International Fraud & Asset Tracing 2024 Comparisons

Brazilian substantive and procedural law establish several rules that address fraudulent transactions such as the making of false statements, the making of corrupt payments, conspiracy and misappropriation. The specific fraud claim applicable will vary depending on the parties involved – both the perpetrator and the harmed party. In general, the following fraud claims can be pursued by the victim.

Civil and Commercial Claims

Fraud against creditors

Fraud against creditors (in Portuguese, fraude contra credores), as provided for in the Brazilian Civil Code, is applicable to private creditors in general. Unsecured creditors have the right to challenge an onerous sale of assets and may be able to reclaim the sale proceeds if the seller was notoriously insolvent at the time of the transaction or if the buyer had reason to know about the debtor’s insolvency.

Fraud upon the execution of judgment

In general, fraud upon the execution of judgment (or fraude à execução in Portuguese) occurs when, at the time of the transfer or encumbrance of assets, there were lawsuits pending against the debtor. Any creditor that filed an enforcement proceeding (or any other legal action against the debtor that could lead the latter to insolvency) before the transaction may challenge the transaction and seek to reclaim the assets, provided certain requirements are met.

Abuse of legal personality

Under certain circumstances, the making of false statements, the making of corrupt payments, conspiracy and misappropriation can be considered an act of abuse of legal personality.

Under the doctrine of piercing of the corporate veil, shareholders, directors, officers and third parties within the same economic group may be held liable for the debts of a company, when they have committed an act of abuse of legal personality. According to the Brazilian Civil Code, abuse of legal personality occurs when there is commingling of assets or deviation from the corporate purpose.

Bankruptcy Fraud

If the victim of a fraudulent conveyance is the estate of an insolvent company, a creditor, the judicial administrator or the Public Prosecutor’s Office may seek to claw back the assets of the transaction. Pursuant to Brazil’s Bankruptcy Law (Law No 11,101/2005) as amended, this can be achieved by means of the following.

Revocatory action

This action can be brought by any creditor to render a past transaction ineffective. It is predicated on the fraudulent behaviour of the debtor and the counterparty of the transaction, resulting in losses to the bankruptcy estate.

Objective ineffectiveness claim

This action is grounded on acts considered fraudulent per se regardless of the parties’ intention. Examples include:

• payment of debts before the maturity date within the look-back period;
• payment of debts in conditions not contractually agreed also within the look-back period; and
• performance of gratuitous acts two years before the bankruptcy.

Criminal Offences

The Brazilian Criminal Code addresses fraud through various provisions that criminalise deceptive or fraudulent conduct in different contexts.

Corruption offences

The Brazilian Criminal Code contains provisions addressing corruption offences, including active corruption (Article 333), passive corruption (Article 317) and influence-peddling (Article 332). These offences involve actions that affect public interest and involve individuals vested with public authority.

Fraudulent appropriation

Article 168 of the Criminal Code criminalises fraudulent appropriation, which includes the act of misappropriating someone else’s property or money entrusted to the offender for a specific purpose. This provision aims to protect against wrongful deprivation of property.

Fraudulent misrepresentation

Article 171 of the Criminal Code covers fraudulent misrepresentation or deceitful conduct aimed at obtaining an unjust advantage or causing a financial loss to another person. This offence encompasses actions such as using false pretences or deceit to deceive others into transferring money or property.

Anti-Corruption Law

Under the Anti-Corruption Law in Brazil, companies can be held liable for bribery and corruption offences committed by their shareholders, directors, officers and employees. The law imposes civil and administrative sanctions, some of which can be severe, for a wide range of prohibited conducts.

These prohibited conducts include offering or giving undue advantages to government officials or related third parties, financing or sponsoring harmful acts under the law, and using third parties to conceal the real interests or beneficiaries of the conduct. Any such conduct deemed harmful under the law may lead to administrative or civil liability for the company involved.

Companies may face individual or cumulative penalties, such as fines of up to 20% of their revenues, confiscation of assets gained from illegal acts, partial suspension or prohibition from business activities, and the prohibition from receiving benefits or credit from government entities.

The Anti-Corruption Law applies to bribery offences committed against both Brazilian and foreign governments and establishes a strict liability regime for companies involved in such offences. Only the Brazilian government has the authority to pursue civil and administrative sanctions against companies and individuals that violate the Anti-Corruption Law.

Administrative Improbity Law

A fraud claim may also be brought by means of an administrative improbity lawsuit, as provided for in Law No 8,429/1992, which enforces wrongful behaviour by public officials and private entities. This Law aims to protect the integrity of public assets and the principles applicable to public administration.

