Brazilian police crack down on $4.8B tax evasion and money laundering scheme

SAO PAULO (AP) – Brazilian police launched Thursday a police operation to dismantle a major tax evasion and money-laundering scheme in the fuel sector. The group under investigation is the country’s largest tax debtor, owing more than 26 billion reais ($4.8 billion), authorities said. Local and state authorities are carrying out 126 search and seizure warrants targeting individuals and companies in five states. According to Brazil’s Federal Revenue, the organization used its own companies, investment funds and offshore entities to hide and shield profits.

Officials did not name any individuals or companies targeted, but local media reported the operations under investigation involve Grupo Fit, a fuel refinery. Grupo Fit did not immediately respond to a request for comment from The Associated Press.

Finance Minister Fernando Haddad said Thursday’s actions stem from a recent crackdown on criminal links to Brazil’s fuel supply chain. In August, authorities flagged 40 fuel-sector investment funds allegedly used to hide assets for members of the First Capital Command crime syndicate, or PCC.

PCC is Brazil’s biggest and most powerful organized crime group. It was founded in 1993 by hardened criminals inside Sao Paulo’s Taubate Penitentiary to pressure authorities to improve prison conditions. It quickly started using its power to direct drug dealing and extortion operations on the outside. Over the past few years, the gang has diversified their investment portfolios into various illicit markets.

Haddad said that investigations have since identified a pattern of capital flight that included opening investment funds in the United States. Federal authorities said they identified more than 15 U.S.-based offshores sending roughly 1 billion reais ($186 million) back to Brazil to buy equity stakes and real estate.

Suspects set up money-laundering operations in Delaware, which the finance minister called “a tax haven in the United States” used for “a serious international triangulation scheme.” One of the group’s latest operations involved 1.2 billion reais ($223 million) sent to funds in the U.S. state, he added.

“The scheme works like this: Loans are issued to these funds – loans suspected of never being repaid – and the money then returns to Brazil as supposedly legal investments in economic activities,” Haddad said. “But the money sent abroad is not legitimate.”

Haddad said he pledged to President Luiz Inácio Lula da Silva to seek deeper international cooperation with the United States against organized crime and money laundering, amid tariff negotiations with U.S. President Donald Trump. ____