Intent Declared Summary

In 2006, the Financial Action Task Force (FATF) conducted a mutual evaluation of Spain's Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime against the FATF's forty recommendations and nine special recommendations. In its published findings, the FATF concluded that Spain was compliant with 10 FATF recommendations and special recommendations; largely compliant with 22; partially compliant with 12; non compliant with 3; and two recommendations were found not applicable to Spain. However, Spain was rated only partially compliant with Recommendation 5 (on customer due diligence), designated as a core recommendation by the FATF. A country needs a largely compliant or compliant rating for the core recommendations to be deemed as having in place a proper functioning AML/CFT regime. The report noted that there were areas where Spain's AML/CFT regime could be improved. For example, while concluding that the terrorist financing offences were broadly satisfactory, the FATF report observed that these offenses did not appear to cover acts of an individual terrorist not related to a larger terrorist group and the collection of funds under some circumstances. Further, customer due diligence measures were lacking in the financial sector and in the designated non financial businesses and professions. Additionally, the FATF report stated that, due to Spain's lack of comprehensive statistics on prosecutions and convictions relating to money laundering and terrorist financing, the effectiveness of the AML/CFT offences and measures was difficult to assess more precisely. In its 2008-2009 Annual Report, the FATF names Spain as one of the countries that has committed to adopting the organization's 40 recommendations and 9 special recommendations.

General Overview

According to a Financial Action Task Force (FATF) mutual evaluation of Spain's Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime conducted against the FATF's forty recommendations and nine special recommendations, the overall AML/CFT framework in Spain is generally comprehensive. The FATF published its findings in a 2006 report, in which it concluded that Spain achieved a high degree of compliance with most of the FATF's recommendations. The FATF report stated that Spain was compliant with 10 FATF recommendations and special recommendations; largely compliant with 22; partially compliant with 12; non compliant with 3; and two recommendations were found not applicable to Spain. The FATF report stated that money laundering offences were broad in scope and easy to apply. Despite, the overall positive environment, Spain was rated partially compliant with Recommendation (R) 5 on customer due diligence (CDD), which is categorized as a core recommendation by the FATF. A country needs to be rated compliant or largely compliant with the core recommendations to be classified as having a properly functioning AML/CFT regime in place.

Money laundering is criminalized pursuant to Article 301 of the Spanish Penal Code on the basis of the Vienna and Palermo Conventions. Terrorist financing is criminalized pursuant to Article 571 of the Spanish Penal Code, and this criminalization is largely in line with international standards, according to the 2006 FATF report. On March 6, 2001 Spain's Council of Ministers adopted a decision to implement the United Nations Security Council Resolution (UNSCR) No. 1373 in Spain's legal framework. However, while concluding that the terrorist financing offences were broadly satisfactory, the FATF report also observed that these offenses did not appear to cover acts of an individual terrorist not related to a larger terrorist group or the collection of funds under some circumstances.

The 2006 FATF report also pointed out that Spain's legal framework on confiscation, freezing and seizing of proceeds of crime measured up well against the FATF standards. The obligation to freeze under S/RES/1267 (1999) has been implemented through EC Regulation No. 881 of 2002. Spain's legal framework on confiscation, freezing and seizing of proceeds of crime is further complemented by Article 127 of the Spanish Penal Code, which allows for broad confiscation by applying it to all crimes under the Code, and Article 374 which mandates confiscation of assets acquired through drug trafficking. Law No. 12 of 2003 permits freezing of any type of financial flow so as to prevent the funds from being used to commit terrorist acts.

