Brazil Considering Reporting Requirement for FinTechs Amid Money Laundering Concerns

Brazil’s tax revenue service may reinstate the requirement for FinTechs to report transaction values due to money laundering concerns. Previously suspended amid public backlash, the proposal follows indications of illicit activities linked to easy account setups. Brazil’s digital economy, especially through the Pix system, has seen substantial transactions and engagement from consumers.

Robinson Barreirinhas, the head of Brazil’s tax revenue service, stated on March 11 that the potential for money laundering may prompt the government to reconsider requiring FinTech companies to report transaction values. This proposal had previously been suspended due to public opposition, as reported by Reuters.

During a Senate hearing, Barreirinhas expressed concern over indications that some lesser-known FinTechs could be facilitating money laundering via easy account openings. Following this, the tax authority issued a rule in September mandating FinTechs to report transactions starting in January, including those through the instant payment system, Pix. This rule was suspended in mid-January due to declining public approval.

Opponents of the reporting requirement argued that it would unfairly burden workers. Furthermore, Barreirinhas highlighted that the revenue service is wary of the roles played by smuggled goods like cigarettes, cryptocurrencies, and online betting in financing organized crime activities in Brazil.

Pix, launched by Brazil’s central bank in late 2020, reportedly processes transactions exceeding $338 billion each month. An upcoming feature for recurring payments is anticipated to add an additional $30 billion in eCommerce transactions.

Brazil has emerged as a leader in digital engagement, with significant participation in activities such as work, communication, and shopping. According to the PYMNTS Intelligence report, approximately 75% of the 215 million Brazilian population holds a debit card, 77% utilizes Pix, and nearly two-thirds engage with financial services via mobile devices.

Additionally, Brazil is innovating in the use of digital wallets. Unlike other countries, where these wallets are primarily for eCommerce, Brazilian consumers are leveraging them for bill payments and identity verification, as noted in the joint report by PYMNTS Intelligence and Google Wallet. Recent findings indicated that 47% of Brazilians utilized digital wallets for bill payments in the previous year.

The Brazilian government is re-evaluating the proposal for FinTechs to report transaction values in light of potential money laundering activities identified by tax authorities. Despite previous public pushback and suspension of the reporting rule, concerns over the use of these platforms for illegal financing persist. Brazil’s digital economy, particularly the Pix payment system, continues to thrive, showcasing significant consumer engagement with digital financial services.

Original Source: www.pymnts.com