Claims based on administrative improbity may refer inter alia to causing damages to the public treasury, unlawful enrichment of public officials or third parties, as well as violations of the principles applicable to public administration.

Under Article 12 of Law No 8,429/1992, the improbity acts may be punished through several penalties, such as fines, prohibition from entering into contracts with the public administration, prohibition from benefiting from special tax treatments and loss of public function, without prejudice to claims seeking to obtain compensation for damage caused to the public administration.

The following causes of action may be available in Brazil to a claimant whose agent has received a bribe.

• Civil liability claims– Claimants may pursue civil liability claims under the Brazilian Civil Code, which provides remedies for damages caused by unlawful acts. A claimant whose agent received a bribe can seek compensation for losses suffered as a result of the agent’s actions.
• Claims against officers and directors – Brazilian entities and shareholders can pursue damages against officers or directors who took bribes or misappropriated company funds. Law No 6,404/1976 (Brazilian Corporations Law) allows companies to bring civil liability actions seeking compensation for losses caused by officers or directors.
• Annulment of fraudulent transaction – Transactions involving bribery and illicit transfers of assets disguised as legitimate business payments can be challenged through annulment actions under the Brazilian Civil Code. This allows claimants to void fraudulent transactions and recover assets obtained through bribery.
• Criminal complaints –Claimants also have the option to file criminal complaints against public officials for bribery-related offences. Brazilian criminal law prohibits public officials from giving and receiving bribes, with individuals found guilty facing imprisonment and fines. Private corruption, which involves bribery of private agents, is currently not punishable under the Brazilian criminal law.

In Brazil, there are several legal claims available against parties who assist or facilitate fraudulent acts of another, such as the following.

Accessory Liability

Article 942 of the Brazilian Civil Code establishes that the assets of the individual or entity held liable for the offence or violation of another’s rights will guarantee the payment of the losses caused; and, if the offence has more than one perpetrator, they will be jointly and severally liable for the compensation.

Joint Liability With Officers and Directors

Article 158 (§5) of the Brazilian Corporations Law imposes joint liability on individuals who concur in acts contrary to the law or by-laws with the intention of obtaining advantages for themselves or third parties, along with officers or directors.

Participation in Bankruptcy Fraud

Brazil’s Bankruptcy Law provides that claw-back actions (such as the revocatory actions and objective ineffectiveness actions discussed above) can be filed against all third parties who participated in the transaction, benefited from it and/or knew of the debtor’s intention to harm the creditors.

Participation in a Crime

Under the principle of co-authorship in the Brazilian Criminal Code, individuals who directly participate in the commission of a crime are considered co-authors or co-perpetrators. The penalties for these individuals will depend on their specific role or degree of involvement in the crime.

In Brazil, there are two distinct legal concepts to consider regarding limitation periods: prescrição (which can be translated as “statute of limitations”) and decadência (often translated as “lapse” or “forfeiture”). Unlike prescrição, which pertains to the time limit for initiating legal action, decadência typically involves the expiration of a substantive right or entitlement.

The prescrição limitation period can be tolled under certain circumstances. The party entitled to a claim may unilaterally interrupt the statute of limitations for actions subject to prescrição, allowing the limitation period to start running again. In contrast, the decadência limitation period cannot be tolled and expires irreversibly once it begins, except if otherwise provided by statutory law.

Brazilian law establishes several rules that deal with fraud and fraudulent diversion of assets. Depending on who engaged in these fraudulent acts and who was harmed by these fraudulent acts, the limitation period will vary according to the rules of substantive law.

Therefore, there are multiple time limits for bringing fraud claims in Brazil. There are also fraud claims that are not subject to any limitation periods. According to the Brazilian Civil Code, if the specific law does not specify what statutory period is applicable to a certain case, the statutory limit for bringing a claim will be ten years.

Specific limitation periods for bringing fraud claims based on different causes of action include the following:

• claims based on extracontractual civil liability – generally, three-year limitation period (prescrição);
• fraud against creditors (fraude contra credores) – four-year limitation period (decadência);
• revocatory actions: three-year limitation period (decadência) from the bankruptcy decree;
• claims based on the doctrine of piercing of the corporate veil – per the jurisprudence of the Superior Court of Justice, this is not subject to any limitation period;
• claims by shareholders or entities against directors and officers – two-year decadência from the date of the general or special meeting that approved the directors’ and officers’ accounts; and
• claims by government authorities based on the Anti-Corruption Law – five-year prescrição from the date on which the violation becomes known to the company or, in some cases, from the date on which the violation ceased.