Established in 1993 under Law No. 19 of 1993 and Royal Decree No. 925 of 1995, the Executive Service of the Commission for the Prevention of Money Laundering (SEPBLAC) is Spain's Financial Intelligence Unit (FIU). A 2010 United States’ Department of State International Narcotics Control Strategy Report (2010 U.S. DoS report) states in its section on money laundering and financial crimes that, in 2008, SEPBLAC received 2,904 suspicious transaction reports (STRs), up from 2,783 in 2007. Furthermore, a 2009 version of the U.S. DoS report states that SEPBLAC received 590 requests for information from other FIUs in 2007 and made 193 requests to other Egmont Group members. However, the 2006 FATF report pointed out some deficiencies in SEPBLAC's operations, most notably that law enforcement authorities (i.e. the national police and the anti-corruption prosecutor) "believe that they are receiving too many reports and that many of them are inadequate for starting an investigation" (p. 4). The FATF report recommended that law enforcement agencies be more involved in the process of deciding which STRs SEPBLAC dispatches, although subsequent sources through May 2010 have not provided any update on this issue. In April 2010, Law No. 12 was unified with Law No. 19 of 1993 and Royal Decree 925 of 1995 into a new Law No. 10 for the Prevention of Money Laundering and Financing of Terrorism. According to the International Bar Association website, the new law means that Spain has now implemented the Third EU Money Laundering Directive.

Pertaining to STRs, the 2010 U.S. DoS report notes that Law No. 19 of 2003 requires financial institutions to make monthly reports on large transactions. Specifically, banks must report all international transfers in excess of EUR 50,000. Furthermore, all internal transfers greater than EUR 100,000 must be declared and reported. Meanwhile, foreign exchange houses and money remitters are required to report transactions above EUR 5,000. According to the 2009 U.S. DoS report, Law No. 19 of 1993 imposes AML/CFT obligations on most categories of Designated Non-Financial Businesses and Professions (DNFBPs), including realty agents, dealers of precious metals, stones and art, lawyers, accountants, auditors, casinos and notaries. However, the 2006 mutual evaluation highlighted some key shortcomings in Spain's adherence to Recommendation 12. For example, all existing requirements in relation to the identification of beneficial ownership and additional identification/know-your-customer rules (especially for higher risk activities) do not apply to DNFBPs. The 2010 U.S. DoS report states that most DNFBPs “are subject to the same core obligations as the financial sector” (p. 195), outlining the same set of businesses listed above as being subject to these rules. However, the same report also states that the Spanish government “should work to close the loopholes in the [area] of customer due diligence” (p. 197).

According to the 2010 U.S. DoS report, Spain is a party to the 1988 United Nations (UN) Drug Convention, the UN Convention against Transnational Organized Crime, the UN Convention against Corruption, and the UN Convention for the Suppression of the Financing of Terrorism. Also, SEPBLAC belongs to the Egmont Group of FIUs. However, the FATF report noted that, as of the release date of the report in June 2006, Spain had yet to fully implement Article 3(1)(c)(1) of the Vienna Convention and Articles 6(1)(b)(i) and 6(2)(e) of the Palermo Convention ("possession or use", self-laundering). Also, Spain has not fully implemented Article 2(1), which criminalizes both the provision of funds for terrorist acts and the collection of such funds. As of May 2010, there is no further information publicly available regarding Spain's implementation of these requirements.

The Principles

CP1. Legal Systems and Related Institutional Measures

The 2006 FATF report finds Spain largely compliant with R 1 regarding the money laundering offence and largely compliant with R 2 on its mental element and corporate liability. Money laundering is criminalized pursuant to Article 301 of the Spanish Penal Code on the basis of the Vienna and Palermo Conventions, even though some of the requirements listed in these Conventions are not included in Article 301, such as the possession or use of the proceeds of crime.

