Judge in US crosshairs warns Brazil banks not to apply sanctions locally

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By Ricardo Brito and Brad Haynes Brazilian Supreme Court Justice Alexandre de Moraes, who recently had sanctions imposed on him by the U.S. government, told Reuters that courts could punish Brazilian financial institutions for seizing or blocking domestic assets in response to U.S. orders. Those remarks raise the stakes in a standoff that has hammered shares of Brazilian banks caught between U.S. sanctions and the orders of Brazil's highest court.In a late Tuesday interview from his office in Brasilia, Moraes granted that U.S. law enforcement regarding Brazilian banks that operate in the United States "falls under U.S. jurisdiction." "However, if those banks choose to apply that law domestically, they cannot do so — and may be penalized under Brazilian law," he added.His remarks underscore the potential consequences of a Monday ruling by fellow Supreme Court Justice Flavio Dino, who warned that foreign laws cannot be automatically applied in Brazil. That ruling was followed by a sharp rebuke from the U.S. State Department's Bureau of Western Hemisphere Affairs, which warned on social media hours later that Moraes was "toxic" and that "non-U.S. persons must tread carefully: those providing material support to human rights abusers face sanctions risk themselves." The U.S. Treasury Department slapped the sanctions on Moraes last month under the Global Magnitsky Act, a law designed to impose economic penalties on foreigners deemed to have a record of corruption or human rights abuse. The order accused him of suppressing freedom of expression and leading politicized prosecutions, including against former President Jair Bolsonaro, a staunch Trump ally on trial before Brazil's Supreme Court on charges of plotting a coup to reverse his loss in the 2022 election. Bolsonaro has denied any wrongdoing and denounced the case as politically motivated.In his interview, Moraes said decisions by foreign courts and governments can only take effect in Brazil after validation through a domestic process. He said banks therefore cannot seize assets, freeze funds or block the property of Brazilian citizens without following those legal steps.The global reach of the U.S. financial system means foreign banks often restrict a wider range of transactions to avoid secondary sanctions. Moraes said he was confident that the sanctions against him would be reversed via diplomatic channe...

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