A recent ruling by Supreme Court Justice Flávio Dino, stating that foreign laws and court orders have no automatic effect in Brazil or over Brazilian firms, has created uncertainty for banks with operations in the United States, industry sources told Valor.

The concern arises from US sanctions imposed under the Magnitsky Act against Justice Alexandre de Moraes.

Two possible scenarios are under discussion, according to banking executives. If the sanctions are interpreted narrowly, applying only to Moraes himself, Brazilian banks could restrict any accounts he may hold at US branches.

But some bankers fear US authorities could adopt a wider reading, requiring full compliance across a bank’s global operations, including accounts in Brazil.

“In that case, the US subsidiary could ‘extend’ US jurisdiction to the entire group,” said one banker.

Reactions to Dino’s ruling have been critical. “It’s madness — no one knows what could happen, and it only adds to Brazil-US tensions,” said one source.

Another added: “If the choice is between defying Brazil’s Supreme Court or the US government, banks will likely push back against the Court. Here, they have more lawyers and some political lobbying power.”

Executives also pointed to contractual obligations tied to international financing, often governed by US or UK law, which could expose local banks to penalties if they maintain dealings with sanctioned individuals.

Political risks were also highlighted, with one source saying: “It’s certain that Eduardo Bolsonaro will add fuel to the fire.”