In August 2025, the then Justice and Public Security Minister Ricardo Lewandowski announced the results of ‘Operation Hidden Carbon’, a major investigation into the fraudulent sale of petrol by organised crime, hailing it as ‘one of the largest operations in history against organised crime, especially its activities in the legal market’.

Federal tax revenue service Receita Federal reported that its officials and police had discovered that between 2020 and 2024, more than 1,000 Brazilian petrol stations had registered very low tax collection related to BRL52bn (Brazilian Real; $10bn) in sales.

According to Receita Federal, this involved outright tax evasion and fuel adulteration. The network undertaking these crimes was linked to Brazilian international organised crime group, the First Capital Command (Primeiro Comando da Capital – PCC). This group is powerful, with the European Union police agency Europol reporting that it controls much of the cocaine-trading logistics between Brazil and Europe. Earlier this year, it was designated as a foreign terrorist organisation by the US.

The group’s Brazilian fuel crime scheme encompassed much of the supply chain – importation, production, distribution and retail sales – with petrol stations also being used to launder criminal proceeds from other crimes.

Part of the scheme, according to Receita Federal, involved importing cheap methanol, which is not produced in Brazil, to adulterate legitimate fuel (which often uses Brazilian-made ethanol). ‘The methanol, allegedly imported for other purposes, was diverted for use in the manufacture of adulterated gasoline [petrol], causing serious harm to consumers,’ the tax agency was quoted as saying by Brazilian newspapers. As methanol delivers strong combustion, its use reduces cost and hence increases fraudulent profits when sold to motorists and other buyers.

Moreover, the group used a fintech company as a parallel bank (called BK Bank), which was said to have moved BRL46bn ($8.9bn) in illicit additional receipts from 2020–2024 linked to fuel frauds, according to Receita Federal.  

However, BK Bank told Brazilian financial newspaper Valor Económico it is ‘duly authorised, regulated and supervised by the Central Bank of Brazil and conducts all its activities with total transparency, adhering to strict compliance standards’.

The PCC network was also said to have used at least 40 investment funds to conceal its criminal earnings. It acquired several legitimate assets to aid laundering, including four ethanol plants, a port terminal and 1,600 trucks for transporting fuel to help the network manage their fraud, said Receita Federal.  

In August 2025, Brazilian authorities announced ‘Operation Hidden Carbon’, a major operation against organised crime 
Photo: Receita Federal 

Solvent scam

Meanwhile, in February 2026 the Brazilian National Agency for Petroleum, Natural Gas and Biofuels (Agência Nacional do Petróleo, Gás Natural e Biocombustíveis – ANP), which regulates these sectors, seized 2.2mn litres of gasoline adulterated with solvents in tanks at a fuel storage terminal in São Paulo state. Cheap solvents bulked out the legitimate fuel sold to clients, who paid standard prices for sub-standard petrol.

‘Besides causing damage to vehicles, it is also linked to tax fraud and creates unfair competition in the fuel sector,’ warned the ANP.

Legitimate fuel sector at stake

Such infiltration in the economy by criminal groups is not new in Brazil, says Roberto Uchôa, Executive Board Member of the Brazilian Public Security Forum (Fórum Brasileiro de Segurança Pública) and a former Brazilian federal police officer. Indeed, he states that since 2006, the PCC has realised that instead of exercising violence against the authorities, it is ‘much more profitable to buy the state’ through corruption, bribery, political campaign financing, infiltration of legal markets, bidding on public tenders and entry into public businesses.

Uchôa explains how petrol stations have offered the PCC an effective means for money laundering. It would offer owners of these retail outlets (and some ethanol manufacturing plants) money to purchase their businesses. The offer was often under these businesses’ value, however, so the PCC also backed its purchase bids with threats of murder. ‘They would financially ruin the gas [petrol] station, and people would disappear,’ he says, stressing that such practices cause market distortion.  

‘They need businesses that involve money movement and where oversight and verification of the use of that business is very difficult… The company will say whatever it wants,’ he notes.  

Such comprehensive crime is damaging the entire Brazilian fuel retail sector. According to the Brazilian research entity FGV Energia and the non-governmental organisation (NGO) Legal Fuel Institute (Instituto Combustível Legal – ICL), which fight the illegal fuel market, operational fraud at petrol stations causes annual losses of BRL27bn ($5.29bn) to the country’s fuel sector.  

And while the vast majority of the sector operates within the rules, ICL President Emerson Kapaz believes the problem is worse than official data shows.

‘There are forms of fraud that do not necessarily show up in quality analyses, such as electronic pump tampering, delivery of lower volumes than recorded, misleading information regarding product origin, or even the sale of products without a tax invoice.’

To him, ‘risk may emerge at various stages of the supply chain, particularly where high financial turnover, physical movement of products, tax complexity and traceability challenges converge’.

But the issue is not exclusive to Brazil, adds Kapaz. ‘For example, United States’ authorities have been combatting fuel smuggling schemes on the border with Mexico associated with criminal organisations, combining tax evasion, falsified documents and shell companies. In Europe, there is a significant history of tax fraud involving fuels and products formulated to evade taxes or even smuggled. In parts of Africa, especially in border regions, fuel smuggling also represents a significant portion of illicit economies,’ he says.

