More than 3,400 properties in São Paulo owned by offshore companies

More than 3,400 properties located in the most expensive areas of São Paulo, worth about $2.7 billion, are owned by offshore companies—businesses established in the so-called tax havens (countries that offer tax exemptions and protect the owners' identities.)

The findings were published in a report by Transparency International, a non-governmental organization (NGO) based in Berlin. Transparency International has raised concerns that some of these properties may have been bought with embezzled public funds for money laundering purposes.

According to its report, 236 offshore companies own these properties in São Paulo, where more than half (65%) of the foreign corporations established in Brazil are headquartered. The city is home to the largest Latin American stock market (BM&FBovespa), which draws investors for high-end real property.

A vast majority of these companies (87%) are registered in five locations—British Virgin Islands, Uruguay, the United States, Panama, and Switzerland. According to Transparency International, the proceeds of corruption are kept mainly in the British Virgin Islands and Panama, where anonymous business registration “means that criminals can often stay one step ahead of the authorities.”

The NGO went on to say that in 70% of the 200 big corruption cases reviewed by the World Bank, secret corporate arrangements—such as trusts and offshore companies—have been used to launder money and conceal the identities of the purchasers of assets. Buying property is a popular strategy chosen by criminals, because it is a relatively low-risk investment that enables them to launder large amounts of money in a single operation.

“Because the real owners are hidden, we are unable to determine how many of these properties have been purchased with proceeds from corruption,” the report said.

It went on to instance the case of former Petrobras director Nestor Cerveró, who arrested in 2015 over his involvement in the “Car Wash” corruption scandal. He was given a five-year prison sentence for buying a $2.4 million luxury apartment in Rio with the procceds of bribes, and using a shell company to conceal the fact that he was the owner of the property.

The study said investors of offshore companies often use “facilitators”, including lawyers, accountants and agents, and may control legal entities in Brazil and use them to buy jewel, luxury boats, and real estate property. These operations are often attempts to hide the proceeds and traces of corruption, the watchdog said.

Translated by Mayra Borges