Federal Police Detail R$7 Billion Fraud Scheme Involving Banco Master and State-Owned BRB

Federal Police (PF) reports have detailed a massive financial fraud scheme, potentially one of the largest in Brazil's history, centered on the now-liquidated Banco Master and its alleged sale of non-existent assets to the state-owned Banco de Brasília (BRB). The core of the scheme involved simulating approximately R$7.15 billion ($1.3 billion USD) in fake payroll-deducted loans, a move that has deepened an investigation into alleged corruption at the highest levels of Brazilian politics.

The mechanism described by investigators involved creating a shell company, Tirreno, capitalized at only R$100, which then supposedly sold R$6.7 billion in fake credit receivables to Banco Master. These assets were crédito consignado, a popular type of loan in Brazil repaid directly from a borrower’s salary or pension, typically reserved for low-risk groups like government workers and retirees. The PF found evidence of a 'document factory' within Banco Master dedicated to creating the paperwork for over a million contracts that did not exist.

Banco Master then allegedly resold these fabricated credits to BRB, a state-owned bank controlled by the Federal District government, in a transaction totaling approximately R$12.2 billion. Reports indicate that BRB proceeded with the purchase despite ignoring internal compliance alerts and warnings raised by the Central Bank of Brazil.

The investigation has widened dramatically to include allegations of corruption and money laundering, with "robust evidence" pointing to Senator Jaques Wagner (PT-BA), a former Minister and then the government's leader in the Senate. PF reports detail that Wagner allegedly received substantial undue advantages from Banco Master executives, including a high-end R$2.45 million apartment in Salvador and more than R$3.5 million in financial transfers. He also allegedly used private aircraft linked to the bank and was in contact with executives regarding legislative matters of interest to the bank. Senator Wagner has denied all allegations of wrongdoing, stating he will present clarifications to the authorities.

The scandal has already led to the Central Bank’s liquidation of Banco Master in November 2025, with an estimated 1.6 million people and R$41 billion in deposits affected. The focus of the continuing investigation is on understanding the full extent of the systemic corruption that allowed a mid-sized private bank to execute such a massive fraud on a state-owned entity, bypassing multiple regulatory and compliance checks.

What it touches

The fallout from the alleged fraud scheme impacts Brazil’s financial sector and public finances. The state-owned BRB is expected to set aside billions of reais to cover the transactions with the failed bank, and the national Credit Guarantee Fund (FGC) will draw on contributions, partly from state-owned institutions like Banco do Brasil (BBAS3) and Caixa Econômica Federal, to compensate the 1.6 million creditors, effectively socializing part of the loss.