Breach of Bank Secrecy for Purpose of Investigating Fraud in Brazil

Bank secrecy is a conditional agreement between a bank and its clients that all foregoing activities remain secure, confidential, and private.

During the investigation of the famous Watergate affair that brought down US President Richard Nixon in the 1970s, the suggestion of the then Associate Director of the Federal Bureau of Investigation (FBI), William Mark Felt, can be summed up in the following phrase: “Follow the Money”.

Since 2001 Brazilian judges are expressly authorised to trace the movement of money in bank accounts for the purpose of investigating not only criminal offences, but any illegal acts. Article 1, paragraph 4 of Complementary Law no. 105/2001, deals with the investigation of unlawful acts, without any specification of a criminal or civil nature, provided that the breach of secrecy is authorised in judicial proceedings.

The Superior Court of Justice confirmed that “any judicial proceedings may allow the breach of secrecy, with no restrictions made as to the nature of the alleged offence (civil or criminal)”, in Special Appeal no. 1.275.682, judged in 2011.

In an application for disregard of separate legal personality, access to the bank transactions of the parties may “elucidate the possibility of confusion of assets”, in the words of Justice Roberto Maia, of the Appellate Court of the State of São Paulo, in the judgment of interlocutory appeal no. 2244220-75.2017.8.26.0000.

Following the money is the most efficient way of detecting transfers, expenditure and receipts that constitute the confusion of assets and deviation of purpose between persons remitting and those receiving the money. And the best legal tool for obtaining this evidence is the so-called breach of bank secrecy.

As stated by Justice Roberto Maia, “the constitutional protection of bank secrecy should not be used by judgment debtors who try to take advantage of it in order to avoid payment of their debts”. This means that the strict rules governing bank secrecy have been attenuated in favour of other constitutional principles, such as access to justice, procedural effectiveness and reasonable duration of the proceedings.

Preservation of the privacy of persons under investigation may be guaranteed through measures that can be adopted judicially. Note the provision of art. 773 of the Code of Civil Procedure: “When, as a result of the provisions of this article, the court receives secret data for the purpose of enforcing judgment, the judge shall adopt the necessary measures to ensure confidentiality”.

The Federal Constitution, when providing for the fundamental guarantee of privacy (art. 5, X and XII), also provides for the principle of access to justice, whereby no threat or injury to a right may be excluded from judicial review. On weighing up these fundamental guarantees, fraud, procedural bad faith and attacks on the dignity of justice cannot be tolerated, and if there is evidence of money being hidden, it is possible to request judicially that bank secrecy be broken.

Luiz Adolfo Salioni Mello
Associate lawyer in the Civil Area – São Paulo
luiz.mello@stussinevessp.com.br

The Importance of Identity Verification for Banks

Identity verification is the process that ensures a person is who they are supposed to be. Global data breaches have been on the rise over the past few years. Studies reported five billion data breaches in 2020 alone.

These breaches have led to the rise in identity theft and account takeovers. So to be safe, organisations need a trustworthy method of verifying a person’s true identity.

So the banks’ success highly depends on their capacity to complete this task quickly without hiccups. Also, they need to develop strong and reliable fraud prevention systems. This will help them adhere to more stringent anti-money laundering (AML) regulations, which include Know Your Customer (KYC) compliance.

The traditional and physical techniques were limiting in offering identity verification solutions. But the digital age has made the process of identity authentication possible.

What measures have you put in place to have a streamlined identification process? According to statistics, about 36% of businesses use identity management and biometrics technologies.

To prevent fraud and money laundry and improve your customer experience, you should consider investing in this cutting-edge technology. Most importantly, you will avoid fines related to General Data Protection Regulation (GDPR).

You can run tasks like using selfies for face identification, determining liveness, extracting data from documents, automatically reviewing watchlists, and analysing records for false information.

1. Prevent Costly Chargebacks

Chargebacks are consumer safeguards to protect cardholders against fraud or abuse. It is consistently enforced by the card issuer – banks if the cardholder raises claims of fraud or transaction dispute with merchants.

There are three benefits that cardholders gain from chargebacks:

  • Better customer service from merchants to avoid forced chargebacks and reversals. 
  • Protect cardholders from merchant fraud – an illegal seller posing as a legitimate merchant with fake or low-quality offers. 
  • Protection from criminal fraud that may use your card for their illegal transactions.

