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P 221933Z MAR 06
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 4889
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
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C O N F I D E N T I A L SECTION 01 OF 05 BRASILIA 000579 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR S/CT - NOYES 
STATE FOR WHA - D. MCCARTHY/C.CROFT 
STATE FOR INL - RINDLER 
TREASURY FOR TFI - O'BRIEN, MEDINA 
DHS FOR ICE - D.THOMPSON 
TREASURY FOR FINCEN - SHOWELL 
 
E.O. 12958: DECL:03/09/2016 
TAGS: KTFN EFIN PTER SNAR ETTC PREL BR
SUBJECT: BRAZIL - TREASURY A/S O'BRIEN MEETINGS ON MONEY 
LAUNDERING, TERROR FINANCE 
 
REF: BRASILIA 0410 
 
Classified by Deputy Econ Counselor Andrew Plowman based upon 
Reasons 1.5(B) and (D). 
 
¶1. (C) Summary: GoB interlocutors told Treasury A/S O'Brien 
during Brasilia meetings March 6 and 7 that the GoB has no 
evidence of terror cells or terrorist financiers operating in 
the Brazil-Paraguay-Argentina Tri-border Area (TBA).  Ministry 
of Foreign Affairs Transnational Crimes Coordinator Marcos Pinta 
Gama expressed frustration that while USG officials have been 
making public statements about such activities taking place in 
the TBA, the USG is not sharing such information with the GoB. 
O'Brien responded that the USG remains concerned that the region 
is uniquely vulnerable to abuse as a source of financing for 
groups with links to terrorist organizations, citing the example 
of Ahmad Barakat, whom the USG had designated a terror 
financier.  The GoB is drafting counter terrorism legislation 
that would criminalize terror financing and expects to create, 
via decree, a high-level counter-terrorism coordination group, 
most likely in the Institutional Security Cabinet (GSI).  It is 
also moving to refine its anti-money laundering regime through 
legislation, currently in draft, that would implement the 
Financial Action Task Force (FATF) recommendation on 
politically-exposed persons and give the GoB administrative 
authority to freeze transactions.  Several opportunities for 
cooperation were highlighted, including the GoB's plans to 
overhaul its law enforcement and prosecutorial training 
programs.  GoB interlocutors welcomed progress on establishing a 
Trade Transparency Unit and asked for assistance on how to 
manage and dispose of seized assets.  End Summary. 
 
¶2. (C) Background: a Treasury and DHS delegation, led by 
Assistant Secretary for Terrorism Finance and Financial Crimes 
Patrick O'Brien held meetings with senior GoB counterparts March 
6 to 7 in Brasilia.  The U.S. delegation included Treasury 
policy analyst Cynthia Medina, Public Affairs Officer Molly 
Millerwise, FINCEN regional analyst Jennifer Showell and David 
Thompson, Chief of the Money Laundering Coordination Center at 
the Department of Homeland Security Immigration and Customs 
Enforcement Bureau (DHS-ICE).  The delegation met with: Ministry 
of Foreign Relations Coordinator for the Combat Against Illicit 
Transnational Activities Marcos Pinta Gama; Gustavo Rodrigues, 
President of the Council for the Control of Financial Activities 
(COAF - Brazil's financial intelligence unit); Superior Criminal 
Court Justice Gilson Dipp; Deputy Director of the Institutional 
Security Cabinet, General Wellington Fonseca and Intelligence 
Agency (ABIN) Intelligence Department Director Carlos Calvano; 
Ministry of Justice Department Head for International 
Cooperation and Asset Seizure Antenor Madruga; Receita Federal 
(IRS-equivalent) Assistant Secretary Cardoso and Customs Service 
Director Medina; and, Central Bank Department Head for the 
Combat of Illicit Financial Activities Ricardo Liao.  O'Brien 
also held a press roundtable on March 7. 
 
Draft Terrorism Legislation 
--------------------------- 
 
¶3. (C) COAF President Rodrigues acknowledged to A/S O'Brien 
during their March 6 meeting that, even though Brazil had now 
ratified the UN convention on the suppression of terrorist 
financing, it still had the most to do in the area of terror 
financing in order to bring its legal framework up to 
international standards.  The GoB had developed a policy paper 
on the issue, he said, which the Institutional Security Cabinet 
(GSI -- an office combining functions of the NSC and DNI, which 
reports directly to the President) was using as the basis for 
drafting a law that would define terrorism and its financing as 
criminal acts for domestic legal purposes.  Superior Criminal 
Court Justice Gilson Dipp clarified separately that, were a 
 
BRASILIA 00000579  002 OF 005 
 
 
terrorist act or terrorist financing to take place on Brazilian 
soil before a new terrorism law is passed by Congress, Brazilian 
judges could theoretically apply the UN terrorism conventions, 
since they now carry the force of law in Brazil.  There is, 
however, little direct precedent for this option. 
 
