I. Challenges to recovering assets in Brazil

Brazil has in the past decades faced massive corruption schemes with relevant transnational features, even since before the “Car wash Operation”, such as the Propinoduto case1 and the Paulo Maluf case2. Proceeds of corruption in these cases are usually laundered abroad in well-known tax havens, which makes the recovery of these assets considerably more complicated. 
One of the biggest challenges Brazil faces in recovering proceeds of corruption in transnational cases is the general understanding abroad that they are solely criminal in nature, while nationally that is not necessarily the case. The Brazilian national framework has relevant mechanisms in the fight against corruption and asset recovery that are, from a formal perspective, non-criminal proceedings. These proceedings are essential tools to promote asset recovery in cases that originate from money laundering and corruption. The liability of legal persons in Brazil is a civil-administrative issue and not a criminal matter, except in some rare environmental crimes cases, due to constitutional limitations. Therefore, when legal persons are involved in corruption schemes in Brazil, they can only be held responsible through civil-administrative tools.  

Article 26 of the United Nations Convention against Corruption (UNCAC), paragraph 2, states that the liability of legal persons may be criminal, civil or administrative, and Brazilian lawmakers have made the unusual choice by choosing the non-criminal option. However, the nature of these proceedings in Brazil has made it difficult, if not impossible, to seize foreign assets or enforce judgments abroad in cross-border asset recovery cases. Most countries do not recognize the importance of non-criminal asset forfeiture tools in international assistance requests, since they consider the liability of legal persons a criminal matter.

Thus, the global tendency to treat this as a criminal matter and the non-mandatory nature of international cooperation in civil-administrative proceedings have created a risk for the effectiveness of the liability system of legal persons in Brazil, especially those who laundered money abroad and do not have assets located in the national territory. 

II. Legal tools for asset recovery in Brazil

Further to the criminal prosecution of cases, there are multiple agencies in Brazil responsible for asset recovery cases and fighting corruption: the Comptroller-General’s Office (Controladoria-Geral da União – CGU), the Court of Accounts (Tribunal de Contas da União – TCU) and the Attorney General’s Office (Advocacia-Geral da União – AGU), which also have a central role in recovering the proceeds of corruption in Brazil. There are several non-criminal mechanisms in Brazil through which authorities can forfeit assets and obtain compensation for victims of money laundering and corruption cases. These proceedings seek the enforcement of public sanctions and are carried out exclusively by public authorities (i.e., the Attorney General’s Office and the Public Prosecution Office, separately or jointly), with specific rules of procedure.

Two of the main non-criminal judicial tools employed for the recovery of assets include the Administrative Improbity lawsuit specified in Law nº 8.429 of 1992 (Administrative Improbity Act), and the Corporate Liability lawsuit described in Law nº 12.846 of 2013 (Corporate Liability Act). Since Brazil considers corporate liability a civil-administrative issue, legal persons involved in corruption schemes are held responsible in Courts through these measures.

Both can serve as a means to recover proceeds of crime, defined by UNCAC as any property derived from or obtained, directly or indirectly, through the commission of an offence according to its article 2 (e). These proceedings allow for the forfeiture of assets, including substitute assets through value-based confiscation,3 and provisional measures such as restraining orders or seizure orders. Civil  proceedings under these measures guarantee all the constitutional and fundamental rights related to the due process of law and penalties are comparable to those issued during criminal proceedings such as fines, forfeiture, disgorgement or debarment. Thus, they fit the criteria of article 54, 1 (c) of UNCAC as proceedings that allow for the confiscation of property without a criminal conviction.

The Administrative Improbity Act establishes penalties for acts of misconduct committed either by public servants, private individuals or enterprises that are detrimental to public property. Those acts are divided into three categories: acts  of illicit enrichment, whereby one gains illicit assets by virtue of one’s office, mandate, function, employment or government business; acts detrimental to the public treasury, whereby one causes loss of assets, diverts funds, embezzles, squanders or destroys public property or the assets of public entities; and acts that violate the principles that govern the Public Administration, such as duties of probity, impartiality, lawfulness and loyalty to public institutions. Penalties include confiscating the unlawfully acquired assets, making a full restitution to the treasury for the damages caused, losing public office or paying fines and/or being debarred from any government contracts or from receiving tax or credit benefits or incentives.