Spain is rated largely compliant with Special Recommendation (SR) II on the criminalization of terrorist financing in the 2006 FATF report. Terrorist financing is criminalized pursuant to Article 571 of the Spanish Penal Code, and is largely in line with international standards, according to the same FATF report. Under Articles 572 and 574 of the Spanish Penal Code, prison terms for terrorism financing crimes range from ten to thirty years, according to the 2009 U.S. DoS report. On March 6, 2001 Spain's Council of Ministers adopted a decision to implement UNSCR No. 1373 into Spain's legal framework. Spain then implemented EC Regulation No. 881 of 2002, which obliges covered countries such as Spain to execute UNSCR No. 1373. According to the 2008 U.S. DoS report, in 2003 Spain adopted Law No. 12 on the Prevention and Blocking of the Financing of Terrorism, which created the Commission of Vigilance of Terrorist Finance Activities (CVAFT), which coordinates all of Spain's efforts at tracking terrorist financing. In April 2010, Law No. 12 was unified with Law No. 19 of 1993 and Royal Decree 925 of 1995 into the new Law No. 10 for the Prevention of Money Laundering and Financing of Terrorism. This was in response to a formal complaint lodged by the European Commission against Spain for “inadequate implementation of EU norms against money laundering,” (p. 195) according to the 2010 U.S. DoS report. According to the International Bar Association (IBA) website, however, by this new Law Spain has now implemented the Third EU Money Laundering Directive. Also, regarding deficiencies in Spain's terrorism financing legal framework, the 2006 FATF report indicates that Spain's terrorism financing offences "do not properly cover terrorist financing in the form of providing or collecting funds directly in order for them to be used to carry out a terrorist act" and that "a lack of more comprehensive statistics on prosecutions, convictions and sanctions imposed on natural and legal persons means that effectiveness cannot be fully assessed" (pp. 165-166).

Concerning the legal framework for confiscation, freezing and seizing of proceeds of crime (R 3), the FATF's mutual evaluation rates Spain as largely compliant with the FATF standard. In Spain, the obligation to freeze proceeds of crime under S/RES/1267 (1999) has been implemented through Council Regulation (EC) No. 881 of 2002. According to the 2009 U.S. DoS report, Law No. 19 of 2003 permits the seizure of up to 100 percent of currency tied to illegal activity under financial crimes laws and allows the seizure of assets of third parties in criminal transactions. The 2010 U.S. DoS report states that Spain's legal framework on confiscation, freezing and seizing of proceeds of crime is further complemented by Article 127 of the Spanish Penal Code, which allows for broad confiscation by applying it to all crimes under the Code, and Article 374 of the Spanish Penal Code, which mandates confiscation of assets acquired through drug trafficking.

With regards to SR III relating to the freezing of terrorist financing-related assets, the FATF mutual evaluation rates Spain as largely complaint. The 2008 U.S. DoS report further notes that Spain complies with, and exceeds all, EU regulations on the freezing of terrorist assets. However, the FATF report recommended that Spain "take the necessary steps to ensure the full practical and efficient application of the otherwise seemingly adequate domestic legal framework laid down in Law 12/2003" (p. 3). As mentioned above, this law was in fact consolidated with other AML legislation in April 2010 under the new Law No. 10 on the Prevention of Money Laundering and Terrorist Financing. Finally, the 2009 U.S. DoS report states that Spain's Council of Ministers has also implemented the obligation to freeze assets under UNSCR No. 1267. As a result, in 2005, the CVAFT took six actions against individuals or entities in 2005 under UNSCR No. 1267 and/or UNSCR No. 1373.

In terms of the FIU and its functions, the FATF report classifies Spain as largely compliant on R 26; partially compliant on R 30 on resources, integrity and training; and partially compliant with R 32 on statistics keeping. As mention before, created in 1993 as an interdepartmental body chaired by the Secretary for Economic Affairs, SEPBLAC is Spain's FIU. Established under Law No. 19 of 1993 and Royal Decree No. 925 of 1995, SEPBLAC's primary mission is "to receive, analyze, and disseminate suspicious and unusual transaction reports from financial institutions and DNFBPs," according to the 2009 U.S. DoS report. The same report states that agencies working with SEPBLAC on AML efforts include the National Drug Plan Office, the Ministry of Economy, Federal Prosecutors (Fiscalia), Customs, Spanish National Police, Civil Guard, National Securities Market Commission (CNMV), Treasury, Bank of Spain, and the Director General of Insurance and Pension Funds. The 2009 U.S. DoS report (the latest report for which this information is available) states that, in 2007, SEPBLAC received 2,783 STRs, up from 2,251 in 2006. Furthermore, SEPBLAC received 590 requests for information from other FIUs in 2007 and made 193 requests to other Egmont Group members. However, the 2006 FATF report pointed out some deficiencies in SEPBLAC's operations, most notably that law enforcement authorities (i.e. the national police and the anti-corruption prosecutor) "believe that they are receiving too many reports and that many of them are inadequate for starting an investigation" (p. 4). The FATF report recommended that law enforcement agencies be more involved in the process of deciding which STRs SEPBLAC dispatches.

