Brazil's central bank hits Banco Topázio with crypto ban, $3.3M fine over violations

The Brazilian Central Bank has emphasized that crypto compliance is not just a formality. According to the regulator’s supervisor, the action taken on Banco Topazio serves as a model for future enforcement cases, and not as a one-off punishment.

The ruling came after Copas identified several irregularities in the bank’s operations from October 2020 to September 2021. Within those years, the bank executed over-the-counter cryptocurrency transactions without putting proper checks in place to ensure the identities and qualifications of third-party beneficiaries. 

The flagged transactions made up 63% of the bank’s outbound foreign exchange transfers that period and 47% of its primary market activity. Due to this, the committee concluded that the scale of the issue has damaged the institution’s credibility in the country’s foreign exchange market.

Regulators call Banco Topazio’s violations grave

According to Article 4, clause IV of Law 13.506, Copas deemed that the actions committed by Banco Topazio were grave, and the following punishment serves as a model for future enforcement cases that might arise, and not a special punishment for the bank.

The committee mentioned that violations are divided into three main areas: little to no checks on the financial capacity of clients, weak customer registration procedures, and inadequate controls to prevent money laundering and terrorism funding. 

Following the punishment,  three executives were also punished. Ademir Julio Schenatto was fined R$732,000 and banned from holding any position at regulated financial institutions for five years. Allison Forgiarini Ferreira was fined R$471,000, while Haroldo Pimentel Stumpf was fined R$358,000.

Brazil’s central bank fires warning shot to broader industry

While the fines take the spotlight, the underlying message from Ailton Aquino who serves as the Central Bank director and the president of the Copas committe is simple: the commercial restriction imposed on Topazio “could and should also be used, as necessary, as a precautionary measure, without initially requiring the opening of an administrative sanctioning process, whenever we assess that the grounds for applying Law 13.506 are present.”

Aquino also confirmed that the government intends to use the sanctions against other companies in the sector that fail to implement proper client registration or supervision systems, signaling a much tougher approach to managing and controlling the crypto and financial industry.

The wider regulatory crackdown in Brazil 

On April 30, Brazil’s central bank released Resolution BCB No. 561, which placed a ban on all electronic foreign exchange providers from using stablecoins and other crypto tokens like Bitcoin to carry out overseas transactions. The institution placed an order for all EFX payment routes to follow traditional foreign exchange systems or non-residential real accounts.

This new development is aimed at removing digital assets from the country’s regulated framework rather than outrightly banning crypto transfers in the country. With this, the central bank is able to keep international transfers within the foreign exchange channels it can monitor.

These new laws introduce stricter terms and regulations to the ecosystem, as eFX providers must now safeguard client funds in separate accounts, submit monthly reports through the central bank’s foreign exchange system, and store transaction records with the institution for the next ten years.

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