Financial Crime

Washington calls him a financier for the PCC. The prosecutor who has spent a career chasing that gang for São Paulo state says his office holds no information tying the man to it, a gap now sitting at the centre of Brazil’s largest PCC money laundering case.

US Sanctions a PCC Financier; Brazil’s Lead Prosecutor Disagrees. (Photo Internet reproduction)

Somebody hands over cash in São Paulo. Somebody else, minutes later, releases the same value in Lisbon, Miami or Asunción, and no money ever crosses a border.

That, according to Brazil’s Federal Police, is how the network attributed to the businessman Victor Henrique de Oliveira Shimada worked. Investigators call it a clandestine bank.

The money side is settled. A court froze up to ten billion reais, roughly two billion dollars, when officers launched Operation Exchange on 3 July, and the court decision released this week shows how the machine ran.

Inside the PCC money laundering machine

The mechanism is old and needs no technology at all. It is the settlement system used by informal money changers everywhere, in which two operators keep a running balance and cancel debts against each other rather than shipping banknotes.

The federal court decision describes operations touching six countries. Brazil, the United States, Portugal, Paraguay, Argentina and Colombia all appear in the messages and negotiations that police obtained.

The examples are unglamorous and precise. One client asked whether he could collect the equivalent of fifty thousand dollars in guaraníes in Asunción, and receive reais in Brazil by bank transfer in exchange.

Another held a billion Argentine pesos in Buenos Aires. The proposal was to hand the pesos over gradually and take rather more than three million reais in Brazil, priced at the parallel exchange rate.

Run that arithmetic and the rate implied is roughly 1,520 pesos to the dollar. That is Argentina’s black-market price, not the official one, which tells you exactly which market these operators serve.

In Portugal, an operator took seventy thousand euros in the coastal town of Cascais, counted the notes and held them until he was told who should receive the money. In the United States a spreadsheet logged more than seven million dollars across Houston, Chicago, Denver, Atlanta, Cleveland, Nashville, Memphis and Los Angeles.

Cash was called paper, and dollars were called blue. Crypto, mostly the dollar-pegged token USDT, moved whatever the couriers could not.

Two governments, two very different stories

On 1 July the American Treasury designated Shimada, a relative and four companies. Its announcement says his organisation laundered more than thirty million dollars of drug money earned in American cities and sent it home through cryptocurrency for the PCC.

Washington used two legal authorities at once. One targets drug networks, the other targets terrorists and their supporters, which is what makes the listing bite for any bank that touches him.

Two days later the Federal Police launched Operation Exchange, with fifty officers, thirteen search warrants and eleven arrest warrants across São Paulo state. Investigators traced more than ten billion reais of movements through the network.

Compare the two numbers and something odd appears. The sum Washington attributes to the gang is under two percent of what Brazilian investigators traced through the same network.

The gap runs deeper than arithmetic. Lincoln Gakiya, the prosecutor who has spent his career pursuing the PCC for São Paulo state, says his office holds no information linking Shimada to the organisation at all.

The Federal Police itself names the gang only once in the request for his arrest. Shimada’s lawyers deny any involvement with criminal organisations and say they will examine the evidence.

Why a foreign company should care

This is the first enforcement case to land after Washington labelled the PCC a foreign terrorist organisation in May. Brasília rejects the label and calls the gangs a matter for its own police.

The disagreement is not academic for a foreign bank. An American designation reaches any institution that knowingly processes a significant transaction for the listed party, wherever it sits.

Look at what was designated. A payments company, a financial services firm, a construction company and a logistics business near Lisbon, all ordinary corporate wrappers that a supplier or client could plausibly encounter.

The Treasury also notes that in January last year Shimada was briefly held under house arrest, after one of the same companies was used to launder money stolen from a Brazilian football club in an advertising fraud.

Police sources say the early publication of his name and photograph helped him vanish before the warrants were served. He has now been free for six days, and the money is what the court could reach instead.

What is a clandestine bank?

An informal settlement network that moves value without moving money. An operator receives cash in one country and a partner releases the equivalent in another, cancelling the balance between them later.

Does the PCC money laundering sanction apply in Brazil?

No. American sanctions take effect in the United States and are not self-executing in Brazil, though Brazilian banks face secondary-sanctions exposure if they knowingly serve a designated party.

Where is Victor Shimada?

Unknown. A court ordered his preventive arrest on 3 July and officers did not find him when they executed the warrants.