The leniency agreement stipulated in Provisional Measure (MP) 784, which increased the punitive powers of the Central Bank (BC) and of the Securities and Exchange Commission of Brazil (CVM), exclusively reaches administrative infractions committed by agents of the financial system and of the capital markets. To encompass criminal conducts, such as money laundering and corruption, the government may submit a bill or an amendment to the provisional measure already being considered in Congress stipulating the joint action of the Federal Public Ministry (MPF, the public prosecutors’ office), the BC and the CVM. Only the MPF has the prerogative of criminal prosecution.

The prosecutor general of the Central Bank, Cristiano Cozer, explained: “The leniency agreement with the BC only covers administrative infractions, not crimes. It wouldn’t make sense an offender to sign agreement only with the BC, because it would need to confess and run the risk of responding to criminal charge filed by the Public Ministry. Much less in cases of facts prior to the issuance of MP 784, when the fine was [and continues being] of at most R$250,000.”

Issued last week, the measure has been object of criticism by the MPF and of mistaken interpretations either in relation to its content or to the timing of its publication.

The BC attributes this noise to the climate of “animosity” now sweeping the country. This would be the reason to identify the publication of MP 784 with the expected plea bargain of ex-Finance Minister Antonio Palocci, involving players of the financial system, and with the investigations of insider trading that would have produced gains for JBS on the forex and interest markets.

Yet the measure has no guarantee of retroactive effect. In reality, there are two hypotheses. In the punitive law, new rules retroact only in benefit of the defendant. In the procedural law, the new legislation will be retroactive depending on the state in which the proceeding is. In that context, there will be a discretionary analysis of each case presented to the BC.

The provisional measure innovates by typifying the administrative infractions until then addressed only by resolutions of the National Monetary Council (CMN). For not being described in law, the Superior Court of Justice (STJ) was overturning administrative penalties imposed by the BC on the financial system. The MP describes 17 illegal actions that go from posing constraints to the BC supervision to providing incorrect information and data, acting as administrator of financial institution without prior BC approval, structuring transactions without economic grounds or misappropriating funds of third parties.

This description will not solve the stock of financial-system cases that is in the judiciary, but with it the STJ may consolidate a jurisprudence, public-sector lawyers reckon.

The provisional measure, in this sense, is structural. And the introduction of the leniency agreement is, in the view of the monetary authority, only an “appendix” to the new legislation.

The discussion on the terms of MP 784, which also updates the values of fines imposed on the financial system in case of infraction, is a recommendation of the G-20 and had beginning at the Central Bank in 2010, in the preparatory evaluation of the Financial Sector Assessment Program (FSAP) of the Basel Accord. The bill was sent to the Office of the Chief of Staff in the second term of Dilma Rousseff (Workers’ Party, PT). With the change of government, it returned to the BC and was taken as part of the “BC Plus” agenda at the end of 2016 by its president, Ilan Goldfajn.

In July there will be new FSAP evaluation, made by the IMF and World Bank, with impacts on the country’s rating and risk premium. Because of that, the BC opted for issuing a provisional measure, a faster initiative, abandoning the original idea of a bill.

The country was not appearing well on the picture of the international organisms, one government official says, for having a legislation of administrative proceedings dated of 1964, when law 4,595, which created the Central Bank, was enacted. The values of the fines imposed on the financial system were frozen since the 1990s at a maximum of R$250,000, value that MP 784 raised to as much as R$2 billion.

The terms of the provisional measure were inspired in the legislation of the Administrative Council of Economic Defense (Cade), even making use of its instruments, such as the leniency agreement, the terms of commitment and the cautionary measures. BC and CVM thus start to invest more in the intelligence activity, with more investigative capacity.

Administrative wrongdoing committed before the publication of MP 784 are likely to be punished with the fines existing until then, of R$250,000, charged by the BC, and of up to R$500,000, imposed by the CVM. Because of these small sums, there is no expectation that individuals or financial institutions will approach the BC and the CVM to make leniency agreements without crime. The most probable is that whoever committed crime will directly seek an agreement with the Public Ministry and, with that done, will go to the BC or the CVM to settle the accounts of potential administrative infractions committed.

On June 12, the BC released an official note in which rebuts sharp criticism made by prosecutors in stories and articles published in the press during the weekend. The note attests that the measure “in nothing alters or interferes in the capacity of investigation and substantiation of criminal wrongdoing of the Public Ministry. Nor does it alter the legal duty of the BC and of the CVM of communicating indications of crime to the MPF.” It is common for the Central Bank to act as an assistant of the accusation in proceedings it sends to MPF investigation and to lend analysts to help clarify the nature of infractions committed. It also says that the urgency of the provisional measure comes from the evaluation of Brazil in the FSAP, which begins next month.

The proposal of updating the legislation was widely announced and released in Agenda BC+ and, therefore, “the MP has no relation with rumors of plea deals that emerged later and whose content is unknown.”

Source: Valor Econômico