The Corporate Liability Law provides for the civil and administrative liability of legal entities for acts committed against the national or foreign public administration and carries sanctions including loss of the assets, rights or valuables representing the advantage or profit directly or indirectly obtained from the wrongdoing, without prejudice to the right of the victim or of third parties in good faith; partial suspension or interdiction of its activities, compulsory dissolution of the legal entity, prohibition from receiving incentives, subsidies, grants, donations or loans from public agencies or entities and from public financial institutions or government-controlled entities from one to five years. Under this law the innovative new anti-corruption instrument titled the Leniency Agreement was also created to provide a negotiated non-trial resolution for corruption cases.

From an asset recovery perspective, these non-criminal proceedings are essential to guarantee the recovery of proceeds of corruption and have achieved significant results in the past years. According to the National Risk Assessment of 2021, over 206 administrative misconduct lawsuits that sought to recover over approximately USD 566 million had been initiated by the AGU, and 56 assets-freezing injunctions had been granted to an amount of over USD 188 million. The AGU and the CGU had signed 12 leniency agreements that recover over USD 2.5 billion to the public treasury in fines, compensation for damages and refund of the amounts which had resulted in illicit enrichment. The CGU launched over 480 administrative investigations with a determined amount of damages of nearly USD 1 billion.4

In addition, civil claims to reimburse the public treasury are also available under the Civil Procedure Code and result in the payment of damages to the claimant and loss of the assets or valuables that represent illegal proceeds obtained from the wrongdoing. Aside from being the legislative choice regarding the liability of legal persons, these proceedings are also essential to recover assets when criminal cases are unsuccessful, for instance when the statute of limitations runs out or when there are multiple appeals in a criminal proceeding and a long time has passed without a final judgment.

The Importance of Provisional Measures

Since in Brazil’s practical experience foreign authorities do not authorize the repatriation of assets until the decisions are final, the provisional measures to freeze assets located abroad become essential in international cooperation. According to article 19, paragraph 4, of the Corporate Liability Law, the Public Prosecution Office or the judicial representative body of the public entity (such as the AGU) may request the freezing of assets, rights, or values necessary to guarantee the payment of the fine or to ensure the full compensation for the damages caused. Article 16 of the Administrative Improbity Act also states that a request for the freezing of the defendants' assets may be made before or in the scope of the lawsuit, in order to guarantee the full restitution to the public treasury, including the increase in wealth resulting from illicit enrichment.

Complex criminal corruption cases before Brazilian Courts can take decades until the procedure is finally decided. The Propinoduto case,5 for instance, has been ongoing for approximately 18 years. The Brazilian criminal system allows for many appeals, thus, the statute of limitations is a constant issue to be managed during prosecutions. In this context, non-criminal lawsuits become increasingly important, and while these proceedings are pending, freezing and seizing orders are essential to guarantee their effectiveness and ensure that the defendants' assets will be sufficient for the final payment of the fines and the compensation of damages, depending on the case.

III. Enforcement in transnational cases

To provide an idea of the scale of the amounts of the assets to be repatriated in multijurisdictional cases, the Brazilian press reported in 2021 that according to the Swiss Public Prosecutor's Office, a total of 310 million Swiss francs (over USD 311 million) was still awaiting a decision or conviction of the defendants in the “Car Wash” case.6 

The international framework provides a roadmap for international cooperation on non-criminal proceedings, while affirming the non-mandatory nature of mutual legal assistance in these proceedings. 
Article 43.1 of UNCAC states that “(…) where appropriate and consistent with their domestic legal system, States Parties shall consider assisting each other in investigations of and proceedings in civil and administrative matters relating to corruption”. In addition, its article 46.2 establishes that mutual legal assistance should be afforded in relation to the offences for which a legal person may be held liable in accordance with article 26 of UNCAC in the requesting jurisdiction.