¶4. (C) Another alternative, Justice Dipp said, would be to apply 
the 1983 national security law, which defines several types of 
acts as terrorism.  He admitted that applying the 1983 law, 
which dates back to the military dictatorship and pre-dates the 
1988 constitution, might prove legally complex and politically 
unpalatable to some.  GSI Deputy Director General Wellington 
told O'Brien that the Institutional Security Cabinet was 
considering a parallel measure to establish a high-level 
coordination council to deal with counter-terrorism policy and 
coordinate response to terrorist acts.  The unit likely would be 
located in the GSI, although placing it in the intelligence 
agency (ABIN) was another possibility.  The GoB hoped to 
establish the group well in advance of the 2007 Rio de Janeiro 
Pan American Games, so that it could participate in security 
planning for the games, Wellington said. 
 
Trade Transparency Unit 
----------------------- 
 
¶5. (SBU) O'Brien and David Thompson of DHS-ICE described for all 
their Brazilian interlocutors the advanced status of planning 
for the establishment of a U.S.-Brazil Trade Transparency Unit 
(TTU), initial set-up of which may begin within two weeks. 
Thompson noted that the preliminary data exchanges already had 
produced several leads for investigation by both sides and 
expressed confidence in the value of the unit for both parties. 
GoB interlocutors, particularly Receita Federal's Cardoso and 
Customs Director Medina, welcomed the progress on the TTU. 
 
Tri-Border Area -- Please Share Your Information 
--------------------------------------------- --- 
 
¶6. (C) GSI Deputy Director General Wellington, ABIN Intelligence 
Director Calvano, MRE Transnational Crimes Coordinator Pinta 
Gama and COAF President separately delivered to O'Brien the same 
talking point on the TBA:  although the GoB has significant 
police, customs and intelligence assets in the TBA, it has found 
no evidence of operational terrorist cells or even of terror 
financing in the region.  Wellington acknowledged that while 
there is undoubtedly a flow of remittances from Brazil to 
Lebanon, the GoB has not been able to find evidence that these 
go to support terrorism.  O'Brien responded that the USG remains 
concerned that the region is uniquely vulnerable to abuse as a 
source of financing for groups with links to terrorist 
organizations, citing the example of Ahmad Barakat, whom the USG 
had designated a terror financier.  And while the GoB might not 
see an operational terrorist threat in that region, terror is 
now a global issue and all countries must act accordingly, 
O'Brien argued.  In that context, he commended the GoB 
ratification of the UN terrorism financing convention and urged 
the government to continue its review of Brazil's 
counter-terrorism legal framework. 
 
¶7. (C) Pinta Gama acknowledged that the TBA is vulnerable to 
transnational crime of various sorts.  There is political will 
to address these issues, he affirmed, pointing to enhanced 
enforcement of border controls by Brazilian Customs and police 
officials and Brazil's increased enforcement of anti-IPR piracy 
laws.  The GoB also actively had participated in the 
multilateral 3 plus 1 framework, Pinta Gama noted, and felt that 
this year would be crucial for the GoB's assessment of the 
future of that mechanism. Pinta Gama expressed frustration that 
senior USG officials continue to make public statements about 
the presence of terrorists and terrorist financing in the TBA, 
 
BRASILIA 00000579  003 OF 005 
 
 
but that despite the existence of this coordinating mechanism 
and useful bilateral channels the USG does not share detailed 
information on these persons.  The GoB, Pinta Gama said, did not 
want this to "jeopardize" what was otherwise a very useful 
dialogue and coordination mechanism.  (Comment: Although we're 
used to hearing this GoB complaint, Pinta Gama's language was 
qualitatively stronger than during previous iterations, albeit 
delivered with diplomatic polish.  End Comment.) 
 
¶8. (C) ABIN's Calvano stated that the TBA regional intelligence 
center is close to being up and running, but some details remain 
to be ironed out with Paraguay and Argentina (comment: in other 
words, whether Paraguayan and Argentine officials will staff the 
center at all).  Wellington noted the idea for the TBA center is 
based on a successful (NAS-funded) regional intelligence center 
in the Amazon city of Tabatinga, where Colombia, Brazil and 
Peruvian borders meet.  The GoB, he said, also is considering 
establishing a similar center on the Bolivian border since it 
expects reduced coca eradication under the Evo Morales 
Presidency. 
 
Opportunities for Cooperation 
----------------------------- 
 
¶9. (SBU) MOJ International Cooperation Director Madruga 
explained to O'Brien that the GoB plans to overhaul the various 
training programs belonging to different law enforcement 
agencies and the courts.  It planned to introduce standardized 
content for similar courses, certify the course instructors and 
issue course certificates to students as well.  This approach, 
he said, would help ensure the quality of courses across 
agencies.  The course certificates would allow students to count 
the coursework towards job or promotion requirements.  The GoB 
plans an inter-agency coordination meeting at the end of March. 
Emboff noted that the Embassy is looking at how better to target 
USG-offered law enforcement training and suggested that both 
sides coordinate their efforts. 
 