The FATF's mutual evaluation also observes Spain to be largely compliant with R 27 on law enforcement authorities; largely compliant with R 28 on the powers of competent authorities; partially compliant with R 30 on resources, integrity and training; and partially complaint with R 33 on statistics. The FATF report commended Spain for the efficiency and comprehensiveness of its AML/CFT law enforcement and prosecution regime, particularly noting that Spain's two main police organizations, the National Police and the Guardia Civil, along with the Drug and Money Laundering Special Prosecutor's Office and the Special Public Prosecutor's Office for the Repression of Economic Crimes Related with Corruption, "have comprehensive powers to compel production of, obtain access to, search premises for, and seize any documents needed during their investigations, as well as other investigative powers" (p. 4). However, the FATF also noted that, due to the lack of statistics (i.e. the number of AML/CFT investigations and the percentage of total investigations completed), it was difficult to actually ascertain whether or not Spain's law enforcement and prosecution authorities performed their functions effectively. The 2010 U.S. DoS report recommends that Spain "maintain and disseminate statistics on investigations, prosecutions and convictions, including the amounts and values of assets frozen or confiscated" (pp. 197-198).

NC2. Preventive Measures - Financial Institutions

The 2006 FATF report finds Spain partially compliant with R 5 relating to customer due diligence (CDD) and non-compliant with R 6 concerning politically exposed persons. On correspondent banking (R 7), Spain is non-compliant, and on new technologies and non face-to-face business (R 8), Spain is rated as partially compliant. In describing the shortcomings in Spain's CDD regime the FATF report noted that: (1) there is no direct obligation to undertake CDD measures when financial institutions have doubts about the veracity or adequacy of previously obtained customer identification data; (2) legal provisions do not set out requirements in relation to the verification of identification data for natural persons or for legal entities (except the verification of information related to the nature of the business); and (3) Royal Decree No. 925 of 1995 is silent on the type of additional identification and "know-your-customer" measures to be taken by financial institutions when facing a higher risk transaction or customer. The major shortcoming cited regarding both R 6 concerning politically exposed persons (PEP) and R 7 on correspondent banking is that Spain has yet to implement adequate AML/CFT measures concerning the establishment of customer relationships with PEPs and cross-border correspondent banks. As of May 2010, there is no further publicly available information regarding any update on these measures.

The FATF's mutual evaluation rates Spain compliant with R 10 on record keeping, and largely compliant with SR VII on wire transfer rules. The FATF mutual evaluation rates Spain largely compliant with R 13 relating to suspicious transaction reporting and compliant with R 14 about protection and no tipping-off. Pertaining to STRs, the 2008 U.S. DoS report points out that, in addition to creating CVAFT, Law No. 12 of 2003 on the Prevention and Blocking of the Financing of Terrorism (since unified with other laws under the new Law for the Prevention of Money Laundering and Financing of Terrorism of 2010) requires reporting entities to submit STRs to SEPBLAC. With regards to R 13, the FATF noted the following as deficiencies: (1) Spanish law does not directly subject attempted transactions to the reporting obligation; and (2) there is a disproportionately large volume of STRs filed by a small number of financial institutions.