Furthermore, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the Anti-Bribery Convention) obliges (article 9) all parties involved, to the fullest extent possible under its laws and relevant treaties and arrangements, to provide prompt and effective legal assistance for non-criminal proceedings within the scope of the Convention against a legal person under investigation.

Despite these international provisions, enforcing Court decisions of seizure and forfeiture of assets with impacts in foreign jurisdictions has been a challenge for Brazil. In cross-border cases, there is an ongoing concern and reluctance of foreign authorities to provide formal international cooperation in non-criminal cases, jeopardizing Brazil’s efforts in the identification, freezing, seizure and forfeiture of the proceeds of corruption and the damages caused.

Although the civil and administrative proceedings are largely related and often parallel to the criminal actions against the relevant individuals, foreign countries fail to provide assistance in non-criminal cases for reasons that are based on the formal nature of the proceedings and on a superficial analysis that does not fully comprehend the Brazilian system.

While many countries have ratified UNCAC and have signed other regional and bilateral treaties that provide for international legal cooperation in civil or administrative proceedings related to corruption cases, they often do not have internal rules regulating cooperation in those cases and therefore do not provide assistance.

National court decisions on non-criminal lawsuits that order the restraint of assets to satisfy fines specified in the legislation or for the purposes of compensation for damages are common practice. However, they are not enforced against foreign enterprises with no assets in Brazil. So far, other jurisdictions will only accept the seizure of assets that represent proceeds of an offense or property involved in or traceable to the commission of such offense. 

The relevance of non-criminal tools to fight corruption has been recognized in the international community with some improvement in the work of promoting the use of non-criminal proceedings in corruption cases. 

Resolution 6/4 of the 5th Conference of the States Parties to the UNCAC in 2013 addressed specifically the need to improve international cooperation in civil claims and to promote the importance of other mechanisms outside of the criminal framework to foster asset recovery. The G20 Guide “Requesting International Cooperation in Civil and Administrative Proceedings relating to corruption”7 also highlights practical matters related to these tools in international cooperation and present information on how G20 members can provide legal cooperation for civil and administrative proceedings. 

Brazil urges international anti-corruption organizations and countries to take measures to enhance international cooperation in mutual legal assistance requests originating from civil and administrative proceedings in corruption cases, especially since the underlying conducts involve parallel criminal offenses.

IV. Alternatives to international cooperation

When international cooperation fails or proves insufficient, one alternative to recovering assets located in foreign jurisdictions is to take direct action by hiring local counsel and fighting the legal battle abroad. One example of this would be as a plaintiff in a civil procedure to establish ownership of confiscated (or non-confiscated) assets or as third party in a criminal procedure seeking compensation.8

UNCAC recognizes in its article 53 the importance of civil actions in the context of asset recovery and mandates that States parties adjust their legal systems so that their courts are prepared to rule on different types of actions initiated by foreign states for repatriation of assets, such as civil actions to recognize the rightful ownership of the assets, civil reparation actions and criminal actions recognizing those states as victims and rightful recipients of the illicitly obtained assets through acts of corruption.

This strategy has been used by Brazil in successful asset recovery cases such as the Banestado case (US$ 1.3 million in 2012), the Jorgina de Freitas case (US$ 15 million in 2003), and the Paulo Maluf case (US$28 million by Maluf and his son).9 The following case studies provide one example where non-criminal procedures were unsuccessful in the return of assets, and one where civil proceedings worked in recovering assets.

CASE 1 – Unsuccessful use of non-criminal proceedings for the recovery of assets10

This case relates to bribes of tens of millions of dollars paid by a foreign company to Brazilian officials in order to obtain a public contract. The enterprise did not have headquarters or assets in Brazil, and the money was laundered abroad. The value of the bribes represented a direct increase in the value of the public contract.

Whilst the company was prosecuted in a civil proceeding based on the Administrative Improbity Act, there were parallel criminal proceedings against the individuals. The court issued a provisional decision ordering the freezing of assets to guarantee the future payment of a fine, of the equivalent value to the bribes paid in the corruption scheme and the restitution of damages caused to the public treasury. Although the lawsuit was only at an initial stage, the judge stated that a precautionary seizure was essential to guarantee the final payment of the losses, damages and the fine. Such an order can be defined as a value seizure, since it orders the seizure of assets whose value corresponds to the proceeds of crime.

