(Bloomberg) — Brazil’s Federal Police launched a sweeping crackdown on organized crime across the country’s fuel supply chain, exposing illicit transactions totaling more than 23 billion reais ($4.2 billion). 

The investigations — dubbed Quasar and Tank — aim to dismantle sophisticated money-laundering schemes tied to criminal organizations, the police said in a statement Thursday. Members of the organized crime group Primeiro Comando da Capital (PCC) are among those involved, the Sao Paulo public prosecutors’ office, which also took part in the operation, said in a separate statement.

Operation Tank executed 14 arrest warrants and 42 search-and-seizure orders across the states of Paraná, Sao Paulo and Rio de Janeiro. Investigators say the network has been active since 2019, laundering at least 600 million reais and channeling more than 23 billion reais through hundreds of companies, including gas stations, distributors, holding companies, collection agencies and even central bank–authorized payment institutions.

Dozens of police cars descended on Faria Lima Avenue in Sao Paulo, known as Brazil’s Wall Street, Thursday morning. Some 1,400 agents are targeting 350 people and companies targeted in the investigation, according to the Sao Paulo public prosecutors’ office. The group is suspected of committing economic crimes, fuel adulteration, environmental violations, money laundering and tax fraud, among other crimes. The irregularities were identified across multiple stages of the fuel production and distribution chain.

In one case, the investigation uncovered a methanol import conspiracy in which the feedstock entered through Paranaguá port in Paraná state. Instead of going to its registered recipients, the methanol was clandestinely diverted to gas stations and distributors, the prosecutor’s office said.

Investigators also uncovered fraud at more than 300 gas stations whose owners were forced to hand over their businesses to criminal groups without receiving any payment. The owners received death threats if they attempted to seek compensation.

The financial transactions were routed through fintechs controlled by organized crime, whose client base consisted mostly of companies in the fuel sector, according to investigators from the public prosecutors’ office.

“The fintechs operated with parallel accounting systems, enabling transfers between companies and individuals without identifying the final beneficiaries,” the Sao Paulo prosecutors said in a statement.

One of those companies is said to have moved more than 46 billion reais between 2020 and 2024, and also to have received cash deposits, the Brazilian tax authority said in a statement. There were also smaller payment institutions used to cover up the transactions, the authority said.

By using payment institutions and non-traditional banks, the organization was able to make the amounts difficult to trace, the agency said. It also used accounts maintained by fintechs at commercial banks to move resources without identifying clients. 

The profits obtained and the laundered proceeds were then obscured in investment funds to hide their real owners. The authority said the criminal organization controls at least 40 investment funds with 30 billion reais in assets. Those funds acquired assets such as a port terminal and four ethanol-production plants.

The financial companies didn’t have to declare client operations to the tax authority until 2024, the investigators said. Reforms intended to make such financial transactions more transparent were revoked at the beginning of this year because of false information about them, the authority said.

Financial firms Reag Investimentos SA and Cia Brasileira de Servicos Financeiros SA confirmed in a regulatory filing that search warrants are being served at their offices on Thursday as part of the investigations. The companies are “fully cooperating with authorities, providing the requested information and documents, and will remain available for any additional clarifications that may be necessary,” the statement said.

Operation Quasar executed 12 search-and-seizure warrants in the cities of Sao Paulo, Campinas and Ribeirao Preto. The group under investigation specialized in money laundering and fraudulent management of financial institutions, using investment funds to conceal illicit assets. Evidence points to direct links with criminal gangs, according to the police. 

The operation was welcomed by top fuel distributors, who have long argued that growing criminality erodes their profits. The Legal Fuel Institute, backed by companies such as Brazilian state-controlled Petrobras, Shell and Vibra, supported today’s operation, and said that beyond money laundering and public security, organized crime directly impacts tax collection and competition in the fuel sector.

–With assistance from Daniel Carvalho.

(Corrects day of crackdown to Thursday in fourth and third-to-last paragraphs)

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