Brazil is reconsidering requiring FinTechs to report transaction values in light of potential money laundering. Discussions were previously paused due to public backlash. Concerns were raised over less known FinTechs being misused for illicit activities, particularly through the widely used instant payment system, Pix. The latest data indicates a significant reliance on digital wallets for various transactions in Brazil.
On March 11, Robinson Barreirinhas, the head of Brazil’s tax revenue service, indicated that due to potential evidence of money laundering, Brazil may revisit the requirement for FinTech companies to report transaction values. Previously, discussions on this requirement were halted following public discontent, as reported by Reuters. Barreirinhas highlighted concerns regarding lesser-known FinTechs being exploited for money laundering due to simplified account opening procedures.
In September, Brazil’s tax revenue service mandated FinTechs to report transactions beginning in January, including those via the Pix instant payment system. However, amid declining public approval ratings, the government suspended this rule in mid-January. Critics of the measure argued it would place additional taxes on workers.
During the Senate hearing, Barreirinhas expressed concerns over the financing of organized crime in Brazil through activities involving smuggled products, cryptocurrencies, and online betting. As reported in January, Brazil’s Pix system processes over $338 billion in transactions monthly, and a new recurring payments feature is anticipated to increase eCommerce payments by an additional $30 billion.
Brazil has demonstrated significant engagement in digital activities, including work, communication, and shopping, as observed in the PYMNTS Intelligence report, “How the World Does Digital.” The report noted that 75% of Brazil’s 215 million population owns a debit card, 77% utilizes Pix, and nearly two-thirds access financial services through mobile devices. Furthermore, Brazilian consumers are innovatively leveraging digital wallets for bill payments and identity verification, contrasting with other nations where such wallets are predominantly for eCommerce use. This trend is supported by the PYMNTS Intelligence and Google Wallet collaboration, which indicated that 47% of Brazilians utilized digital wallets for bill payments in the last year.
In summary, the increasing usage of digital payment systems in Brazil, particularly Pix, draws attention to the necessity for regulatory measures to combat potential money laundering facilitated by FinTechs. The government’s previous setbacks regarding transaction reporting illustrate the challenges faced amidst public opinion, highlighting a growing concern for organized crime financing. As digital wallet utilization expands, addressing these issues becomes crucial to ensure the integrity of Brazil’s financial landscape.
Original Source: www.pymnts.com
