Spain – Know Your Customer (KYC) Rules

 

 

Spain is a major European center of money laundering activities as well as an important gateway for illicit narcotics entering Europe, although the serious focus of Spanish law enforcement on combating organized crime, drug trafficking, and money laundering during the past five years has reduced the country‘s attractiveness as an entry point.

Drug proceeds from other regions enter Spain as well, particularly proceeds from hashish from Morocco and cocaine from Latin America. Passengers traveling from Spain to Latin America reportedly smuggle sizeable sums of bulk cash. Informal money transfer services facilitate cash transfers between Latin America, particularly Colombia, and Spain. Spanish security forces reportedly discovered at least 119 organized crime groups (including Russian, Eurasian, Chinese, and Italian groups) operating in the country that were engaging in money laundering during 2010. Of the 175 police investigations against money laundering in 2010, 58% were linked to drug trafficking, particularly of cocaine, heroin, and hashish; 17% involved political corruption; while 12% were related to value added tax fraud, mainly involving vehicle trafficking. Tax evasion in internal markets also continues to be a source of illicit funds in Spain.

An unknown percentage of drug trafficking proceeds are invested in Spanish real estate, particularly in the once-booming coastal areas in the south and east of the country, though less so since the speculative real estate bubble burst in 2008. Criminal groups also place money in other sectors, including services, communications, automobiles, art work, and the financial sector.

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: YES
    • Domestic PEP: YES

Spain – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Spanish Law:

    • Banks
    • Mutual savings associations
    • Credit companies
    • Insurance companies
    • Financial advisers
    • Brokerage and securities firms
    • Pension fund managers
    • Collective investment schemes
    • Postal services
    • Currency exchange outlets
    • Individuals and unofficial financial institutions exchanging or transmitting money
    • Realty agents
    • Dealers in precious metals, stones, antiques and art
    • Legal advisors and lawyers
    • Accountants
    • Auditors
    • Notaries
    • Casinos

Spain – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 3,172 in 2010

Number of CTRs received and time frame: 707,968 in 2010

The following is a list of STR covered entities covered by Spanish Law:

    • Banks
    • Professional money changers, credit intermediaries, payment systems and managers, and lending firms
    • Life insurance entities and insurance companies that provide investment services
    • Securities and investment service companies, collective investment, pension fund, and risk capital managers
    • Mutual guarantee companies
    • Postal wire services
    • Real estate brokers, agents and developers
    • Auditors, accountants, and tax advisors
    • Notaries and registrars of commercial and personal property
    • Lawyers, attorneys, or other independent professionals when acting on behalf of clients in financial or real estate transactions
    • Company formation and business agents
    • Trustees
    • Casinos, gaming and lottery enterprises
    • Dealers of jewelry, precious stones and metals, art, and antiques
    • Safekeeping or guaranty services
    • Foundations and associations

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: Not available
Convictions: Not available

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

Spain has long been dedicated to fighting terrorist organizations, including ETA, GRAPO, and more recently, al-Qaida. Spanish law enforcement entities have identified several methods of terrorist financing: donations to finance nonprofit organizations (including ETA and Islamic groups); establishment of publishing companies that print and distribute books or periodicals for the purposes of propaganda, which then serve as a means for depositing funds obtained through kidnapping or extortion; fraudulent tax and financial assistance collections; the establishment of ―cultural associations‖ used to facilitate the opening of accounts and provide a cover for terrorist financing activity; and alternative remittance system transfers.

Spanish authorities recognize the presence of alternative remittance systems. Informal non-bank outlets such as “locutorios” (communication centers that often offer wire transfer services) are used to move money in and out of Spain by making small international transfers for members of the immigrant community. Spanish regulators also note the presence of hawala networks in the Islamic community.

Spanish law does not allow civil forfeiture. The Finance Ministry, as the sanctioning organ, opened 580 investigations in 2010 for cash movements. Forty million euros (approximately $52.7 million) were initially confiscated; 20 million euros (approximately $26.3 million) were ultimately retained as fines. During the first half of 2011, 250 cases were opened and over 10 million euros (approximately $13.2 million) were confiscated. Carrying more than 100,000 euros (approximately $131,700) in cash within the country is not allowed. If the authorities discover an amount larger than that, they can seize and hold it until proof of legal origin is provided. According to press reports, the police and civil guard opened 175 investigations in 2010.

On April 29, 2010, Spain enacted Law 10/2010, on preventing money laundering and terrorist financing. The law introduces a risk-based approach to preventing money laundering and terrorist financing and imposes stringent requirements on financial institutions as well as designated non-financial businesses and professionals. Additionally, the law greatly enhances authorities‘ capacity to combat terrorist financing by placing greater requirements on financial institutions and other businesses, and by strengthening penalties and monitoring and oversight. The new law entered into force immediately; however, implementing regulations will not be approved until 2012; until then, many of its provisions are not being implemented. The Spanish government is waiting for the approval of the new FATF Recommendations to develop the implementing regulations in conformity with international standards. In the interim, the implementing regulations for Law 19/1993, updated in 2005, remain in force.

In 2010, the Financial Crimes Enforcement Network (FinCEN), the financial intelligence unit of the U.S., suspended information sharing with its Spanish counterpart, the Executive Service for the Prevention of Money Laundering (SEPBLAC) due to an apparent unauthorized disclosure of FinCEN information by SEPBLAC. SEPBLAC has addressed the improper disclosure issues and has taken steps to ensure the protection of FinCEN‘s information, including negotiating an updated version of a memorandum of understanding (MOU) with FinCEN. FinCEN will resume information exchange with SEPBLAC after signing the MOU. The security forces and the judiciary exchange information with the U.S. related to money laundering.

A working group has been created within the Commission for the Prevention of Money Laundering to promote the collection of statistics. Currently this information is not centrally collected. Spain should maintain and disseminate statistics on investigations and prosecutions.