Unless otherwise provided in the relevant statute, as a rule the limitations period starts to run from the date on which the fraudulent transaction was effected (although in some cases the limitation period arguably starts from the date of the party’s knowledge of the fraudulent transaction, based on the actio nata doctrine).

Where a claimant seeks the recovery of property misappropriated or induced by fraud to transfer, a proprietary claim can be asserted based inter alia on the annulment of the underlying transaction.

If the property reclaimed is in the possession of a bankruptcy estate, a claimant may file a Request for Restitution (Pedido de Restituição) within the bankruptcy proceeding, thereby recovering the property with preference over other creditors.

However, under Brazilian law, it is generally not possible to establish a proprietary claim with precedence over unsecured creditors against property that represents the converted proceeds of the original fraud. This limitation reflects legal principles aimed at preserving the integrity of insolvency proceedings and equitable distribution of assets among creditors.

In Brazil, there are no specific rules of pre-action conduct that apply exclusively to fraud claims. However, certain general principles and procedural rules may be relevant when initiating legal proceedings involving fraud allegations. These principles aim to ensure fairness, efficiency and the protection of the parties’ rights throughout the litigation process.

Brazilian law imposes a duty of good faith on parties involved in legal proceedings. This includes a duty to act honestly, fairly and co-operatively throughout the litigation process. Parties are expected to disclose relevant information and evidence in a timely manner and to refrain from engaging in fraudulent or deceptive conduct.

Prior to initiating formal legal proceedings, parties may engage in pre-litigation investigation and informal dispute resolution efforts to gather information, assess the strength of their claims or defences, and explore potential avenues for settlement.

In Brazil, victims of fraud have access to some of the most sophisticated tools and legal recourse to prevent defendants from dissipating or secreting assets with the intention of avoiding the consequences of a judgment.

Preliminary Injunction or Seizure

Under Brazilian law, the claimant may petition the court for a preliminary injunction or seizure order to prevent the defendant from dissipating assets or concealing them. This involves presenting evidence to substantiate a risk of asset dissipation or concealment and demonstrating a likelihood of success on the merits. Brazilian courts typically consider factors such as the strength of the claimant’s legal arguments, the availability of evidence and the potential harm to both parties when assessing the likelihood of success.

Non-compliance with a court order may result in freezing orders, monetary penalties, criminal prosecution or other consequences, for parties to judicial proceedings as well as third parties.

SISBAJUD (Freezing of Bank Accounts)

SISBAJUD, which stands for “Sistema de Busca de Ativos do Poder Judiciário” (Judiciary Asset Search System), is a centralised electronic system used by the Brazilian Judiciary to facilitate the search and freezing of assets held in financial institutions. It is primarily utilised in civil and enforcement proceedings to enforce court orders, judgments and other legal obligations.

The SISBAJUD system covers all financial institutions operating in Brazil, including banks, credit unions, investment firms and other financial entities. It allows judicial authorities to search for and identify assets held in accounts belonging to debtors or defendants named in legal proceedings.

Judges access the SISBAJUD system through a secure online portal. They can input specific search criteria, such as the name of the debtor or defendant, taxpayer identification number (CPF or CNPJ), or other identifying information, to initiate a search for assets held in financial institutions. Once a search is initiated and assets are identified, judicial authorities can issue electronic orders through the SISBAJUD system to freeze bank accounts and other financial assets belonging to the debtor or defendant. The freezing order is transmitted electronically to the relevant financial institutions, which are required to immediately comply with the order and block access to the frozen assets.

RENAJUD (Freezing of Vehicles)

RENAJUD is an electronic system used in Brazil for the automated search and blocking of vehicles to enforce judicial decisions. The system is operated by the Brazilian National Traffic Department (DETRAN) and allows judicial authorities to identify vehicles owned by debtors and block them from being sold or transferred.

Judicial Bond

A Brazilian Court may exercise discretion to order the plaintiff to provide a judicial bond, such as a bond or cash deposit, to secure the defendant against potential losses resulting from precautionary measures, such as asset freezes or injunctions. The purpose of a judicial bond is to provide security for the defendant in cases where there is a risk that the precautionary measure may not be reversible or may generate damages if revoked.

Disclosure of Assets in Legal Proceedings

In addition to information obtainable via public sources (see below), a claimant in a civil proceeding can petition the court to order the defendant to disclose their assets and notify third parties to provide any information available about the assets held by the defendant.

In enforcement proceedings, where the defendant fails to disclose its assets after being duly summoned, the judge may impose a fine of no more than 20% of the updated debt (Article 774 of the Civil Procedure Code). Generally, to obtain disclosure of assets held by nominees on the defendant’s behalf, the plaintiff must present strong evidence that the assets belong to the defendant.