In 2021, the AGU of Brazil sent a request for international cooperation to seize assets, based on the bilateral treaty between Brazil and the requested country and the fact that both were  parties to UNCAC. Brazil maintained that the civil proceeding was directly related to a criminal matter and stressed that companies are not criminally liable in Brazil for acts of corruption, and argued that the case falls under Article 31, sub 1 (a) of UNCAC , which obliges countries to take measures to enable confiscation of proceeds of crime derived from offences established in accordance with the Convention or property the value of which corresponds to that of such proceeds.

After several discussions between Brazilian and foreign authorities on how to implement the order, the requested country responded that it would not be able to provide assistance since the assets located within the jurisdiction were deposited in a bank account that was not an originating, transit nor recipient account of the funds used for the bribe, and therefore, were not considered proceeds or instrumentalities.

In addition, the foreign authorities determined that assistance would be limited to criminal matters and could not be provided because the enterprise had not been criminally charged. They did not take into account that the Brazilian system does not allow for the criminal prosecution of legal persons in a corruption case. The foreign authorities expressly declared that they would be unable to execute forfeiture-related requests based on complaints of the Administrative Improbity Act, since their country’s legislation did not contemplate the possibility of their authorities enforcing such orders.


CASE 2 - Successful use of civil proceedings for the recovery of assets11

A request for international assistance was sent to a European country by the Brazilian Federal Prosecution Service to freeze laundered assets that originated from an extensive scheme of payments of bribes to Brazilian public officials. The amounts deposited in foreign bank accounts were successfully restrained by the foreign authorities.

However, since the statute of limitations in the criminal lawsuit had run out, the foreign authorities requested a proper court decision that could support the maintenance of the freezing order. To guarantee that the bank accounts in question remained seized, the AGU filed a civil claim before the Brazilian court to seek damages for the Federal Government and the restraint of the defendants' assets that would have been subject to forfeiture in favor of the Federal Government in the criminal case. The civil court recognized the same reasons for the previous criminal restraint order and the need to ensure the effectiveness of a final decision in favor of the Federal Government. A decision was then rendered seizing the assets and also recognizing the risk of asset dissipation that the lifting of the restraint by the criminal court caused. 

Based on this decision by a civil court, a new request for international assistance was sent to the foreign authorities based on the UNCAC. The request was granted and the restraining order was maintained. The clear connection to the criminal proceedings and especially the fact that the assets to be repatriated in the civil proceeding were already cited in the criminal file were critical to the success of this civil case of international cooperation.

Successful cases such as this one demonstrate how civil tools can be excellent measures within the asset recovery system, including when the criminal proceedings are ineffective due to issues such as the statute of limitations. This example also shows the importance of the national coordination among agencies, as the Federal Prosecution Service and the Attorney General’s Office partnered to guarantee the freezing of assets in a large corruption case.

V. Conclusion

Brazil has been working on various initiatives to raise awareness of the importance of providing international cooperation in civil and administrative cases and to recognize the value of non-criminal tools in the effectiveness of the global asset recovery system. Brazilian authorities have highlighted the importance of these mechanisms for sanctioning and recovering proceeds of corruption in relevant international anti-corruption forums such as the UNCAC bodies, FATF, OECD and G20.

Strategic efforts have been made on requests for international cooperation based on non-criminal cases related to asset recovery, including meetings with foreign authorities to explain Brazil’s legal framework, how these proceedings are conducted as regards to due process and discussing how such requests should and could be executed.

The defense of the public interest in the repatriation of assets recommends the adoption of initiatives abroad in criminal, civil and administrative proceedings through international cooperation and, where appropriate, direct actions by hiring specialized local counsel to take action in the jurisdiction where the assets are located.

