In São Paulo, Brazilian authorities have initiated a significant police operation aimed at dismantling a large-scale tax evasion and money laundering scheme within the country’s fuel sector. This operation targets the largest tax debtor in Brazil, which reportedly owes over 26 billion reais (approximately $4.8 billion). Law enforcement is executing 126 search and seizure warrants across five states, focusing on various individuals and corporate entities. According to Brazil’s Federal Revenue, the organization allegedly utilized a network of its own companies, investment funds, and offshore accounts to obscure and protect its profits.

While officials have not disclosed the names of the individuals or companies involved, local media sources suggest that Grupo Fit, a prominent fuel refinery, is under investigation. Grupo Fit has yet to respond to requests for comments from The Associated Press.

Finance Minister Fernando Haddad explained that this operation is part of a broader initiative to curtail criminal activities linked to Brazil’s fuel distribution network. In August, authorities identified 40 investment funds within the fuel sector that were allegedly used to conceal assets for members of the First Capital Command (PCC), a notorious crime syndicate.

The PCC, Brazil’s most influential organized crime group, was established in 1993 by inmates in São Paulo’s Taubaté Penitentiary, originally to advocate for better prison conditions. However, it soon expanded its operations to include drug trafficking and extortion. Over recent years, the group has further diversified its illicit investments.

Minister Haddad also noted that investigations revealed a pattern of capital diversion, including the establishment of investment funds in the United States. Federal authorities have traced over 15 offshore entities based in the U.S. that allegedly funneled approximately 1 billion reais (around $186 million) back into Brazil for purchasing equity stakes and real estate.

Suspects set up money-laundering operations in Delaware, which the finance minister called “a tax haven in the United States” used for “a serious international triangulation scheme.” One of the group’s latest operations involved 1.2 billion reais ($223 million) sent to funds in the U.S. state, he added.

“The scheme works like this: Loans are issued to these funds — loans suspected of never being repaid — and the money then returns to Brazil as supposedly legal investments in economic activities,” Haddad said. “But the money sent abroad is not legitimate.”

Haddad said he pledged to President Luiz Inácio Lula da Silva to seek deeper international cooperation with the United States against organized crime and money laundering, amid tariff negotiations with U.S. President Donald Trump. ____

Follow AP’s coverage of Latin America and the Caribbean at https://apnews.com/hub/latin-america