Closing Anti-Money Laundering Gaps in Brazil Fintech and Gambling
The month of September in Brazil not only marks the arrival of spring but also the intensification of the debate on combating money laundering in the financial and betting sectors. At the end of August, three major joint operations by the Federal Police, the Federal Revenue Service, and the Public Prosecutor's Office of São Paulo achieved a historic milestone: for the first time, authorities reached the highest levels of the Primeiro Comando da Capital (PCC), the country’s largest criminal faction, and dismantled its financial structure, which moved billions of reais annually.
The PCC’s money laundering scheme was sophisticated and layered. Initially, the criminals adulterated and marketed fuels, managing over a thousand service stations throughout Brazil. Illicit profits were deposited in fintechs, which then transferred the funds to investments and real estate funds, some headquartered on the emblematic Faria Lima avenue, the financial heart of São Paulo. Investigations showed that these funds served to shield and conceal the crime money, but before reaching them, the resources passed through fintechs, as evidenced by the Federal Revenue Service.
The rise of fintechs, technology companies offering innovative and accessible financial services, democratized access to products previously reserved for traditional banking. However, the lack of regulation and oversight allowed many to be created for illicit purposes, especially for money laundering. Among the main vulnerabilities of the sector are: opacity about the ultimate beneficiary (who is the true owner of the fintech), the existence of companies registered in tax havens without control, liquidity risk (if the money disappears, investors lose everything), and historically weak regulation, which made it easy to create fintechs.
In the context of iGaming, the relationship between fintechs and betting houses is divided into two: the regulated market, protected by regulations such as Portaria SPA/MF 566/25, which obliges financial institutions and payment systems to reject accounts of illegal operators and report suspicions within 24 hours; and the illegal market, lacking governance and compliance, where bets rely on fintechs operating illegally, using payment systems outside the radar of the Central Bank and the Federal Revenue Service. Regulation has been strengthened with Portaria SPA/MF 1.143/2024, specific for the prevention of money laundering and terrorist financing (PLD-FTP).
The combination of both regulations marks a before and after: it requires rejecting illegal operators, immediately reporting suspicious cases, and continuously monitoring transactional betting accounts. The illegal market survives by trying to evade money tracking. A common tactic is the use of “pocket accounts,” where the fintech appears as the holder but hides multiple unidentified subaccounts. Additionally, shell companies have acquired Banking as a Service (BaaS) to offer payment methods to the illegal betting market, detected only by million-dollar movements at atypical hours.
To mitigate these risks, experts recommend six immediate measures for operators and fintechs: strengthen due diligence on suppliers; automate and integrate KYC/AML processes with official databases; monitor geolocation to detect VPNs and proxies; continuously audit transactional accounts; invest in compliance teams focused on PLD; and adopt executive risk KPIs understandable to senior management. Among the suggested KPIs to translate the impact of PLD to boards are: approval rate versus fraud rate, average response time to PLD alerts, financial exposure due to tracking failures, and volume of transactions blocked preventively.
After the impact of the operations against the PCC, the Federal Revenue Service published a Normative Instruction equating fintechs with banks, obliging them to report financial information of their clients and expanding the capacity to track tax crimes and money laundering. The message for betting operators is clear: knowing your suppliers, strengthening compliance, and investing in money laundering prevention is essential. Otherwise, any effort to maintain a good image can be destroyed by association with the wrong partner.
Tags: Brazil, fintech, money laundering, online betting, federal revenue service, SPA MF 56625