Brazil Fines Banco Topazio $3.2M, Bans Crypto Trades 2 Years

The Central Bank of Brazil barred Banco Topazio from carrying out foreign purchases and sales of cryptocurrency assets for two years and imposed a $3.2 million fine after finding failures in due diligence on $1.7 billion of trades.

The Administrative Sanctioning Process Decision Committee (Copas) found the violations took place between October 2020 and September 2021. During that period the bank executed cryptocurrency purchases without verifying the qualification of third parties that benefited from the operations. The transactions involved 15 legal entities and were not reported as atypical operations to the regulator.

Copas concluded Banco Topazio did not properly assess customers’ financial capacity, had deficiencies in registration procedures and failed to identify anti-money laundering and counter-terrorist financing (AML/CFT) risks linked to the trades. The transactions identified by the review amounted to $1.7 billion, equal to 63% of the bank’s foreign exchange volume and 46% of its market operations in the period under review.

Because the committee classified the irregularities as ‘serious in nature,’ the central bank applied the two-year ban on foreign cryptocurrency trading and the monetary penalty. The committee stated the shortcomings could ‘severely affect the purpose and continuity of activities or operations within the National Financial System, the Consortium System or the Brazilian Payment System.’

Ailton Aiquino, head of oversight at the central bank, cautioned that comparable prohibitions could be imposed on other institutions if regulators find similar breaches. He said that with growing use of crypto assets in the Brazilian economy supervisors are attentive to behaviors that could enable money laundering.

The measure follows earlier central bank restrictions on the use of cryptocurrencies in regulated payment systems and limits on non-financial event markets nationwide. The case focuses regulatory attention on banks that add crypto services, particularly on customer due diligence and AML/CFT controls.