BRAZIL Law and Practice Contributed by: Thomas Gibello Gatti Magalhães, André Dágola Brostoline and Luisa Grespan Danhoni Neves, Magalhães & Zettel
this policy must be based on transparent criteria that ensure the absence of discrimination. With regard to the compensation of the adminis - trators responsible for the areas of internal con - trol, risk management, compliance and internal audit specifically, the Resolution determines that it must be structured in such a way as to attract qualified and experienced professionals, without connection to the performance of the business areas, thus avoiding conflicts of interest. The compensation policy requires approval by the general meeting in credit unions, while in other financial institutions it is up to the board of directors to approve and supervise the policy, including its planning, execution, control and review. With regard to variable compensation, the Reso - lution allows it to be paid through various instru - ments, such as cash, shares or other assets, in proportion to the responsibility and function of the administrator. The rule also emphasises that the ratio of fixed to variable compensation must be balanced. For the payment of variable compensation, the following criteria, among others, must be observed: • in determining the overall amount and the allocation of compensation, the current and potential risks, the overall result of the insti - tution, the cash generation capacity, the economic environment and the long-term prospects must be considered; and • in the individual compensation of the admin - istrators, the individual performance, the per - formance of the business unit and the perfor - mance of the institution as a whole, in relation to the risks assumed, must be assessed.
For institutions with shares traded on the stock exchange or that issue stock-based instruments (Stock Options), 50% of the variable compensa - tion must be paid in shares. For other institu - tions, the compensation must consider the vari - ation in the book value of net equity. In addition, at least 40% of the variable compensation must be deferred for future payment, with a progres - sive increase of this percentage according to the level of responsibility of the administrator. Finally, institutions that are registered as publicly held companies and that are leaders of a pruden - tial conglomerate classified in Segments S1, S2 and S3 shall constitute a statutory body called a “compensation committee”. This committee shall prepare a document called “compensation committee report”, on an annual basis, referring to the base date of December 31. BCB plays an essential role in the Brazilian Sys - tem for Preventing and Fighting Money Laun - dering and Terrorism Financing, contributing significantly to the mitigation of risks and their financial repercussions within the scope of SFN. In addition, BCB is responsible for regulating and supervising the activities of financial insti - tutions and other entities authorised to operate by BCB in the fight against money laundering and terrorist financing (PLD/FT). In this sense, Circular Letter No 3,978, of 23 Jan - uary 2020, provides for the policy, procedures and internal controls to be adopted by institu - tions authorised to operate by BCB, in order to prevent the use of the financial system for the practice of crimes of laundering or concealment of assets, rights and values and terrorist financ - 5. AML/KYC 5.1 AML and CFT Requirements
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