As a rule, there is no cross-undertaking in damages for applications for disclosure of assets.

Breach of Fiscal and Banking Secrecy

Breach of fiscal (tax) and banking secrecy of a debtor is a legal measure that can be applied under certain circumstances, typically in the context of legal proceedings involving debt collection, enforcement of judgments or investigation of financial crimes, when there is suspicion of dissipation of assets. In Brazil, judges have access to electronic systems whereby they can instantly obtain the tax returns of a debtor and order financial institutions to provide any relevant bank statements.

INFOJUD is a system used in Brazil to obtain tax-related information from government databases. It is primarily utilised by judicial authorities in civil and criminal proceedings to access tax records and financial information related to individuals and entities involved in legal disputes.

Information Available From Public Sources

In Brazil, a wide range of public sources can provide information about the defendant’s assets, including the following, among others:

• land registry – holds information on real property ownership;
• registry of vehicles – holds information on vehicle ownership;
• commercial registry (trade board) – holds information on share ownership; and
• aircraft registry – holds information of aircraft ownership.

Early Production of Evidence

In the Brazilian legal system, parties have an independent right to obtain evidence regardless of a previous legal proceeding. Such right can be initiated through a standalone proceeding known as the Early Production of Evidence (Article 381 of the Civil Procedure Code). This procedure aims to preserve evidence in various circumstances:

• there is a substantiated risk that it could become impossible or very hard to verify certain facts after filing the lawsuit;
• such evidence might enable the parties to settle the case or reach some other solution to the dispute;
• the prior knowledge of such facts will have a bearing on whether or not a suit needs to be filed; and/or
• the party needs to justify the existence of a fact or legal relationship for documentation purposes.

Precautionary Measures

In addition, under Articles 300 and 301 of the Civil Procedure Code, a party may petition the court for a preliminary injunction to preserve evidence if it can demonstrate both the likelihood of success of its claims and the risk of losses where the evidence is not produced as requested. This measure allows for the preservation of specific types of evidence, such as documents or other tangible items, that are believed to be in the defendant’s possession.

To support the request for a preliminary injunction, the applicant must specifically describe the evidence sought and provide sufficient justification for the belief that it is in the defendant’s possession. This may include presenting relevant facts or circumstances that indicate the likelihood of the evidence being within the defendant’s control.

The judge will review the grounds of the request and assess whether the evidence sought should be preserved through a preliminary injunction. Factors considered may include the likelihood of success of the claims, the potential harm to the claimant if the evidence is not preserved, and any other relevant circumstances of the case.

Other Considerations

In Brazil, the plaintiff is not permitted to conduct a physical search of documents at the defendant’s residence or place of business. However, the claimant may petition the court for a judicial order authorising a judicial bailiff to conduct the search and seizure if the need to preserve the evidence is proven.

Any court authorisation for the use of police force should be motivated and preceded by a demonstration of the necessity and appropriateness of the measure. Factors such as the importance of the evidence, the potential harm if it is not preserved, and the availability of alternative means of obtaining the evidence may be considered in assessing the request.

In preserving evidence proceedings, as a general rule no cross-undertaking in damages is required.

As discussed in 2.2 Preserving Evidence, it is possible to obtain evidence through a standalone lawsuit referred to as an Early Production of Evidence. This procedure serves several purposes, including preserving evidence obtained from third parties. There are no restrictions placed on the use of such material in civil claims, save for confidentiality provisions or judicial secrecy ordered by the court.

Under Brazilian law, for evidence to be considered admissible in court proceedings, it must meet certain requirements, such as the following.

• Lawfulness – The evidence must have been obtained lawfully, meaning it must have been obtained in accordance with applicable laws and regulations. Evidence obtained through illegal or unlawful means may be deemed inadmissible by the court.
• Authenticity – The evidence must be authentic and accurately represent the facts it purports to depict. This may require verifying the authenticity of documents or other forms of evidence through appropriate means, such as expert analysis or testimony.
• Admissibility under the law – The evidence must be admissible under the rules of evidence set forth in the Brazilian Civil Procedure Code and other relevant laws and regulations. Certain types of evidence may be excluded or restricted based on legal principles or public policy considerations.

Under the Brazilian legal framework, a decision cannot be rendered against one party before its hearing, as stipulated in Article 9 of the Civil Procedure Code. However, exceptions to this rule exist, permitting the granting of preliminary injunctions without notice (inaudita altera pars).

