Spain
Spain is a major European center of money laundering activities as well as a major gateway for illicit narcotics. Drug proceeds from other regions enter Spain as well, particularly proceeds from Afghan hashish entering from Morocco, cocaine entering from Latin America, and heroin entering from Turkey and the Netherlands. Tax evasion in internal markets and the smuggling of goods along the coastline also continue to be sources of illicit funds in Spain. The smuggling of electronics and tobacco from Gibraltar remains an ongoing problem. Passengers traveling from Spain to Latin America reportedly smuggle sizeable sums of bulk cash. Colombian cartels reportedly use proceeds from drug sales in Spain to purchase goods in Asia. They subsequently sell these goods legally in Colombia or at stores run by drug cartels in Europe. Credit card balances are paid in Spanish banks for charges made in Latin America, and money deposited in Spanish banks is withdrawn in Colombia through ATM networks.
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. Up to twenty percent of the 500 euro notes in use in Europe were reported to be in circulation in Spain during 2009, directly linked to the purchase of real estate to launder money. Efforts by Spain’s tax authority to deter fraudulent activity involving these large bank notes have kept the number of 500 euro notes at October 2008 levels (around 110 million notes).
Offshore Center: No
Free Trade Zones: No
Criminalizes narcotics money laundering: Yes
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Money Laundering and Financial Crimes
Money laundering is criminalized by Article 301 of the Penal Code, added in 1988 when laundering the proceeds from narcotics trafficking was made a criminal offense.
Criminalizes other money laundering, including terrorism-related: Yes
The law was expanded in 1995 to cover all serious crimes that require a prison sentence greater than three years. Amendments to the code, which took effect in 2004, make all forms of money laundering financial crimes. Any property, of any value, can form the basis for a money laundering offense, and a conviction or a prosecution for a predicate offense is not necessary to prosecute or obtain a conviction for money laundering. Spanish authorities can also prosecute money laundering based on a predicate offense in another country, if the predicate offense would be a crime in Spain.
In October 2009, the European Commission filed a complaint against Spain in the European Court of Justice for inadequate implementation of EU norms against money laundering. In December, the Council of Ministers submitted to Congress a draft of a new anti-money laundering/counter-terrorist financing (AML/CFT) law. The legislation aims to codify existing AML/CFT laws and will supersede Law 12/2003 on the Prevention and Blocking of the Financing of Terrorism, which was never fully implemented.
Criminalizes terrorist financing: Yes
S
ee above. In addition, crimes of terrorism are defined in Article 571 of the Penal Code, and penalties are set forth in Articles 572 and 574. Terrorist financing issues are governed by a separate code of law.
K
now-your-customer rules: Yes
M
oney laundering controls apply to most entities active in the financial system, including 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, and individuals and unofficial financial institutions exchanging or transmitting money. Most categories of designated nonfinancial businesses and professions (DNFBPs) are subject to the same core obligations as the financial sector. The list of DNFBPs includes realty agents; dealers in precious metals, stones, antiques and art; legal advisors and lawyers; accountants; auditors; notaries; and casinos.
B
ank records retention: Yes
Spanish financial institutions are required by law to maintain fiscal information for five years and mercantile records for six years.
Suspicious transaction reporting: Yes
The financial sector is required to report suspicious transactions. Reporting entities are required to report each suspicious transaction to the financial intelligence unit (FIU). In 2008, the FIU received 2,904 suspicious transaction reports (STRs). Of those received, 328 were submitted by non-bank financial entities.
Large currency transaction reporting: Yes
Law 19/2003 obliges financial institutions to make monthly reports on large transactions. Banks are required to report all international transfers greater than 50,000 Euros (approximately $71,300). The law also requires the declaration and reporting of internal transfers of funds greater than 100,000 Euros (approximately $143,000). Foreign exchange and money remittance entities must report transactions above 5,000 Euros (approximately $7,100).
Narcotics asset seizure and forfeiture:
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Article 127 of the Penal Code allows for broad confiscation authority by applying it to all crimes or summary offenses under the Code. Instrumentalities used to commit the offense and the profits derived from the offense can all be confiscated. Article 127 also provides for the confiscation of property intended for use in the commission of any crime or offense. It also applies to property that is derived directly or indirectly from proceeds of crime, regardless of whether the property is held or owned by a criminal defendant or by a third party. Article 374 of the Penal Code calls for the confiscation of goods acquired through drug trafficking-related crimes and of any profit obtained. This allows for the confiscation of instrumentalities used for illegal drug dealing, as well as the goods or proceeds obtained from the illicit traffic.
