Brazil Slaps Banco Topazio With $3.2M Fine and 2-Year Crypto Trading Ban

Central Bank of Brazil Bans Banco Topazio From Conducting Crypto Trading Operations

As banks enter the cryptocurrency business, regulators are becoming more vigilant on the compliance processes they must follow to conduct these operations safely.

The Administrative Sanctioning Process Decision Committee (Copas) of the Central Bank of Brazil imposed a two-year ban on Banco Topazios’ foreign cryptocurrency trading operations due to irregularities in transactions accounting for billions of dollars.

The committee determined that Banco Topazio disregarded compliance measures between October 2020 and September 2021, when it executed cryptocurrency purchases without executing procedures to determine the qualification of the third parties benefiting from these operations.

Banco Topazio’s trading volume during that period reached $1.7 billion involving 15 legal entities without notifying of atypical operations. Topazio was fined $3.2 million for irregularities in determining customers’ financial capacities, deficiencies in its registration procedures, and failure in determining AML/CFT (Anti-Money Laundering and Terrorist Financing) risks.

These transactions accounted for 63% of Topazio’s foreign exchange volumes during the period, and 46% of the institution’s market operations. This led the reviewing committee to determine that the irregularities were of a “serious nature,” which, according to the law, 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, hinted that these same prohibitions could be applied against other institutions as a precautionary measure if the bank considers them in violation of regulation.

He concluded that, given the rising popularity of crypto assets in the Brazilian economy, it was important to “warn and make it clear to all agents operating in this market that the banking supervisor is attentive and vigilant regarding deviant behaviors that may lead to business models capable of enabling money laundering operations.”

The announcement of the measure comes after the central bank banned the use of cryptocurrency in regulated payment rails and imposed a nationwide prohibition on non-financial event markets.