Bilateral and multilateral treaties should also reflect the need to cooperate in non-criminal cases of corruption and international debates should include discussions on improving the framework to implement foreign court decisions in non-criminal cases regarding sanctions, including monetary fines which are a relevant tool for the effectiveness of corporate liability measures in Brazil, as well as in other countries parties to the UNCAC or to the OECD Anti-Bribery Convention which do not adopt a criminal liability system for corporations.

There is still a long way to go to achieve acceptable levels of repatriation of stolen assets and  significant effectiveness in international cooperation requests related to the recovering of proceeds of corruption in civil proceedings. The international community must expand the tools used to fight corruption and transnational corruption. Strengthening the international response to corruption will require countries to be flexible and seek to find solutions jointly to allow the enforcement of foreign non-criminal orders in international cooperation cases.

Anchor[1] Marco Antônio Martins e Pedro Bassan (G1). “Propinoduto: Depois de 18 anos, processo ainda está na Justiça e réus podem ter de volta dinheiro depositado na Suíça”, G1, Feb. 7, 2021. https://g1.globo.com/rj/rio-de-janeiro/noticia/2021/02/07/propinoduto-depois-de-18-anos-processo-ainda-esta-na-justica-e-reus-podem-ter-de-volta-dinheiro-depositado-na-suica.ghtml
Anchor[2] Mariana Oliveira e Renan Ramalho (G1). “STF condena Paulo Maluf por lavagem de dinheiro e determina perda do mandato”. G1, May. 23, 2017. https://g1.globo.com/politica/noticia/supremo-condena-deputado-paulo-maluf-por-lavagem-de-dinheiro.ghtml
Anchor[3] "Some jurisdictions elect to use a value-based approach, which is a system where a convicted person is ordered to pay an amount of money equivalent to the value of their criminal benefit. This is sometimes used in cases where specific assets cannot be located. The court calculates the benefit to the convicted offender for a particular offence. Value-based confiscation allows for the value of proceeds and instrumentalities of a crime to be determined and assets of an equivalent value to be confiscated". United Nations Office on Drugs and Crime (UNODC), “Confiscation”. https://www.unodc.org/e4j/en/organized-crime/module-10/key-issues/confiscation.html/ 
Anchor[4] Brazil, Working Group for National Risk Assessment of Money Laundering, the Financing of Terrorism and the Financing of the Proliferation of Weapons of Mass Destruction (Brasília, 2021). https://www.gov.br/coaf/pt-br/centrais-de-conteudo/publicacoes/avaliacao-nacional-de-riscos/3-1_national-risk-assessment_ing.pdf
Anchor[5] Marco Antônio Martins e Pedro Bassan (G1). “Propinoduto: Depois de 18 anos, processo ainda está na Justiça e réus podem ter de volta dinheiro depositado na Suíça”, G1, Feb. 7, 2021. https://g1.globo.com/rj/rio-de-janeiro/noticia/2021/02/07/propinoduto-depois-de-18-anos-processo-ainda-esta-na-justica-e-reus-podem-ter-de-volta-dinheiro-depositado-na-suica.ghtml
Anchor[6] Jamil Chade, “Suíça mantém confiscados R$ 2 bi de corrupção de suspeitos da Lava Jato”. Uol Noticias, February 20, 2021. https://noticias.uol.com.br/colunas/jamil-chade/2021/02/20/suica-mantem-confiscados-r-2-bi-de-corrupcao-de-suspeitos-da-lava-jato.htm

Anchor[7] G20 Guide on “Requesting International Cooperation in Civil and Administrative Proceedings relating to corruption” https://tinyurl.com/4tvx9m5x
Anchor[8] Boni Soares, “Facing legal battles abroad to combat corruption: the Brazilian experience” https://tinyurl.com/2p9yx2ry
Anchor[9]   Boni Soares. “Advocacia internacional do Estado e o Ministério Público: dez anos de parceria entre AGU e MPF”. in Temas de cooperação internacional / Secretaria de Cooperação Internacional. (Brasília: Ministério Público Federal, 2015) https://tinyurl.com/2x6n6duu
Anchor[10] Specific details cannot be provided since this is a confidential case.
Anchor[11] Specific details cannot be provided since this is a confidential case.