Brazil moves to make financial institutions responsible for facilitating illegal gambling

• Brazil’s House Finance Committee has approved legislation making financial institutions liable for illegal gambling transactions
• The bill sends a clear signal that banks will be held responsible
• The proposal now moves to the Committee on Constitution, Justice, and Citizenship for final analysis before becoming law

Brazil’s House of Representatives’ Finance and Taxation Committee has approved groundbreaking legislation that holds banks and financial institutions accountable for their role in illegal gambling operations.

The bill, introduced by Deputy Kim Kataguiri, seeks to establish clear liability for any negligence, omissions, or direct involvement in facilitating unauthorised betting activities. The rules will extend to all institutions supervised by the Central Bank and members of the Brazilian Payment System.

The committee vote followed the recommendation of rapporteur Representative Pauderney Avelino, who argued the proposal significantly strengthens prevention and control mechanisms against illicit gambling activities.

Avelino pointed out that the legislation contributes to combating criminal organisations that exploit the financial system for illegal betting operations. The measure represents a major shift in regulatory approach as Brazilian authorities intensify their crackdown on unauthorised gambling platforms.

“The proposal contributes to strengthening the mechanisms for preventing and controlling illicit activities related to illegal gambling and criminal organisations,” Representative Pauderney Avelino said during the committee session.

The legislation comes as Brazil faces mounting challenges from a thriving illegal gambling market estimated to move R$35 billion annually without paying taxes or offering consumer protection.

Current estimates suggest that between 41% and 51% of Brazil’s betting market still operates outside legal frameworks, causing the country to lose approximately R$10.8 billion per year in potential revenue.

The Secretariat of Prizes and Betting has already notified 33 financial institutions suspected of facilitating transactions for unauthorised platforms, with potential fines reaching R$2 billion.

For the bill’s author, the clearer and more objective regulations reduce loopholes that could be exploited by illegal operators.

“Furthermore, it sends a clear signal that the State is vigilant and will not allow the financial system to be used for its own perpetuation,” Deputy Kim Kataguiri explained.

The proposed legislation builds on existing enforcement measures, including March 2025 ordinances requiring payment institutions to monitor and report suspicious betting-related activities within 24 hours.

The financial sector has already begun implementing stricter compliance measures following government pressure. Pay4Fun, one of Brazil’s prominent fintech companies operating in the betting space, has severed ties with over 600 unauthorised sites using “know your merchant” verification processes.

The Brazilian Federation of Banks has expressed concern about gambling’s contribution to personal debt levels, whilst ABFintech has committed to servicing only regulated operators.

The bill now awaits final analysis by the Committee on Constitution, Justice, and Citizenship before potentially becoming law. If approved, the legislation would mark Brazil’s most comprehensive attempt to hold financial institutions directly responsible for their participation in illegal gambling operations.