Opening a bank account in Brazil: What you need to know

It is particularly challenging to open a bank account in many Latin American countries, given anti-money-laundering and other regulations put in place to combat drug trafficking and terrorism. Brazil is a case in point. The time it takes to set up a bank account in Brazil can vary greatly, depending on the bank involved and other factors. 

For example, Brazilian Central Bank Regulation (“Circular 3,461” – article 2, paragraph 2) requires the disclosure of the ultimate beneficial owner of the company opening the bank account. Depending on the structure of your company in Brazil, fulfilling this requirement may be challenging. For instance, companies held by private equity funds must disclose the identity of the individuals responsible for managing these funds. (They must also disclose information like monthly revenue estimates, net equity, and detailed descriptions of the activities to be carried out in Brazil.) And companies belonging to a group of companies must disclose the identity of all shareholders/quota holders until the last tier. 

Needless to say, these requirements can take time. While extreme, we recently had a client that opened an account in Brazil and the process took a full six months from start to finish.

Because of Brazil’s popularity as a target country for multinationals, we thought we would give readers a high-level understanding of what it takes to open a bank account there. And opening a local bank account could not be more critical to beginning operations in Brazil. Under local law, a bank account is required in order to set up a Brazilian legal entity.

Here is a list of important points to keep in mind for those companies looking to expand into Brazil.

• Foreign companies holding investments in Brazil must have a local legal representative in order to represent the foreign quota holders/shareholders before the Brazilian authorities. This representative must be a resident of Brazil with an individual taxpayer number and must agree to assume ongoing company liability. The legal representative will be responsible for signing the documents required to open a Brazilian bank account. 
• Both the local legal representative and certain shareholders will be required by the bank to complete and return know your customer (KYC) documents for review and approval. As mentioned above, stringent anti-money laundering laws and similar controls are now the norm in countries around the globe, and Brazil is no exception. The local legal representative and quota holders/shareholders named on the new Brazilian company’s articles of association will be required by the bank to provide personal documentation to verify that the account will be used for legal purposes. This inherently cumbersome process — with all of the many parties involved — is the number one reason foreign companies experience delays when opening a bank account in Brazil.
• Each bank operating in Brazil has its own requirements and timelines for establishing an account. Perhaps counterintuitively, larger international banks are not necessarily easier to deal with than relatively small local banks. In fact, generally speaking we’ve found that opening an account at a well-known international bank operating in Brazil can be more time-consuming than opening an account at a local Brazilian bank.
• All money wired into Brazil must be sent to a financial institution previously authorized to close foreign exchange transactions by the Brazilian Central Bank and must be registered with the Brazilian Central Bank system (Banco Central do Brasil, or “BACEN”). Like many Latin American countries, Brazil has strict laws around international wire transfers. All money entering Brazil must be registered under the Brazilian Central Bank System (SISBACEN). Pursuant to the Brazilian Central Bank rules, the inflow and outflow of capital into and from Brazil must be classified into one of the transaction codes provided by the Brazilian Central Bank regulation. And as a general rule, support documentation (such as articles of association, services agreements and loan agreements) is required to justify these transactions. 

We’re aware of certain companies that have been unable to comply with Brazil’s laws related to foreign exchange transactions. As the level of compliance associated with foreign transactions is higher than the level associated with opening and maintaining a Brazilian bank account, a company in this situation may choose to maintain its bank account while not conducting any foreign transactions.

It should be clear by now that the process of opening a bank account in Brazil involves many variables and can take a long time. Companies considering opening an office in Brazil should also bear in mind that, due to the scandal involving HSBC’s private Swiss bank and executives and politicians related to the Brazilian state oil company Petrobras, Brazilian banks are increasingly strict in their application of compliance rules. These rules are imposed not only by the Brazilian Central Bank System, but also by the Brazilian Federation. It’s also worth noting that one company’s experience opening a Brazilian bank account may differ greatly from another’s, even under similar initial circumstances.

That said, if you’re considering expanding into Brazil, you should not be put off by the challenges of opening a bank account there. The potential rewards of operating in the South American country — with its large and growing middle class — can be great. So rather than being put off by Brazil’s banking-related challenges, you should understand all the realistic scenarios involved in opening an account. That way, you can create an equally realistic, and flexible, budget and timeline for establishing your new international operations.