On R 19 regarding other forms of reporting, the mutual evaluation rates Spain compliant and Spain is given a partially compliant rating for R 25 on guidelines and feedback. The evaluation also rates Spain as largely compliant with SR IV relating to suspicious transactions reporting linked with terrorism. The FATF report primarily attributed its R 25 assessment to the lack of "specific, timely and systematic feedback to reporting entities especially the status of STRs and the outcome of specific cases" (p. 163).

The 2006 FATF mutual evaluation finds Spain largely compliant with R 15 relating to internal controls, compliance and audit. On R 22 addressing foreign branches and subsidiaries, Spain is rated as largely compliant. Spain is adjudged partially compliant with R 18 pertaining to shell banks. On this topic, the 2009 U.S. DoS report adds that there is no prohibition under Spanish law preventing financial institutions from entering into relationships with shell banks, but notes that Spain has no shell banks. Furthermore, “financial institutions have no requirements to determine whether a correspondent financial institution in a foreign country allows accounts used by shell banks” (p. 461), states the report.

The 2006 FATF report finds Spain to be largely compliant with R 17 regarding sanctions and partially compliant with R 23 relating to regulation, supervision and monitoring. On R 29 about supervisors, Spain is rated partially compliant. The FATF report attributes its R 23 assessment to key financial institutions producing and transmitting a paucity of reports to SEPBLAC, and, as such, the compliance of these institutions with FATF standards is not being adequately measured. On R 29, the FATF reported cited as a central deficiency the low number of on-site supervisory visits resulting in inspection reports on compliance with AML/CFT requirements, which raises concerns about the effectiveness of Spain's supervisory regime. The 2009 U.S. DoS report states that SEPBLAC’s “supervisory capabilities continue to be hampered by its limited resources” (p. 463). The report notes that SEPBLAC has acknowledged this problem and has vowed to address it. The 2009 U.S. report recommended that the government of Spain provide SEPBLAC with the resources necessary to perform its function.

NC3. Preventive Measures - Designated non-Financial Business and Professions

The 2006 FATF report rates Spain partially compliant with R 12 on CDD and record keeping obligations for DNFBPs. According to the report, Law No. 19 of 1993 has imposed AML/CFT obligations on most categories of DNFBPs since April 2005, including realty agents, dealers in precious metals and stones, lawyers, accountants, casinos and notaries. However, the mutual evaluation highlighted some shortcomings in Spain's adherence with R 12, among which are: (1) all existing requirements in relation to the identification of beneficial ownership and additional identification/know-your-customer rules (especially for higher risk activities) do not apply to DNFBPs; (2) Spain has not implemented adequate AML/CFT measures concerning R 6 that are applicable to reporting non-financial businesses and professions; and (3) the evaluation noted some concerns about the implementation of the record keeping obligation by casinos.

On R 16 about STRs for DNFBPs, Spain is rated as partially compliant. Concerning R 24 about DNFBP regulation, supervision and monitoring, the 2006 FATF mutual evaluation rates Spain as non-compliant. According to the FATF report, the same deficiencies noted for R 13 and R 15 apply equally to R 16 about STRs for DNFBPs. Regarding R 24, the FATF report noted that, at the time of the assessment, the Spanish authorities had not yet designated a supervisor for the DNFBPs, nor had they arranged additional supervisory capacity and resources that will be required. As such, at the time of the evaluation, internet casinos and other DNFBPs were not monitored for AML/CFT activities. The 2010 U.S. DoS report states that most DNFBPs “are subject to the same core obligations as the financial sector” (p. 195), outlining the same set of businesses listed above as being subject to these rules. However, the same report states that the Spanish government “should work to close the loopholes in the [area] of customer due diligence” (p. 197).

