Money Laundering in Spain

Taxes Sat, 29 Nov 2014
Money laundering in Spain

You’ve probably heard of ‘money laundering’ but not thought you would personally be affected. However, concerns about money laundering activity in Spain means that people are suddenly finding it cropping up in quite ordinary circumstances.  

A number of non-residents and residents have recently been asked for additional information by their banks. This has usually involved a request for NIE, passport details and, in some cases, proof of income in the UK. The reason being that banks need to ‘know their customer’ in a bid to prevent money laundering.

What is money laundering?

Money laundering is the process by which the proceeds of crime are transferred into legitimate money or assets. Money laundering is often linked to drugs and gangland activities. It is also sometimes used to fund terrorism and, understandably, has every country keen to do something about it.

In more recent times money laundering has extended to include other misuse of financial systems such as tax evasion, bribery and corruption. These are all issues that have been very prominent in Spain’s recent history.

Money is cleaned up or ‘laundered’ to make sure that it is acceptable for banks and other financial institutions to process properly so that it becomes accepted revenue.  It is first ‘placed’ and then involved in a financial transaction to cover up the actual source.

On occasions it might be split into smaller amounts to disguise it or placed in an off-shore bank or other financial institution with lower level of enforcement. Other disguises can be through ‘black’ salaries, fictitious loans, casinos and real estate.

You can be accused of money laundering not only if it’s your own money but if you are involved in the concealment or disguise of these assets in some way.

What is Spain doing about it?

Spain is considered to be a relatively high risk country as it can be the gateway for narcotics entering Europe from Central and South America and North Africa. Illegal money has been used to purchase properties in coastal areas and has also found its way into other sectors such as cars, art and finance.

It’s not just dodgy drug dealers who are currently under fire for money laundering. There have been several high profile cases in Spain, including that of Isabel Pantoja, a famous folk singer, and individuals linked to the Spanish royal family.

Spain has introduced legislation to monitor money laundering activities and businesses need to be registered with the money laundering commission in Madrid. It is expected that businesses will look out for operations and client activities that might constitute this kind of illegal practice.

The CaixaBank has been proactive in checking the origin of the money that it handles. It explains the reasons for this on its webpage.

Santander has produced a general statement of policy which includes

  • Customer identification and KYC (Knowing Your Customer)
  • Transaction monitoring with IT tools used to monitor transactions to detect unusual or suspicious activity
  • Reporting of suspicious activity - all members are obliged to report operations that might be related to money laundering or terrorism financing

How it might affect you

With this knowledge, it is not surprising that some bank customers in Spain are being asked where their money has come from. At the moment, all account holders apear to be being asked to at least prove their identity with ID and you should not be surprised if, out of the blue, you are asked to confirm who you are by providing a copy of your passport. 

Banks are likely to be on the look out for:

  • Sudden and substantial increases in funds
  • Large withdrawals

We understand that many different types of transactions are being queried and this should not cause you alarm. If there has been any unusual activity on your Spanish bank account you are even more likely to be summoned to explain why. 

For the vast majority, it is no reason for concern. Banks are required to be vigilant and although you might feel targeted by these questions, you are not being singled out because of your nationality. If crimes such as money laundering are to be addressed, then everyone has a roll to play in transparency and compliance.   

Spain Explained by Ábaco Advisers

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