Such exceptions arise when the presence of the other party could jeopardise the effective outcome of the procedural act, particularly when there are grounds to believe that the defendant may frustrate the proceeding if made aware of the request. To request a preliminary injunction without notice, it is necessary to demonstrate urgency (periculum in mora), necessity or exceptional circumstances that justify conducting the procedural act without the presence of the other party.

Compensation Under Criminal Proceedings

When handing down a conviction, the judge shall set a minimum amount to compensate for the damage caused by the offence, considering the losses suffered by the offended party (Article 387, IV, of the Criminal Procedure Code). This is without prejudice to the possibility of the victim filing a separate civil lawsuit.

Although there is academic discussion regarding the legality, breadth and scope of setting compensation in the criminal sphere, it is certain that the wording of the above provision is clear and allows the judge to set the minimum compensation.

Possibility to Act as a Prosecution Assistant for the Public Prosecutor’s Office

In Brazil, as a rule the plaintiff of a public criminal action is the Public Prosecutor’s Office. The victim is given the possibility of requesting intervention in the criminal process to assist the Public Prosecutor’s Office, as an assistant to the prosecution. This role is accepted only during the criminal proceeding, and there is no role as an assistant to the prosecution during the police investigation phase. Nothing prevents the victim of fraud, even if deprived of the status of assistant prosecutor, from assisting the police in investigations.

Intervention as an assistant to the prosecution may occur at any time during the criminal action as long as there has not yet been a final judgment (Article 269 of Criminal Procedure Code).

Among the possible actions, there is the possibility for the prosecution assistant to propose means of proof, such as requesting expert examinations, confrontations or search and seizure. The assistant is also able to put questions to witnesses, always after the Public Prosecutor’s Office, and participate in oral debates. The prosecutor’s assistant may also reason the appeals filed by the Public Prosecutor’s Office or by themself.

Civil Actions Ex Delicto

If a conviction is handed down in a definitive sentence, within the records of any criminal action, the convicted person becomes obliged to compensate the victim (Article 91, I, of the Criminal Code).

Regarding the legal duty to indemnify, there is the possibility of filing a civil action ex delicto, an action defined by scholars as “the judicial procedure aimed at recovering the civil damage caused by the crime”. Only individuals who have been convicted in the criminal court can be the subject (on the defendant side) of a civil action ex delicto. Any joint and several liability may only be recognised in specific actions filed in the civil court.

The acquittal sentence does not constitute res judicata in civil matters, unless the non-existence of the fact has been recognised (Article 66 of Criminal Procedure Code).

Parallel Claims

The instigation of a criminal prosecution does not impede the progression of parallel civil claims. However, there can be instances where the progression of one case affects the other. In some situations, a civil court may decide to stay civil proceedings for a period up to one year if there is an ongoing criminal investigation or prosecution involving the same parties and issues (Article 315 of Civil Procedure Code). This decision aims to avoid potential conflicts between the civil and criminal processes and ensure a fair resolution of the case.

As a rule, Brazilian law requires a full trial where the defendant has been given the right to fully defend themself. However, in certain circumstances in civil proceedings, the judgment can be rendered without a full trial.

• Summary judgment (Article 332 of Civil Procedure Code) – If the case does not require evidence to be produced apart from documentary evidence, it may be summarily dismissed, even before the defendant has been served, when the plaintiff’s requests are against the binding precedents of the Superior Court of Justice or Supreme Federal Tribunal in matters of Federal or Constitutional law; or when against the binding precedents of the State Court in matters of local law. A summary judgment dismissing the case may also be rendered if the judge recognises the statute of limitation.
• Default judgment (Article 355 of Civil Procedure Code) – A plaintiff may seek for a default judgment, without a full trial, if the defendant fails to participate or to file their defence in the timeframe prescribed, despite being duly summoned to appear before the court. In that case, as a rule, the plaintiff’s allegations shall be presumed to be true.
• Relief granted on the basis of prima facie evidence (Article 311 of Civil Procedure Code) – Relief based on prima facie evidence is to be granted when:
1. there is an abuse of the right of defence or the party demonstrates clear intentions of delaying the proceedings;
2. the allegation can be proven only by means of documental evidence and when there is a rule based on the trial of multiple claims on the same point of law or a “súmula”, a binding statement;
3. it is an action to reclaim the possession of property based on the documental evidence of a bailment contract, in which case an order shall be issued to return the object held by the bailee for safekeeping, under a fine; or
4. the complaint produces sufficient documental evidence of the facts that constitute the plaintiff’s right, and against which the defendant does not produce evidence capable of generating reasonable doubt.

Although Brazil lacks special legal rules for pleading fraud, there are certain rules and professional conduct considerations that lawyers must adhere to, including the following.

