.
- transactions with politically exposed persons (PEPs)
We have listed several situations that may indicate a possible risk of money laundering below:
- operations involving a company that is domiciled in a tax haven or sanctioned country;
- payments made in a country outside of the country in which the respective service was provided;
- recurring amendments;
- assignment of credit;
- the division of contractual obligations;
- the use of intermediaries;
- disproportionate commission;
- non-formal procedures;
- recurring change of trade name or business purpose;
- payments for which there is no corresponding service order;
- exceptionally favorable Conditions of Receipt;
- change in bank details without a reasonable justification;
- payments made in cash, check or a currency other than those established under the contract;
Managers that are responsible for processes subject to a risk of money laundering must seek assistance from Compliance Management in order to ensure that the necessary measures are put into place and mitigate the inherent risks involved in their operations.
To learn more about the AMLFT procedures, click here.
[1] Sanctions are embargoes established against countries/persons suspected of being involved in illicit activities. The main Sanctions Lists include those published by the United States (OFAC), E.U., U.K. and the United Nations.