Circular N° 3.799

The Board of Directors of the Central Bank of Brazil, in a session held on 28 June 2016, based on Articles 9, 10, item IX, of Law No. 4,595 of 31 December 1964, 1, § 1, of Complementary Law No. 130 of 17 April 2009, and 14 of Resolution No. 4,454 of 17 December 2015, and in view of Articles 3, 4 and 11 of said Resolution,

R E S O L V E S :

Art. 1 The scope of the cooperative audit activity must be defined by a Cooperative Audit Entity (EAC) or by an independent audit firm, observing the provisions of Articles 3 and 4 of Resolution No. 4,454 of 17 December 2015, covering the assessment of the audited institution, at a minimum, with regard to the following aspects:

• I - with regard to the adequacy of operational performance and the economic and financial situation:

  • a) economic and financial situation, including aspects of short- and long-term soundness, liquidity, and adequate assessment of assets, liabilities, equity, and surpluses or losses;

  • b) integrity and reliability of accounting information;

  • c) reconciliation of relevant accounting balances;

  • d) credit granting and management processes; and

  • e) criteria adopted for the distribution of surpluses, allocation of losses, formation of reserves, establishment of specific funds, and allocation of resources of the Technical, Educational and Social Assistance Fund (Fates);

• II - with regard to the adequacy and adherence of institutional policies:

  • a) segregation of functions and conflicts of interest in critical activities;

  • b) manuals, internal regulations, as well as determinations of the central cooperative and the system, when applicable;

  • c) process for providing information on the financial situation, performance, business management policies, and relevant events to the administrative bodies, supervisory board, and members; and

  • d) codes of conduct and ethics, when applicable;

• III - with regard to education, training, and remuneration compatible with responsibilities and positions:

  • a) remuneration policy for the board of directors, the administrative council, and the supervisory board, including any performance bonuses or similar; and

  • b) education, training, and availability of time of members of statutory bodies, managers, and members of the technical team;

• IV - with regard to the adequacy of operational limits and capital requirements, compliance with:

  • a) minimum Reference Equity (PR) requirements;

  • b) exposure limits per client; and

  • c) other operational limits;

• V - with regard to governance rules and practices and internal controls:

  • a) establishment, operation, segregation of functions, and effectiveness of the board of directors, the administrative council, and the supervisory board, considering the responsibilities provided for in the bylaws and in current legislation;

  • b) implementation, adequacy, and compliance of the internal control system;

  • c) information technology and communication strategies, policies, and procedures; and

  • d) standards, structure, and processes related to information security and data integrity;

• VI - with regard to the adequacy of risk and capital management:

  • a) the institution's capacity to identify, assess, monitor, control, and mitigate the risks to which it is exposed, in accordance with the size and complexity of its operations;

  • b) segregation of risk management activities from business areas;

  • c) contingency and business continuity plans; and

  • d) capital management process, including the periodic review of its compatibility with the risks assumed;

• VII - with regard to the prevention of money laundering and terrorist financing (AML/CFT):

  • a) adequacy of the institutional policy, organizational structure, and applicable procedures, covering the monitoring, selection, and analysis of transactions and situations subject to reporting to the Financial Activities Control Council (Coaf);

  • b) adequacy of the procedures defined for the purpose of knowing the customer, covering the identification of the origin and constitution of their assets and financial resources;

  • c) adequacy of the training policy at all levels of the organization; and

  • d) adequacy of internal audit in AML/CFT;

• VIII - with regard to rural credit and the Agricultural Activity Guarantee Program (Proagro), applicable to financial institutions operating in the National System of Rural Credit (SNCR):

  • a) adherence to the provisions of the Rural Credit Manual (MCR), especially in the topics dealing with beneficiaries, supervision, limits, expenses, formalization, registration, and accounting of rural credit and Proagro; and

  • b) existing controls for the proper classification and approval of rural credit operations and Proagro coverage; and

• IX - with regard to the relationship with customers and users of financial products and services:

  • a) adherence to standards for contracting products and providing financial services, including with regard to the content and transparency of contractual relationships;

  • b) adequacy of the charging and disclosure of fees related to the services and products offered;

  • c) adequacy of the management of customer and user demands arising from the Ombudsman's Office and the institution's other service channels; and

  • d) compliance in the contracting of correspondents in the country, including with regard to providing information to the Central Bank of Brazil and disclosing information to the public.

Sole paragraph. The assessment referred to in the main clause must observe the applicable professional standards of independent auditing and include analysis of risks and controls related to the operations and activities under review.

Art. 2 The EAC or the independent audit firm must prepare, at a minimum, annually, a cooperative audit report for each audited entity, relating to the assessments provided for in Article 3 of Resolution No. 4,454 of 2015, presenting the conclusions of the work in clear, objective, and easily understandable language.

Sole paragraph. The report referred to in the caput must:

• I - be issued, in final form, within thirty days after the date foreseen in the annual activity schedule for the conclusion of the work;

• II - describe the results of the analyses carried out in accordance with the scope defined in the manner of Art. 1 of this Circular;

• III - be signed by the technical person responsible for the cooperative audit work; and

• IV - be forwarded by the EAC or by the independent audit firm to the senior management of the institution subject to cooperative audit within ten days after the date of issuance.

Art. 3º The institution subject to cooperative audit must keep the cooperative audit report relating to the assessments provided for in Art. 3 of Resolution No. 4,454, of 2015, available to the Central Bank of Brazil for a minimum of five years and forward it:

• I - to the Central Bank of Brazil, when requested; and

• II - to the central cooperative, in the case of an affiliated primary cooperative, or to the confederation, in the case of a confederated central cooperative, within ten days from the date of receipt of the report.

Art. 4º The documents provided for in Art. 11 of Resolution No. 4,454, of 2015, must be sent to the Central Bank of Brazil, observing the following deadlines:

• I - detailed annual schedule of cooperative audit activities, by 31 October of the year prior to the one to which it refers; and

• II - general report on cooperative audit activities, by 30 April of the following year to which it refers.

§ 1º The documents referred to in the caput must be signed by the technical person responsible for the cooperative audit work.

§ 2º The annual schedule of cooperative audit activities referred to in item I of the caput may be revised by the executor of the cooperative audit service, provided that the new version is previously sent to the Central Bank of Brazil.

§ 3º The Central Bank of Brazil may determine changes to the annual schedule of cooperative audit activities.

Art. 5º This Circular shall enter into force on the date of its publication.

Otávio Ribeiro Damaso Anthero de Moraes Meirelles Director of Regulation Director of Supervision