In late April, the Brazilian Federal Police exposed a fraud scheme in the National Institute of Social Security (INSS). Specialists estimate that a total of 9 billion reais was stolen from over 5 million beneficiaries, primarily retired elderly individuals. Starting last Tuesday (13), institutions involved in the fraud are required to prove to the INSS that they obtained consent from retirees before applying the deductions.
Since its start, INSS has been responsible for funding elderly and injured people with pensions and retirement. Even though the institute has its problems, it’s important to recognize its role in the Brazilian economy. A fraud in the retirement system has been noticeable for affecting people that should’ve been protected, but in this case, they were robbed right in front of their eyes.
How did the fraud happen?
To understand how the fraud occurred, it’s important to examine the discount system. In Brazil, many unions and workers’ associations charge their members a monthly fee. The amount varies based on the occupation but typically ranges from 30 to 50 reais per month. Although these charges are legitimate for some workers, they require explicit consent from the beneficiary, which is where the fraud originated.
Consent was central to this fraud scheme. Some institutions, such as the Confederence of National Agricultural and Rural Entrepreneurs (CONAFER), began registering retirees for monthly deductions without their knowledge or consent. This fraudulent activity persisted for years. Between 2019 and 2023, approximately 6 million people were subjected to unauthorized deductions, with the total stolen estimated at 8 to 9 billion reais.
The institutions forged signatures and made vague consent forms to authorize the deductions. This scheme not only deprived individuals of their money but also stripped them of their agency and the opportunity to refuse the payments. This makes the fraud not only illegal but also a serious social and political issue.
The INSS claims that the irregular deductions ceased in April 2024. However, no definitive evidence supports this assertion. Many victims, being elderly or disabled, often struggle with bureaucratic processes and technology, leaving some unaware of the fraud and unable to report it to authorities.
The Reimbursement Plan
Now, the institutions implicated in the fraud must present proof of consent for deductions to the INSS within 15 business days to avoid further legal and police actions. Based on the submitted data, the Federal Government will establish a reimbursement system.
If fraud is proven, the institutions will have an additional 15 business days to return the stolen money to the affected retirees. However, a significant challenge lies ahead: these institutions no longer possess the stolen funds. Although the Federal Police have frozen assets owned by the perpetrators, the recovered amount—estimated at 1 to 2 billion reais—is far short of the 8 to 9 billion reais stolen. The remaining funds are expected to come from the National treasury raising concerns about a potential economic recession in Brazil, due to an increase on public spendings and a possible high inflation caused by the reimbursement.
TIMELINE OF THE FRAUD
In 2019, the Brazilian Public Ministry received the first report of fraudulent deductions from retirement benefits. At that time, the Federal Police began investigating. By April 2024, they had identified 11 institutions involved in the scheme and uncovered its details. The exposure of this case has spurred political efforts to mitigate the damage and prevent future occurrences.
In 2019, then-President Jair Bolsonaro issued Provisional Measure 871, requiring all institutions receiving funds from INSS beneficiaries to provide proof of consent for deductions. This measure later became Federal Law 13,846/2019, underscoring the importance of this issue.
Over the years, Brazil has had two different administrations affected by this fraud. Its exposure during President Lula’s third term led to political backlash, with some blaming him solely for the problem despite its systemic nature. To address public criticism, Lula dismissed the Social Security Minister, Carlos Lupi, and the INSS president, Alessandro Stefanutto.
OTHER PROBLEMATICS
INSS is an institute that provides elderly and disabled individuals with monthly financial support based on their contributions during their working years. For many, especially those without other sources of income, the INSS is their sole means of financial support after retirement. Consequently, fraud involving this institution is not only illegal but also deeply immoral.
This institute has faced significant criticism following the pension reform of 2019, which introduced changes to the eligibility rules for retirement benefits. The minimum retirement age for women increased from 60 to 62, while the age for men remained at 65. Additionally, the minimum contribution period was adjusted: women now require 15 years of contributions, while men need 20 years. Previously, both genders needed only 15 years of contributions to qualify for a minimum monthly pension.
INSS’s been a hot topic since the pension reform in 2019, being a target from both sides of the political spectrum. Right wingers blame firmely Lula’s government as guilty from this fraud, even though it started in Bolsonaro’s administration, during 2019 and 2022. On the other hand, left wingers tend to make excuses for the current president due to his leftist positioning.
This is one of the biggest Brazilian corruption scandals and falling into Lula’s lap is a punch to the government’s reputation, even though this is a systematic problem that has been around since early Bolsonaro’s administration. It’s valid to criticize both governments, but in this case, the Federal Government is assuming the responsibility of a mistake they didn’t commit, keeping the promise to help the people in need.
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The article above was edited by Giulia El Houssami.
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