Unfortunately, merchants are affected the most by chargebacks. They will incur losses on the value of returned goods and associated shipping and return expenses. In 2021 alone, chargebacks cost merchants about $20 billion.

Banks can also be affected by chargebacks. If the issuer has so many cases of chargebacks from fraudulent or criminal transactions, it may show that they have a lapse in their security procedures.

Plus, bank chargebacks – those between cardholder issuer and merchant’s bank, can be costly for both institutions. As a bank, you can reduce the costs of chargebacks, especially those linked to criminal or fraudulent transactions.

For criminal transactions, most start with the stolen identities of the card holders. As such, you’ll need secure yet flexible identity verification solutions to add a layer of consumer protection. You can pack two-factor authentication (2FA), biometrics, and more just to ensure it’s your client making the transaction and not an impersonator that will cost everyone.

As such, it goes beyond just protecting concerned parties’ high chargeback costs but also prevents criminal fraud aiming to empty your card holders’ cash.

2. Avoid Costly Fines

According to reports, the banking sector incurred fines of about $13.7 billion in 2020. All this resulted from failure to comply with AML, KYC data protection, and MiFID requirements.

Capital One is one of the biggest banks in the United States that got hit with AML non-compliance. The U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) charged them up to $390 million. This is an expensive fine for companies. It’s crucial to adhere to AML and KYC systems to avoid these fines.

AML follows the rules, laws, and protocols created to prevent fraudsters from declaring illegal income legitimate. So, following the KYC procedures is essential to profile your clients and flag any unlawful activity.

Failure to adhere to these rules is detrimental, as you risk hefty fines or serving jail time.

Banks that incorporate the identity verification software and follow the AML and KYC compliance avoid potential fines.

Investing in identity verification procedures is a sure way of preventing money laundering, terrorism, and identity theft-related crimes.

Remember that the guidelines keep changing and updated. So ensure your bank is up to speed to prevent breaking any laws.

3. Improve Your Bank’s Reputation

The success of a business is directly impacted by its reputation. And the same applies to banks. With the availability of so many banks today, consumers can easily switch brands if their needs aren’t met.

With the increase in data breaches, your clients want to be confident that their information is safe. Moreover, most people only want to associate with banks they can rely on. Hence, this makes trust a critical aspect of the banking industry.

So if you run ID verification checks, they can be confident in your commitment to protecting their data. Therefore, this fosters trust in your brand in this unsafe digital environment.

Trust helps to strengthen your relationship with your clients in this unsafe digital era. Lack of it will break this relationship, forcing them to seek alternative solutions.

Besides, your bank’s reputation and revenue will suffer if you fail to recognise this consumer and brand trust need. At the same time, recognising the consumer and brand trust can give your bank an upper hand in retaining more clients.

The faster you can confirm a customer’s identity, the quicker you can build trust. So many banks are adopting identity verification solutions to build this trust. For instance, they use face-matching selfies, client data, and KYC watchlist checks.

Final Thoughts

With frauds and data breaches rising, most banks are looking for ways to improve and modify identity verification methods and overall security procedures.

The devastating impact of less robust identity verification systems costs banks, merchants, cardholders, and normal bank users. Each bank user or client may need different verification to facilitate faster and more secure transactions.

Banks must adopt a more robust, secure, flexible, and customer-friendly identity verification procedure. It will help address every need of each category of client your bank deals with. You stand to benefit more from better and more secure access to your banking system.

The benefits of the identity verification procedure include:

  • Reducing costly chargebacks on the banking institutions
  • It prevents expensive fines and money laundering concerns
  • Improving the banking reputation as a secure and zero-tolerance to money laundering

Confirming a person’s true identity helps clients trust them and avoid being sued for failing to validate their ID.

Plus, certainty is critical, but your clients’ data must remain private and secure or risk non-compliance lawsuits from regulations like the EU’s GDPR. So, work with an identity verification provider that ensures your client’s data is private and secure.

Mastercard MATCH List – Most Important Things You Should Know

The Mastercard MATCH list has been working as an archived database containing the credit history of many merchant clients, ranking them as high-risk merchants for banks to follow up if the specific person is looking to open a new account. The MATCH list has been of great use for payment processors and is a preventive measure allowing the check-up of potential clients.

However, there are so many questions left regarding the list and, as many are unaware of the basics, it is crucial that vital information on the topic is available to all.