EN4. Legal Person and Arrangements & Non-Profit Organizations

The 2006 FATF mutual evaluation rates Spain partially compliant with R 33 relating to legal persons and access to beneficial ownership and control information. The report attributes this primarily to Spanish law not requiring sufficient transparency regarding beneficial ownership and control of legal persons. In addition, access to information on beneficial ownership and control of legal persons is often not timely and sometimes completely unavailable. Finally, the FATF report observes that there is a lack of adequate, accurate and current information on beneficial ownership and control of legal persons using bearer shares, which are still permitted in Spain, even though they are used less than in the past. The 2010 U.S. DoS report makes statements indicating that progress on these fronts has been minimal. The report concludes that loopholes still exist in the areas of beneficial ownership of legal persons and the continued use of bearer shares. R 34 on legal arrangements and beneficial owners is not applicable in the Spanish context due to Spanish legislation not recognizing the legal concept of a trust, including trusts located in other countries. On SR VIII relating to non-profit organizations, the mutual evaluation finds Spain largely compliant.

CP5. National and International Co-operation

The 2006 FATF report finds Spain largely compliant with R 31 on national cooperation, and partially compliant with R 32 on statistics. Regarding the rating assigned to R 31, the FATF report states that the "planning, co-ordination and implementation of the anti-money laundering policy in Spain are carried out through the Commission for the Prevention of Money Laundering," (p. 8) which facilitates cooperation amongst Spain's AML/CFT regime overseers. As mentioned before, according to the 2009 U.S. DoS report, agencies working with SEPBLAC on AML efforts include the National Drug Plan Office, the Ministry of Economy, Federal Prosecutors (Fiscalia), Customs, Spanish National Police, Civil Guard, National Securities Market Commission (CNMV), Treasury, Bank of Spain, and the Director General of Insurance and Pension Funds. While this enables cooperation, the FATF report recommended that Spain improve upon its intra-agency cooperation.

The 2006 mutual evaluation rates Spain as largely compliant with R 35 regarding the ratification of international conventions, and partially compliant with SR I on implementing UN instruments. Most importantly, regarding R 35 and SR I, the FATF report notes that, as of the release date of the report in June 2006, Spain had yet to fully implement Article 3(1)(c)(1) of the Vienna Convention and Articles 6(1)(b)(i) and 6(2)(e) of the Palermo Convention. Also, Spain had not fully implemented Article 2(1), which criminalizes both the provision of funds for terrorist acts and the collection of such funds. As of May 2010, there is no further publicly available information regarding the implementation of these Articles. According to the 2010 U.S. DoS report, Spain is a party to the 1988 UN Drug Convention, the UN Convention against Transnational Organized Crime, the UN Convention against Corruption, and the UN International Convention for the Suppression of the Financing of Terrorism. Also, SEPBLAC belongs to the Egmont Group of FIUs.

The 2006 FATF report states that Spain is compliant with R 36 concerning Mutual Legal Assistance (MLA). The 2010 U.S. DoS report notes that Spain has signed criminal mutual legal assistance agreements with “a number of countries” (p. 197) and has bilateral agreements on AML cooperation and information exchange with 15 countries, including the United States. Furthermore, SEPBLAC has its own similar bilateral agreements with more than 25 FIUs.

Spain is compliant with R 37 on dual criminality and compliant with R 38 pertaining to MLA on confiscation and freezing, as stated in the 2006 FATF report. With regards to SR V on international cooperation, the mutual evaluation rates Spain as largely compliant. The evaluation also adjudges Spain to be compliant with R 39 relating to extraditions. Finally, on R 40 pertaining to other forms of international cooperation, Spain was rated largely compliant.

The SEPBLAC website offers more information on Spain’s international cooperation on AML efforts. Spain participates as an observer in both GAFISUD, the South American AML group, and CFATF, the Caribbean Financial Action Task Force. At the European level, Spain is a member of the FIU.net project, a decentralized computer network that coordinates FIUs from the EU to share information gleaned from financial intelligence efforts. Furthermore, SEPBLAC attends, on a guest-party basis, meetings of the Wolfsberg Group, an organization of 11 international banks which seeks the development of know-your-customer and AML policies for the financial services industry. Finally, SEPBLAC participates in meetings of the AML/CTF Expert Group of the Basel Committee and of the relevant AML group of the Committee of European Banking Supervisors.