Transparency International investigation raises money laundering red flags in Brazil’s biggest city
An investigation by Transparency International, the global anti-corruption coalition, found that in São Paulo 3,452 properties worth at least US$2.7 billion are linked to offshore secret companies raising red flags about the use of real estate for money laundering in Brazil’s largest city.
One year on from the Panama Papers leaks that exposed the extent of corruption using offshore secret companies, this new report, São Paulo: Does corruption live next door?, shows that thousands of high-end properties are owned through 236 companies that are registered in secrecy jurisdictions and tax havens, including in the British Virgin Islands, the US state of Delaware and Uruguay.
In the Lava Jato scandal, which revealed how companies used networks of offshore companies to bribe officials, it was found that one of these companies, Odebrecht, paid bribes and laundered money through at least three layers of offshore companies. This underscores how these types of companies are used for corrupt purposes specifically because they hide who actually owns the assets.
São Paulo: Does corruption live next door? uses data from the São Paulo State Trade Board – including data on company formation – and cross references this with data on property ownership in the city, following an agreement with Transparency International.
Most importantly, it is impossible to find out who the real person is behind these companies.
“This ground breaking report should make lawmakers sit up and take notice. It is alarming that we cannot find out the real owners of US$2.7 billion worth of property in Sao Paulo. That is why Transparency International is calling for public registers of property ownership so that the corrupt cannot hide illicit wealth,” said José Ugaz, Chair of Transparency International.
- 3,452 properties were found to be registered in the name of 236 companies controlled by or linked to others registered in tax havens and secrecy jurisdictions.
- These properties are valued at over US$2.7 billion (R$8.6 billion)
- 87 per cent of the 236 companies registered offshore are in just five territories: the British Virgin Islands, Panama, Switzerland, the United States and Uruguay.
“Trying to uncover the real owners of these types of properties in São Paulo is almost impossible despite the fact that many databases are public. We need a system that is easy to use and transparent. We spent thousands of hours pouring over files and sorting companies by hand. In this day and age this should be possible at the touch of a button. The technology is there, we just need the political will,” said Fabiano Angélico, author of the report.
Along the corridor that joins Chucri Zaidan Avenue and Engenheiro Luiz Carlos Berrini Avenue there are 820 real estate properties valued at US$370 million owned by Brazilian legal persons controlled by shell companies. On Paulista Avenue, the study found 195 properties, worth some US$38.4 million (almost R$120 million) and on Brigadeiro Faria Lima Avenue, another main artery, there are 67 properties worth about US$42 million (R$131 million)*.
Transparency International recommends the following to stop secrecy and make it harder for the corrupt to launder their ill-gotten gains:
- The Senate should pass bill no. 27/2013 (Projeto de Lei da Câmara no. 27/2013) that provides a legal definition of beneficial ownership. This bill was already approved in the Lower House.
- The federal government should make the national company registry publicly available online, in open data format. The national registry must include data on beneficial ownership and be regularly updated to ensure the information is adequate, accurate and current.
- City governments should publish data on beneficial ownership information of all companies, whether incorporated domestically or overseas, owning property. This requirement should be applied retroactively, and the data should be made available in open data format.
- All data published should be in an easy-to-use open data format
It is not illegal for companies registered in secrecy jurisdictions or tax havens to operate in Brazil. The fact that a company is listed in this research means that it has or has had shell companies that are registered in tax havens and secrecy jurisdictions among its shareholders and these companies control real estate property in the city of São Paulo. Transparency International is advocating an end to all shell companies because they can be used by the corrupt to launder illicit wealth and property is a key target.
In 70 per cent of 200 grand corruption cases analysed by the World Bank the corrupt used shell companies that hide who is the real owner of the assets being bought and one of the most popular aims for money launderers using shell companies is to buy property.
Click here for the full report.
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