Member-Alert-To-Control-High-Risk

In short, MATCH is a database operated by Mastercard Worldwide regarding the credit history of merchants globally. We can look at it as a blocklist or even a blacklist, disabling credit card services like payment processing for clients’ accounts, which have been titled as a risk. It allows acquiring banks to scan and look at potential merchant accounts before making an agreement on services. It has been created, as said before, as a preventive measure so that banks can stay away from getting into any legal agreements with clients who have been known in the past to conduct violations of standard rulings. There are many reasons why someone ends up on such a list. We’ll address some below.

How can you “get off” the list?

Well, the first piece of advice we can give you is to check whether you are on the list or not. Unfortunately, you become aware of it only after you’ve been denied the chance for a new account by an acquiring bank. You can ask your payment processor to look it up as there are no other means of checking as the information is not publicly available for everyone. Once you’ve established your presence on the list, you should look at the particular bank that has filed you as a “risk” and consult your legal team on the issue. There has been an instance where people were put on the list by mistake. For this step, you’ll need to give your legal team full disclosure of all the relevant documents. There are other methods to get off the match list Mastercard, such as waiting a certain period of time (usually 5 years) until you have been reassigned as a reliable merchant again. Or you could apply for PCI compliance if you’ve been non-compliant until that moment. A PCI is to comply with data security standards, which are there to protect the credit card data of customers. Your data is being handled securely, and although there are fees involved for your compliance, your non-compliance can be the reason you are on the list in the first place.

Before opting for the first strategy, make sure to have all the needed evidence to back up your claim. While the other option is easier, it can leave a deep scar on your business and disable you from operating normally.

Chargebacks and fraudulent activities

It takes a few things to get on the list, and although it’s not something a merchant hopes for, it can happen due to their reckless behaviour and involvement in illicit activities. Chargebacks are the most common reason, although there must be a large number of such activities (over 100 chargebacks per month) and before that, there are alert penalties opting the client to decrease their rate. Also, fraudulent activities such as laundering, buyer-seller collusions, account data compromises, repeated bankruptcies, having an unreliable credit score, and bad history are all included. All these activities, which seem alarming, are sending a red flag to the acquiring banks, and all the data is safely stored and archived. Being MATCH’d, so to speak, can drastically influence your ability to conduct business and maintain a regular payment process as usual. It can affect your business as a whole, take a heavy toll on your revenue and income, and damage your reputation as an upstanding company. This is why one should deal with the issue as soon as possible.

Are there alternatives?

The short answer is yes. There are still payment processors who’ll accept your request to set up a new merchant account despite the “risk” factor. However, it comes with a few strings attached.

First, your being on the list does not make it illegal for acquiring banks to take you as a client, as the list only serves as a source of information indicating the potential risk and your credit card history. Some processors simply have a higher tolerance when it comes to risk, while others define it completely differently. And while some would look at your activities as risky, others might be completely compliant with them. But, sometimes these processors charge higher fees as well.

There are also alternatives such as cash-only payments, wallet apps, cryptocurrency, and e-checks. So, in other words, there are plenty of alternatives to choose from until you resolve the issue and get your name off the list.

Although it can be quite a blow to your reputation and business, keep in mind how the “requirements” to get on the list are not always met by acquiring banks, which is why there are accidental situations. Also, the issue is not unresolvable and a competent legal team could take care of it in a short time. And as displayed, there are other payment methods that allow you to conduct your business as usual.

Learn How To Negotiate Better Loan Conditions

Loan conditions are something additional that lenders will require from time to time of their potential borrowers. Are you in the market for a new car, but don’t want to break the bank? Or maybe you’re in need of a new home appliance but don’t want to pay full price. In either case, learning how to negotiate better loan conditions can save you a lot of money.

Every loan you take out – whether it’s for a car, a home, or even a credit card – has interest rates and fees associated with it. By knowing how to negotiate these rates and fees, you can save yourself hundreds or even thousands of dollars over the life of the loan.

Here are some tips on how to negotiate better loan conditions:

1) Know your credit score.

This is one of the most important factors in determining the interest rate you’ll be offered on a loan. The higher your credit score, the lower the interest rate you’ll be offered.

For example, let’s say you’re looking to finance a new car. If you have excellent credit, you may be offered an interest rate of 2.99%. However, if your credit score is fair or poor, you may be offered an interest rate of 5.99% – that’s two percentage points higher!