¶10. (SBU) Receita Federal A/S Cardoso and Customs Director 
Medina asked O'Brien for USG expertise in managing asset 
forfeiture funds.  The GoB's enhanced customs enforcement 
operations, particularly in the TBA meant Brazilian Customs was 
seizing assets at a rate far quicker than it could dispose of 
them, resulting in overflowing warehouses and impound lots. 
O'Brien and Thompson outlined how the Treasury and Department of 
Justice asset forfeiture funds work and undertook to try to 
facilitate an exchange of technical expertise.  Thompson also 
noted the possibility of training for combating the growing use 
of cash-couriers, which Medina and Cardoso welcomed. 
 
Refining the AML Regime 
----------------------- 
 
¶11. (SBU) The MOJ's Madruga stated that the GoB had begun to 
effect a culture-change in law enforcement on the importance of 
Anti-Money Laundering, which Justice Minister Bastos had made a 
priority from the beginning of the Lula administration in 2003. 
This was reflected in the fact that the GoB had, in December 
2005, held its third annual national anti-money laundering 
strategy session and was well on its way to institutionalizing 
the process, although more work remained to be done.  Rodrigues 
said that COAF plans to double in size, in large part to deal 
with the huge increases in suspicious transaction reporting from 
banks, factoring businesses, real estate brokers and other 
entities.  He cited reporting from "factoring" businesses which 
increased from 27 reports in 2004 to 12,000 in 2005, due in 
large part to a new requirement to report any transaction above 
Reais 50,000 (about USD 23,000). 
 
¶12. (SBU) Rodrigues noted the GoB is working on draft 
 
BRASILIA 00000579  004 OF 005 
 
 
legislation to refine the AML regime.  One key aspect of the 
draft would be the definition of politically-exposed persons 
(PEPs), whose financial transactions would come under enhanced 
scrutiny by financial institution compliance officers.  The 
Central Bank's Leao said the current draft also would give the 
GoB administrative authority to freeze transactions temporarily 
while it seeks a court order (from one of the specialized 
anti-money laundering courts) confirming the freeze.  Leao 
stated there was still discussion about where this authority 
would reside within the government.  Separately, Rodrigues 
affirmed that he did not want the administrative authority to 
freeze a transaction to reside with COAF.  O'Brien argued that 
such administrative authority was essential to act quickly 
enough to block suspect transactions. 
 
¶13. (SBU) Rodrigues stated that the GoB included in the 2006 
anti-money laundering national strategy document a goal of 
improving feedback to COAF on its reports to law enforcement of 
suspicious financial activities.  To date, he said, feedback had 
been lacking.  Recently law enforcement agencies had begun to 
inform COAF when they have opened a formal investigation based 
on one of its reports, but they still receive little comment on 
the quality of the reports.  Currently, the principal way COAF 
learns of the value of a particular report is when it sees press 
reports of the arrests of persons on whom it reported.  One such 
recent case, Rodrigues stated, was the federal police arrest of 
persons who were falsifying Kimberley Certificates for diamonds 
(reftel).  COAF, he said, is increasing its own feedback and 
outreach to the reporting institutions in a bid to improve the 
quality of suspicious transaction reports. 
 
¶14. (SBU) Justice Dipp noted that Brazil's federal-level 
specialized courts for dealing with financial crimes were 
proving themselves a resounding success, with prosecutions and 
convictions both up substantially since their creation in 2003. 
The existence of the specialized courts also was encouraging 
some specialization from the prosecutors and law enforcement 
agencies that worked with them.  Dipp stated that these 
particular judges (25 total, in the principal Brazilian regional 
capitals) also were proving themselves to be innovative in their 
application of existing legal authorities (e.g. plea bargaining) 
but which Brazilian judges rarely applied.  Furthermore, Dipp 
affirmed, the Federal Judicial Council was ensuring feedback and 
promoting the adoption of best practices by hosting twice-yearly 
meetings of these judges to discuss the program's practical 
implementation.  Despite the success of these federal-level 
specialized courts, Dipp noted there was no analogue at the 
state level, where the majority of money laundering cases are 
tried.  O'Brien suggested the GoB share the results of this 
successful experiment with regional counterparts. 
 
Brazil's FATF-South Agenda 
-------------------------- 
 
¶15. (SBU) COAF President Rodrigues outlined to O'Brien his 
priorities for Brazil's presidency of the FATF South.  First, he 
said, the GoB wants to focus on getting terrorist finance laws 
passed in those jurisdictions where this has not yet been done. 
His second priority is to focus a bit more on 
regionally-relevant issues, particularly corruption and tax 
evasion.  To this end, he wanted to promote implementation of 
the FATF recommendation on politically exposed persons, as 
Brazil was working to do.  He also hoped FATF-South could 
develop additional recommendations that would bolster 
anti-corruption efforts.  Finally, Rodrigues contemplated 
improving the mutual evaluation process, which he argued needed 
to be strengthened. 
 
¶16. (U) A/S O'Brien was unable to clear this message before 
leaving post. 
 
BRASILIA 00000579  005 OF 005 
 
 
 
LINEHAN