On July 30, 2025, the US government sanctioned STF Minister Alexandre de Moraes under the Global Magnitsky Act (EO 13818). This blocks any assets under US jurisdiction and prohibits 'US persons' (individuals and companies under US laws) from dealing with the sanctioned individual. The reaction in Brazil came with a decision from Minister Flávio Dino (STF) determining that foreign laws/orders do not have automatic effect in the country without judicial validation — creating an impasse for banks with operations and exposure in dollars.

What is the (Global) Magnitsky Act and what was applied in this case

The Global Magnitsky Act allows the US to sanction foreigners for serious corruption or human rights violations. The sanctions add the target to the SDN list (OFAC), freeze assets under US jurisdiction, and prohibit transactions by 'US persons.' In the case of Moraes, the US Treasury announced the inclusion under EO 13818, detailing the corresponding financial restrictions.

The legal shock in Brazil — and the banks' impasse

On August 18, 2025, Minister Flávio Dino decided that foreign laws, executive orders, and judicial decisions do not automatically produce effects in Brazil; they only take effect after approval by the STF or through international legal cooperation. In the order, Dino instructed to notify the Central Bank, Febraban, and sector entities and called for a public hearing on the subject. Days later, he clarified that the prohibition does not affect decisions of international courts recognized by Brazil.

With the decision, a practical dilemma arose: comply with the STF's order (not to apply foreign sanctions internally without approval) or comply with OFAC to avoid risk in dollar operations and in their units/relationships in the US. Tension increased when Moraes, in an interview, warned that banks could be punished in Brazil if they applied sanctions locally without due process; authorities and analysts pointed out the regulatory crossroads.

Affected banks (on the trading day of 08/19/2025)

The most significant declines involved the large banks listed on B3, which together lost R$ 42 billion in market value on 08/19, in direct reaction to the new legal framework. The stocks mentioned in the market coverage were: Itaú Unibanco, Banco do Brasil, Bradesco, BTG Pactual, and Santander Brasil.

Value of loss per bank on 08/19/2025

Market value loss figures on 08/19 and the variation at closing:

Important note: these figures reflect a single trading day (08/19/2025) and may have been partially reversed or expanded in subsequent sessions — this is market impact, not definitive accounting losses.

Measures that Brazil tends to adopt (what has already been done and what is on the table)

• Approval rule by the STF (already in effect): without Brazilian judicial validation, foreign norms/orders do not apply internally to individuals, contracts, and assets in Brazil.

• Coordination with regulators (ongoing): the STF communicated with the Central Bank, Febraban, and sector entities to prevent external orders from interfering in operations in the country without STF authorization; there will be a public hearing to guide an institutional solution. This paves the way for formal guidance from BC/CVM to the financial system.

• Collegiate deliberation at the STF (expected): the decision is monocratic and must be reviewed by the Plenary, which tends to establish the thesis and provide legal predictability.

• Diplomatic channel Brazil–USA (ongoing): the STF's own leadership mentions seeking a diplomatic solution; US authorities reiterated the global validity of sanctions for 'US persons,' which requires coordination between governments to reduce regulatory friction.

Why this matters

For banks with dollar-denominated businesses, exposure to OFAC is a fact: ignoring sanctions can affect correspondents, clearings, and units abroad; applying them without approval can create legal liability in Brazil. Until the STF and regulators define clear procedures, the trend is for conservative risk management and extensive institutional coordination to avoid systemic damage.