Additionally, some lenders will require a higher down payment if your credit score is lower. So, it’s important to know your credit score before you start negotiating.

2) Do your research.

Before you start negotiating, it’s important to do your research and know what interest rates and terms are currently being offered by other lenders. This will give you a good starting point for negotiations.

For example, a paystub calculator can help you compare interest rates and terms from different lenders. Additionally, proof of income paystubs can help you calculate what your monthly payments would be. From there you can decide what’s best for you.

Furthermore, it’s important to know the value of the car you’re looking to buy. This way, you can negotiate based on the car’s true worth – not what the dealer is asking for.

3) Be prepared to walk away.

If the lender isn’t willing to meet your needs, be prepared to walk away. There are plenty of other lenders out there who may be more willing to work with you.

Additionally, don’t be afraid to ask for a lower interest rate or fee. The worst they can say is no – and even if they do say no, you may be able to negotiate a different term or condition that’s more favorable to you.

For example, if you’re looking to finance a car, you may be able to negotiate a lower interest rate in exchange for a longer loan term. Or, if you’re looking to finance a home, you may be able to negotiate a lower interest rate in exchange for a higher down payment. Just remember to be creative in your negotiations.

4) Use negotiating power.

If you have good credit, be sure to let the lender know. This will give you more negotiating power and may help you get a lower interest rate.

Similarly, if you’re paying cash for the car, let the dealer know. This also gives you more negotiating power since the dealer won’t have to finance the car for you.

For example, if you’re paying cash for a car, the dealer may be more willing to give you a discount on the price of the car. Similarly, if you have good credit, the lender may be more willing to give you a lower interest rate.

5) Know when to stop negotiating.

There’s a point where further negotiating won’t do any good. Once you reach this point, it’s best to stop negotiating and move on.

For example, if the dealer is only willing to lower the price of the car by $200 but you were hoping for a $500 discount, it may be best to walk away. Similarly, if the lender won’t lower the interest rate on your loan, it may be best to look for another lender.

6) Read the fine print.

Before you sign any loan documents, be sure to read the fine print. This is where all of the important details are – such as the interest rate, repayment terms, and fees.

By taking the time to read the fine print, you can avoid any unpleasant surprises down the road.

When it comes to negotiating a loan, it’s important to be prepared. Do your research, know what interest rates and terms are currently being offered by other lenders, and be prepared to walk away if the lender can’t meet your needs. Additionally, be creative in your negotiations and use your negotiating power – especially if you have good credit.

Useful Safety Tips To Follow When Using Digital Banks

Digital banking combines traditional banking with the internet. Those who live nomadic lives will be glad to know that there is the possibility to carry their bank with them wherever they go due to the development of digital banks. This can be a lot cheaper for individuals as there are less associated fees when withdrawing money and using the card abroad. However, the risks linked to the digital world are well known and you must keep safe and protect your information.

This article will provide you with useful safety tips to follow when using digital banks so that the risk of losing your information is reduced.

Use a Secure Password

It should go without saying that you need to use a secure password whenever using digital banks. Cybercriminals are getting increasingly more sophisticated and getting your financial information can be easy if your passwords are easy to get. Considering that so many people expose their lives on social media, it is not difficult for them to guess what your password is if you base it on simple words such as the name of your pet and the year you were born.

For this reason, make sure that your password does not contain any information that is easy to guess by anyone with basic knowledge of your life.

Make Use of Security Software for Your Device

Passwords are not the only way to secure your financial information. Using digital banks means that you will need to have a smart device to access your account. Failure to have the appropriate protection in place can make you vulnerable to loss of your details or someone else accessing these with no authorisation.

Whether you use a phone or a laptop, make sure that these are appropriately secure and do not give access to anyone other than yourself.

Make Use of Mobile Pay Apps

Digital banks also give you a credit card, as any other traditional bank would. Although digital nomad credit cards are a great option for those living the nomadic lifestyle and working remotely through the internet, for example, this does not mean that you have to be traditional and use your cards all the time. Nowadays, technology has advanced so much that it is possible to make payments with your smartphone as long as you have appropriate mobile pay apps.

This can help you stay safe as your mobile app would be protected by biometric verification, contrary to bank cards.

Do Not Share Your Personal Details

Even though this sounds like an obvious tip, many people still fail to do this, even sometimes accidentally. You must never share your details as a way to protect them. This does not necessarily mean sharing your exact account number and password, but personal details that may give others a clue of what you may use for a password.

