According to Reuters, Brazilian banks received a notice from the US Treasury Department asking about the Magnitsky Law.
This move came just over one month after Washington placed financial sanctions against Justice Alexandre de Moraes of the Supreme Court.
This request came from the Treasury Department’s Office of Foreign Assets Control, which asked the banks to tell them what steps they had taken or planned to take in order for the bankers comply with the sanction framework.
Folha De S.Paulo first reported the development on Wednesday, and Reuters confirmed it later.
According to Folha the notification had been sent the day before to the financial institutions.
Source: Banco do Brasil received the message, described by the source as “something generic,” claiming the Magnitsky Act and asking for what steps were taken.
Moraes Sanctioned
The US Government applied Magnitsky Act in late July to Justice Alexandre de Moraes. They accused him of ordering arbitrarily arrests and limiting free speech.
Moraes is the reporting judge for the proceedings brought against the former president Jair Bolsonaro. Bolsonaro has been accused of planning a coup in the aftermath of losing the election held in 2022.
Moraes is barred from doing business in America and his assets are frozen.
Parallel to this, the US administration of President Donald Trump revoked Moraes’ visa and placed a tariff of 50% on Brazilian exports citing Bolsonaro’s case as a justification.
Trump denounced Bolsonaro’s proceedings as “a witch hunt.”
The political background to the Bolsonaro trial
OFAC issued a preliminary notification about one month prior to the first session of Bolsonaro’s First Chamber Trial in the STF. Bolsonaro, along with seven other individuals accused of trying a coup after the elections of 2022 were the subject of this tentative notification.
While reading the report on this case, Moraes said that the court will act impartially. He also dismissed efforts “to impugn or bring the judiciary under the yoke a foreign country”
Bolsonaro could be arrested, which would have a major impact on Brazil’s politics.
Moraes is currently under international sanctions and the legal investigation of his former presidency has created an explosive mix. This combination intensifies tensions between Brasilia, Washington and puts Brazil’s Financial System once more on high alert.
How to navigate a complicated landscape
Combining US sanctions with STF rulings and high stakes cases in politics highlights the complexity of compliance.
The OFAC investigation may have been portrayed as generic and routine, but the context is more complex. It highlights the difficulty of reconciling domestic legal power with global regulatory goals.
Brazil’s leading lenders are silent for the moment, creating concerns about their ability to meet the US Treasury demands while still adhering to domestic laws.
The conflict between Washington sanctions and Brazil’s courts appears far from over as Moraes continues his presidence over Bolsonaro’s trial and the STF claims supremacy in the administration of international regulation.
As new information becomes available, this post US Treasury asks Brazilian banks about Magnitsky Act Compliance may be updated.