• Substantiation – When pleading fraud, it is essential to provide specific and detailed allegations supported by evidence. Brazilian courts typically require plaintiffs to substantiate their claims with sufficient factual and legal basis. Vague or unsubstantiated allegations of fraud may be dismissed by the court.
• Ethical considerations – Lawyers must adhere to ethical standards when pleading fraud. This includes avoiding making false or misleading statements to the court or opposing parties. Lawyers should present their case honestly and accurately, and refrain from engaging in tactics intended to deceive or manipulate the legal process. Lawyers have a duty to act in the best interests of their clients while also upholding the integrity of the legal profession.
• Consequences of frivolous claims – Filing frivolous or meritless claims of fraud can have serious consequences, including sanctions for bad faith litigation.

As a general rule, an initial complaint that initiates a legal action must properly identify the defendant, including their particulars and known address. However, in exceptional circumstances, the Brazilian legal system allows the filing of claims against unknown or uncertain defendants. For instance, Article 256 of the Code of Civil Procedure permits service by publication of a notice when “the person being cited is unknown or uncertain”. Furthermore, Article 319 (§3) of the Code of Civil Procedure provides that the initial complaint cannot be rejected when information regarding the defendant’s particulars is impossible to obtain.

Regarding proprietary measures qualified as ações reipersecutórias, there are judicial precedents allowing the commencement of legal cases against defendants not currently known but identifiable. This can be particularly relevant for fraud claims involving cryptocurrency.

Testimonial Evidence

According to Brazilian law, any person with knowledge of the circumstances of the claim may be compelled to provide evidence to the court through their testimony. The issuance of a witness summons is a duty of the lawyer and should be effected at least three days before the trial (Article 455, § 1º of the Civil Procedure Code).

The court may issue the witness summons under certain circumstances, including:

• if the lawyer’s attempt to summon the witness is unsuccessful;
• if the need for the witness’s testimony is proven to the judge;
• if the witness holds certain public positions; or
• if the witness has been called by the Public Prosecutor’s Office or the Public Defender’s Office.

Once properly summoned, the witness is obligated to attend the trial and truthfully answer questions posed by the judge or the parties.

Additional Aspects

It is worth noting that the witness may be entitled to refuse to answer questions based on certain privileges, such as legal professional privilege or privilege against self-incrimination. If the witness, summoned in accordance with legal requirements, fails to attend the hearing without a valid reason, they will be coercively conducted and will bear the costs of rescheduling the hearing (Article 455, § 5º of the Civil Procedure Code). Any breach of the duty to truthfully give testimony may render the witness criminally liable for perjury.

The Brazilian Anti-Corruption Law imposes penalties on legal entities in cases of corruption or acts that harm the government and government assets, regardless of whether managers were held criminally liable. However, the law does not absolve managers or any other individuals, whether they are perpetrators, co-perpetrators or participants in the crime, from personal liability. Punishment is based on the principle of strict liability, meaning that investigators are not required to prove that the legal entity intended to commit a crime. It is sufficient to establish a connection between the legal entity and the crime under investigation.

The scope of the law encompasses all legal entities, associations, and foundations with headquarters, branches or representation in Brazil, regardless of whether this connection is temporary.

Furthermore, leniency agreements may be offered to legal entities that voluntarily come forward and offer their co-operation with investigations.

As a rule, a company’s liabilities are typically confined to its own assets. However, shareholders or ultimate beneficial owners can be held liable in cases of “abuse of legal personality”, a legal concept referring to situations where the company is exploited as a vehicle for fraud.

As discussed above, to establish liability in such cases, it is necessary to file a motion to pierce the corporate veil and provide evidence of abuse of legal personality in the form of commingling of assets or deviation from the corporate purpose. Any aggrieved party has legal standing to bring forth this claim. In the case of bankrupt companies, the claim is normally filed by the judicial administrators for the benefit of all creditors.

The claimant typically bears the burden of specifying, to the extent possible, the liability attributable to the shareholder or ultimate beneficial owners, aiming to repair or compensate for all damages caused by the fraud. However, in cases of systemic and widespread fraud (eg, the use of entirely fictitious companies to structure financial pyramid schemes), there are precedents where shareholders and beneficiaries became liable for all the liabilities of the legal entity.

See 1.1 General Characteristics of Fraud Claims, 1.2 Causes of Action After Receipt of a Bribe, 1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts and 1.4 Limitation Periods.

Under Brazilian corporate law, directors are bound by a statutory duty to exercise reasonable care, skill and diligence in their roles, alongside a fiduciary duty to act in the company’s best interests. Should the company or shareholders determine that directors have breached these duties, they have the right to pursue actions for damages against these individuals.

