Brazil’s Finance Ministry has urged the country’s central bank to tighten regulation around pooled and escrow accounts that authorities say are being used by bad actors to circumvent asset freezes, according to Reuters.

Ministry officials believe that individuals and firms facing criminal investigation have exploited pooled accounts, which combine funds from multiple beneficiaries, and escrow accounts, which were originally designed as temporary pass-through structures, to move money that under freeze orders, Reuters said, citing internal documents. 

The problem has been highlighted by recent police actions targeting organized-crime groups and fintech firms, the news agency said. 

In November, the central bank strengthened rules for fintech firms and virtual assets, requiring pooled accounts to be closed when clients use them to offer unauthorized financial services or to conceal assets, Reuters reported. But the Finance Ministry told the central bank that this step “only mitigates,” rather than eliminates, the risks. 

The ministry warned that pooled accounts can still obstruct public-debt collection, reduce traceability of funds, and weaken anti–money laundering efforts, according to Reuters. One of the continuing vulnerabilities is that pooled accounts do not disclose ultimate beneficiaries through the national financial registry and cannot be blocked through the judiciary’s asset-freezing system. 

Escrow accounts likewise fall outside freeze mechanisms, making it harder to properly trace money flows, yet such services are increasingly offered by fintech firms as if they were ordinary accounts, Reuters said. 

Read more at Reuters