Narcotics asset sharing authority: Yes
The Fund of Seized Goods of Narcotics Traffickers, established under the National Drug Plan, receives seized assets. The division of assets from seizures involving more than one country depends on the relationship with the country in question. European Union (EU) working groups determine how to divide the proceeds for member countries. Outside of the EU, bilateral commissions are formed with countries that are members of the Financial Action Task Force (FATF), FATF-style regional bodies (FSRBs), and the Egmont Group, to coordinate the division of seized assets. With other countries, negotiations are conducted on an ad hoc basis.
Cross-border currency transportation requirements: Yes
Individuals traveling internationally are required to report the importation or exportation of currency greater than 10,000 Euros (approximately $14,300). Confiscation provisions apply to persons smuggling cash or monetary instruments that are related to money laundering or terrorist financing. Gold, precious metals, and precious stones are considered to be merchandise and are subject to customs legislation. Failing to file a declaration for such goods may constitute a case of smuggling and would fall under the responsibility of the customs authorities.
Cooperation with foreign governments: Yes
Spain regularly cooperates with other countries investigating money laundering, terrorist financing, and other financial crimes.
U.S. or international sanctions or penalties: No
Enforcement and implementation issues and comments:
Although Spanish authorities have taken steps to neutralize them since 1998, ensuring that mere possession cannot serve as proof of ownership, bearer shares still exist, and the requirements to determine the beneficial owner are inadequate.
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.
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Money Laundering and Financial Crimes
Spain regularly circulates to its financial institutions the list of individuals and entities that have been included on the UNSCR 1267 Sanctions Committee consolidated list. No assets associated with entities listed by the UNSCR 1267 Sanctions Committee were reported to be in Spain in 2009.
A small percentage of the money laundered in Spain is believed to be used for terrorist financing. It is primarily money from the extortion of businesses in the Basque region that is moved through the financial system and used to finance the Basque terrorist group ETA. Throughout 2009, Spanish authorities conducted numerous AML/CFT operations that resulted in arrests and seizures. In July, the Civil Guard arrested 13 members of a trafficking network operating out of the Barcelona airport, including seven airport employees. Police seized cocaine, 12,000 Euros in cash (approximately $18,000) and 85,000 Euros in jewels (approximately $130,000). In September, police raided an area in Mallorca and seized unspecified amounts of drugs, along with 4.3 million Euros (approximately $6,400,000), 8,000 U.S. dollars, and 7.5 kilos of jewelry. In October, five high-ranking ex-officials from the Catalan regional government were arrested for their involvement in a corruption and money laundering case.
U.S.-related currency transactions:
There are no known currency transactions of significance involving large amounts of U.S. currency and/or direct narcotics proceeds from U.S. sales.
Records exchange mechanism with U.S.:
Spain’s mutual legal assistance treaty with the United States has been in effect since 1993. Spain has a robust information exchange with a variety of U.S. law enforcement agencies.
International agreements:
The Government of Spain has signed criminal mutual legal assistance agreements with a number of countries and has also entered into bilateral agreements for cooperation and information exchange on money laundering issues with 14 countries, as well as with the United States. The FIU has bilateral agreements for cooperation and information exchange on money laundering issues with more than 25 FIUs.
Spain is a party to:
• the UN Convention for the Suppression of the Financing of Terrorism - Yes
• the UN Convention against Transnational Organized Crime - Yes
• the 1988 UN Drug Convention – Yes
• the UN Convention against Corruption - Yes
Spain is a member of the FATF and is an observer to the South American Financial Action Task Force and a cooperating and supporting nation to the Caribbean Financial Action Task Force, both FATF-style regional bodies. Its most recent mutual evaluation can be found here:
http://www.fatf-gafi.org/dataoecd/52/3/37172019.pdf
Recommendations:
The scale of money laundering and the sophisticated methods used by criminals represent a major threat to Spain. The Government of Spain (GOS) should review the resources available for industry supervision, and ensure that its FIU has the independence and resources it needs to effectively discharge the duties entrusted to it. The GOS should work to close the loopholes in the areas of customer due diligence, beneficial ownership of legal persons, and the continued use of bearer shares. Congressional approval and implementation of Spain’s new AML/CFT legislation will greatly enhance the authorities’ capacity to combat terrorist financing. The GOS should clarify whether its laws allow civil asset forfeiture. Spain should maintain and disseminate statistics on investigations, prosecutions and 197
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convictions, including the amounts and values of assets frozen or confiscated. Spain should continue its efforts to actively participate in international fora and to assist jurisdictions with nascent or developing AML/CFT regimes.