In normal circumstances, directors are not personally liable for company debts. However, exceptions arise in cases of:

• fraudulent trading, where an insolvent company sells assets or shares below market value;
• unfair preferences among creditors; and
• breaches of fiduciary duties.

In the event of forced liquidation, a judicial administrator appointed by the Bankruptcy Court scrutinises directors’ actions before liquidation to uncover any fraudulent trading, unfair preferences or breaches of fiduciary duties.

Under Brazilian law, defendants have several mechanisms available to involve other parties in legal proceedings or initiate separate actions against third parties based on subsidiary liability. These mechanisms include:

• joinder of parties;
• intervention of third parties; and
• the filing of counterclaims.

Joinder of parties typically occurs when a defendant requests the inclusion of additional parties who may also be liable for the claims asserted in the complaint. This request is made in the defendant’s answer to the complaint, and, if granted, allows all relevant parties to be joined in the same proceedings.

Similarly, intervention of third parties allows individuals or entities with a legitimate interest in the outcome of the proceedings to participate in the case as either plaintiffs or defendants. This intervention can occur at various stages of the proceedings and is subject to judicial approval based on the relevance of the third party’s involvement.

In addition to these mechanisms, defendants may also file counterclaims against third parties who may bear subsidiary liability for the claims asserted against them. By initiating a separate action, defendants can hold these third parties accountable for their role in the underlying legal dispute.

There are two different methods for serving parties out of jurisdiction. For defendants resident or incorporated in foreign jurisdictions, the claimant must analyse whether the foreign jurisdiction had adhered (or not) to the Hague Convention.

Hague Service Convention

Brazil is a party to the Hague Service Convention. When serving a foreign party in a Brazilian legal proceeding via the Hague Convention, the process involves:

• preparing a formal request for service;
• submitting the request to the central authority in Brazil (Ministry of Justice);
• transferring the request to the central authority in the foreign country;
• arranging for service by the foreign central authority;
• providing proof of service to the Brazilian central authority;
• notifying the requesting party of the outcome; and
• taking further steps in the legal proceeding as necessary.

Letter Rogatory

However, if the defendant is resident or incorporated in a jurisdiction that has not adhered to the Hague Service Convention, and assuming that there are no treaties between Brazil and such foreign country regulating service of process, the claimant must follow the ordinary rules of service via a letter rogatory.

Attachment Orders

Enforcement in Brazil typically involves obtaining attachment orders issued by Brazilian courts. These orders are commonly sought in enforcement proceedings and can be obtained against a debtor’s free assets. However, attachment orders against third parties are only granted in specific cases, such as when fraud occurs or when the legal requirements of the disregard doctrine (piercing of the corporate veil) are met.

To obtain an attachment order, the applicant must disclose the nature and location of the assets they seek to attach and demonstrate ownership by the defendant. This request should be included in the initial complaint of the enforcement proceeding (or in subsequent petitions) and must fulfil all legal requirements.

Further Enforcement Measures

In addition to the methods discussed earlier, the applicant can request that the court issue official orders to various entities, including the following:

• the Central Depositary of Shares, to register attachment over shares of public companies, quotas of investment funds and/or other bonds that may exist in the name of the debtor;
• the Real Estate Registry, to register attachment over real estate that may be available in the name of the debtor; and
• the Commercial Registry, to receive information regarding the ownership and location of the defendant’s assets, as well as to register attachment over any shares in the name of the debtor.

Attachment of bank accounts is typically automatic upon the granting of the attachment order and is executed directly by the judge via the SISBAJUD system, without the need for further information. However, the court may grant exceptions to the attachment order if the defendant demonstrates that it may jeopardise the payment of their daily living expenses.

Attachment of vehicles can be effected via the RENAJUD system, which is used in Brazil for the automated search and blocking of vehicles to enforce judicial decisions.

Liens Over the Assets Attached

Once executed, the attachment order creates a lien over the attached assets. If multiple attachment orders are concurrent over the same assets, priority among creditors is generally determined by the date the attachment orders were issued, with a few exceptions. In cases where the same assets are subject to multiple liens, each creditor will have priority over the proceeds from the execution of the asset based on the order in which the lien of execution was established.

However, this priority ceases in the event of the debtor’s insolvency. In such cases, liens lose their effect, and all assets become subject to the collective or concurrent execution of all the debtor’s property, treating all creditors equally based on their respective class.

The privilege against self-incrimination is enshrined in both the Brazilian Federal Constitution and the Criminal Procedure Code. This privilege protects individuals from being compelled by public authorities to incriminate themselves. Its primary legal effects include:

• the entitlement to remain silent when pressured, with this silence not being held against the individual; and
• the right to refuse to produce self-incriminatory evidence.