This is why one must be highly cautious whenever sharing a post on social media – you may think sharing a photo of your new home or you and your pet is innocent but this may just give hackers just what they need to get into your online banking.

Be Aware of Potential Scams

There are a number of scams and thousands of people continue to fall for them. You may think that it is easy to recognise a scam but some are highly sophisticated and make it difficult to recognise, particularly if they play with the receiver’s emotions. For example, you may get a message from ‘your bank’ stating that someone has tried to use your account and calling you to warn you; before you know it, you are sending them money thinking you are protecting yourself when really and truly you are losing money to a scam.

Always contact your bank directly whenever you are in doubt.

Do Not Use Public Devices or Network

Scammers have ways to obtain your information whilst you are using public devices or networks. Even if you are careful, your information may be stored on these platforms and it will make it easier for cybercriminals to access this. This is why you must only use your own devices and network with appropriate security measures and software.

If for any reason, you need to use a public device, make sure to always clear your history completely and browse the web in incognito mode.

Look Out For Suspicious Activity

It can be easy to go about your life and completely forget about your finances and the majority of people forget to do this. Neglecting your finances can mean that you are not aware of any suspicious activity or discrepancies and transactions. You may be losing money without even realising it. For this reason, you must always stay on top of your finances, know how much money is coming in and what money is going out so that you can report any suspicions to your digital bank.

If you are thinking of switching to a digital bank, you must understand the potential risks associated with the online world and how to keep yourself safe. Following the tips above will ensure that the risk to yourself and your account reduces significantly.

5 Important Pieces of Paperwork You’ll Need When Seeking a Loan

Keep all your important pieces of paperwork safe and findable. Applying for a bank loan is an arduous process primarily because of most lenders’ requirements. Most requirements involve presenting paperwork to prove something to the bank, making you worthy of the loan.

Whether looking for a personal or a business loan, these requirements are pretty standard and are often easy to procure and submit. Failure to provide the documents will ensure that you do not qualify for the loan, so it is best to promptly find and hand them over.

The critical pieces of paperwork you will need when seeking a loan will include:

Proof of Identity Documents

First and foremost, you will have to prove your identity to the bank before they can even consider you for a loan. There are various elements that your identity documents prove, such as your age, nationality, and citizenship.

Documents the bank can ask you for as proof of identity may include your: 

  • National or State Issued ID
  • Passport
  • Driver’s License
  • Military ID
  • Social security card
  • Birth certificate 
  • Certificate of Citizenship

The bank will probably only ask you for copies of the above documents, but it is always a good idea to have the originals ready.

Your W2 Form to Prove Your Income

You will also need to prove to the bank that you can pay back the loan, and the best way to do that is to have proof of earning an income. Consistently earning an income ensures that you can make deductions towards the loan payment, even indirectly from you.

Tax documents are the best documents for proving an income. The best part about it is that you can quickly get an online W2 form. Three years of your past income returns should be enough to convince the lender of your ability to pay back the loan. However, you should provide as many forms as the lender asks for during the loan process.

Financial and Bank Statements

If you are with another bank, a lender will ask you for your bank statements to determine your financial capacity. You will be asked for such documents when applying for a commercial loan for your business.

The bank will need your balance sheet, cash flow statement, and profit and loss statement. The statements will likely have to go back at least three years though the statements should be up to date. Other lenders will also ask for your financial information, including three months of your business’s financial statements.

Your financial statements will also be vital for determining your creditworthiness for a personal loan. The bank may also ask for your personal statements if your business is small or has only operated for a short while. You may also require a personal guarantee to get the loan in such cases.

Loan Documents or Lease Agreements

If you have any open loans or leases, the bank will require you to submit the loan documents and lease agreements. It is especially so for a business loan.

The bank wants to know if you have any commitments that might prevent you from paying the loan. It is good to have lease or mortgage agreements in hand if the bank asks you for them.

Proof of Address

A lender may ask you for proof of address if the above documents aren’t enough or if you are using your house as collateral. If so, you will need to prove that you own the property. You can typically use a utility bill, mortgage or lease agreement, property tax receipt, or home insurance documents for proof of address.

These are some documents that a lender will ask you for before giving you a loan. The bank will then know your personal and financial information. These documents should be ready by the time you visit a lender to ask for the loan, and if so, you’ll be safe.