‘Governments that focus primarily on stolen or adulterated fuels may detect criminal infiltration too late. Brazil demonstrates how illicit capital can rapidly infiltrate legitimate trade.’ – Robert Muggah, Co-founder, Igarapé Institute 
 

Steps to protect the sector  

Kapaz says that responses to the issues of criminal exploitation of tax and regulatory differences, weaknesses in enforcement, complex supply chains and mechanisms to conceal money need to be adapted to each market.  

The challenge lies in identifying vulnerabilities and enhancing traceability, intelligence-led oversight, and data integration among public agencies. This includes financial intelligence units and agencies in other countries when needed, since money moves very rapidly, and the state’s capacity to track these transactions needs to evolve in the same direction, he explains.  

In this regard, Kapaz praises the ‘significant shift’ in how Brazilian authorities are now addressing these crimes, as Operation Hidden Carbon showed, thus creating a more balanced and transparent business environment.  

‘The more we can advance in this direction, the better the conditions will be for attracting capital, stimulating innovation and allowing serious companies to compete on a level playing field,’ he points out.

He adds: ‘ANP has expanded its inspection capacity with portable equipment capable of detecting irregular methanol in gasoline and ethanol directly in the field.’

‘The most important thing is to advance the traceability of methanol, tracking its origin, the volumes traded and its final destination. When there is a very large difference between the volume acquired by a company and its effective economic need, for example, this can serve as a warning sign.’

Robert Muggah, Co-founder of the Rio de Janeiro, Brazil-based think tank Igarapé Institute, agrees that more shared information is important, stressing that regulation and law enforcement have struggled to keep pace with criminal activity. He warns, for instance, that infiltration of organised crime into the sector, by impacting prices, can eventually harm legitimate companies and make it more difficult to detect illicit activities.

‘International evidence suggests that Brazil is part of a broader shift of organised crime toward legitimate energy markets,’ he states, mentioning, for example, that in October 2025 Colombian police dismantled a network known as Brent Oil, which allegedly stole crude oil from the Caño Limón Coveñas pipeline and sold it through seemingly legitimate companies, making more than COP2bn (Colombian peso; $643,600) per month. ‘Further investigations revealed that stolen or subsidised fuel was diverted to clandestine cocaine labs.’

These issues are not restricted to South America. Across the Atlantic, Nigerian authorities dismantled more than 6,400 illegal refineries and identified more than 5,500 clandestine pipeline connections in early 2024, he notes.

That is why Muggah praises the increasing cooperation among institutions and new reporting requirements introduced since 2024 in Brazil, under which more than 450 additional institutions began reporting to the federal revenue service.

Muggah emphasises the importance of Complementary Law 225, enacted in January 2026, which gives ANP more robust powers when companies enter the Brazilian fuel market. Applicants must prove the legal origin of their capital and identify their ultimate beneficiaries, besides having minimum capital requirements.

Still, Muggah calls for more efficient communication: ‘Regulatory bodies must be able to identify cases where methanol imports exceed a buyer’s plausible needs, physical fuel volumes do not match invoices, or there are frequent changes in ownership between related companies.’

Furthermore, he goes on to warn: ‘ANP has demonstrated the capacity to generate useful information. The problem is the scale. Brazil is asking a regulatory body with fewer [human and capital] resources to oversee a larger and more complex energy market.’

He advises governments worldwide to also check the finances and property of fuel sector assets. ‘Governments that focus primarily on stolen or adulterated fuels may detect criminal infiltration too late. Brazil demonstrate how illicit capital can rapidly infiltrate legitimate trade.’

Meanwhile, he advises companies to treat organised crime as a material risk to their businesses and therefore invest in better traceability and customer/supplier checks.

Indeed, anti-corruption NGO Transparency International warned in February 2026 that Operation Hidden Carbon had shown that organised crime ‘has become a structural risk to corporate integrity, demanding the development and adoption of new risk management, governance and due diligence strategies’.

Its research in partnership with São Paulo-based research institute Datafolha conducted in November 2024 showed that 93% of compliance professionals see the advance of organised crime as a problem that has impacted the integrity of Brazil. However, only 57% stated that the companies with which they do business have specific controls in place to mitigate this risk.

Renewable energy exposed  

A key concern in this regard is to ensure organised crime stays out of clean energy, as Brazil’s energy transition accelerates. Muggah warns that the exposure of the renewable energy sector to crime is already significant, and so the integrity of the supply chain is a concern.  

‘The biofuels industry utilises many of the same ports, distributors and financial channels as the conventional fuel sector. It introduces additional inputs and certification systems that can also be exploited,’ Muggah notes.

Brazil produced 35.9bn litres of ethanol in 2025, and an analysis by the São Paulo, Brazil-based investment bank BTG Pactual estimated that the companies involved in Operation Hidden Carbon represented 10% of the Brazilian ethanol market in 2024.

To Muggah, carbon markets create another vulnerability, as their value depends on reliable data, even though there is no evidence of organised crime appropriating this sector at scale in Brazil.

He explains: ‘Its advantage in the biofuel and carbon markets will depend, in part, on investors’ ability to trust the origin of products, who controls the companies that produce them, and the credibility of environmental claims.’ He adds that banks may also require greater due diligence, and capital may become more expensive if ownership or supply chains are difficult to verify.

Note: The Brazilian Ministry of Mines and Energy was approached for comment.

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