When a defendant invokes this privilege, no inference is allowed to be drawn.

Under Brazilian law, attorney–client privilege safeguards all communications related to the lawyer’s professional activity with a client, including the inviolability of lawyers’ offices and related work documents. These protections extend to any attorney registered with the appropriate Brazilian Bar Association.

Due to this constitutional safeguard, any written correspondence exchanged between a client and their attorney (who is duly registered with the relevant bar association), whether in physical or digital format, is considered confidential and cannot be disclosed to third parties. Moreover, lawyers are typically prohibited from acting as witnesses in legal proceedings unless authorised by the client. Beyond constitutional provisions, various laws and regulations extend similar protections to attorney–client communications in Brazil, including:

• Code of Ethical Conduct issued by the Brazilian Bar Association;
• Federal Law No 8,906/94, which governs the Brazilian legal profession;
• Civil Procedure Code;
• Criminal Procedure Code; and
• Criminal Code.

Exceptions to the confidentiality rule are rare and require thorough examination on a case-by-case basis. Generally, lawyers may breach client confidentiality in limited circumstances, such as when there is a risk to life or reputation, for the lawyer’s own protection against the client, or with explicit authorisation from the client (waiver).

It is also possible to waive the attorney’s inviolability if there is proof indicating that a lawyer has engaged in criminal activity. In such cases, a judge has the authority to revoke confidentiality to enforce a search and seizure warrant, with a representative from the Brazilian Bar Association present. However, it is prohibited to utilise documents or items owned by clients, as well as any other tools of the trade containing client information, during this process.

In the Brazilian legal framework, explicit provisions for the application of punitive or exemplary damages are absent. This is due to the civil liability theory adopted by the Brazilian Civil Code, which measures liability based on the extent of damages (Article 944 of the Civil Code).

Despite the lack of legal provisions, case law has recognised a punitive aspect in the determination of moral damages. This serves as a means to punish illicit acts and deter future abuses.

Banking secrecy is a right guaranteed by the Federal Constitution and federal legislation. However, Law No 105/01 allows for the lifting of bank secrecy when necessary to ascertain the occurrence of any unlawful act, at any stage of the investigation or judicial proceedings. The law provides non-exhaustive examples of situations in which this measure is allowed, such as in crimes committed against the national financial system, the public administration, Brazil’s tax system, and social security, as well as in cases of money laundering or concealment of assets.

Brazilian courts also authorise the lifting of secrecy in cases of corporate fraud that have seriously harmed creditors and other stakeholders, such as financial pyramids, de facto groups structured with the aim of defrauding creditors, and large embezzlements of money and other assets. In these cases, the lifting of secrecy requires strong evidence of financial fraud.

Furthermore, in the context of bankruptcy proceedings, when bankruptcy is decreed, the judicial administrator takes the place of the company’s former management. This grants the judicial administrator the right and duty to access all of the company’s documents, including financial and bank statements, which is crucial for investigating fraud against creditors.

In December 2022, the Brazilian Congress enacted Law No 14,478, which defines cryptocurrencies (referred to as “virtual assets” in the law) and regulates significant aspects of this market. According to Law 14,478, a virtual asset is defined as a digital representation of value that can be traded or transferred by electronic means and used to make payments or for investment purposes. This explicit definition establishes cryptocurrencies as property under Brazilian law.

The law also introduces important regulations regarding the operations of crypto-asset exchanges. Exchanges now require authorisation from a specialised federal body to operate. Additionally, certain corporate transactions, such as transfers of control, mergers and demergers of Exchanges, must receive prior approval. Furthermore, the law defines the crime of “fraud using virtual assets, securities, or financial assets”, which carries a potential prison sentence of up to eight years.

In cases involving fraud and where there is a risk of asset dissipation, parties can seek precautionary measures from civil and corporate courts to compel Exchanges to provide information on suspicious transactions (such as wallet identification numbers, holder and beneficiary information, transaction hashes, etc). Freezing orders can also be requested, which, once granted, are binding on Exchanges based in Brazil, obliging them to enforce the order.

A particular challenge related to crypto-assets concerns the implementation of freezing orders. As Law No 14,478 has been in effect for a short time, not all Brazilian Exchanges obtained proper authorisation to operate. Moreover, fraudulent transfers often involve wallets located in other jurisdictions, and many transactions are conducted through clandestine Exchanges or by individuals maintaining anonymity. To address this challenge, co-operation with the Public Prosecutor’s Office and foreign judicial and governmental authorities is crucial.