Reported by Marina Cavalari

(Excerpt shared below. To read full report, go to: https://insightcrime.org/news/historic-pcc-bust-spurs-brazil-crackdown-on-digital-money-laundering/)

An investigation into a multibillion-dollar First Capital Command (Primeiro Comando da Capital – PCC) money laundering scheme involving chemical imports, fuel distribution, and investment funds has triggered reforms in Brazil’s digital banking sector. But gaps in enforcement mean the gang is likely to keep exploiting digital platforms to launder profits.

Operation Hidden Carbon (Carbono Oculto) was the largest-ever government response to organized crime in Brazil, according to President Luiz Inácio Lula da Silva. Beginning in 2023, it brought together Brazil’s Federal Revenue Service (Receita Federal) and São Paulo’s Special Action Group for the Suppression of Organized Crime (Grupo de Atuação Especial de Repressão ao Crime Organizado de São Paulo – GAECO) and involved around 1,400 security agents and the execution of over 400 court orders. 

The payoff was the detection of a PCC schemeinvolving the illegal importation of methanol to adulterate fuel and money laundering via investment funds and fintechs — companies that offer digital banking and financial services.

Members of the PCC illegally imported methanol using money from companies linked to the gang and listing false buyers on the receipts, the investigation found. Then, they sent it to fuel blenders that mixed the methanol into the gasoline before passing it on to distributors and gas stations that sold the adulterated fuel to customers. The profits were then transferred back to the PCC using fintechs. Finally, the illicit money was reinvested into investment funds and other businesses.

The use of fintechs in the scheme made it difficult to track transactions, as they are not classified as financial institutions and at that time did not have to follow the same regulations as traditional banks. The investment funds then acted as the point of entry for the untraceable money into the legal economy. 

The operation revealed that the PCC had assets of around 30 billion reais (over $5.5 billion) invested in over 40 funds in one of Brazil’s most important financial centers in São Paulo. Among them were funds operated by one of the country’s biggest investment management companies. While some of the funds were exclusive, with the PCC as the sole shareholder, others saw PCC money mixed in with investments by regular account holders.