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 40+9 recommendations and special recommendations. The FATF published its findings in a 2006 report, in which it concludes that Spain is compliant with 10 FATF recommendations and special recommendations; largely compliant with 22; partially compliant with 12; non compliant with 3; and two recommendations are not applicable to Spain. The report notes that the overall AML/CFT framework in Spain is generally comprehensive, and achieves a high degree of compliance with most of the FATF's recommendations. Nevertheless, there are some areas where Spain's AML/CFT regime could be improved. For example, while concluding that the terrorist financing offences are broadly satisfactory, the FATF report observes that these offenses do 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 are lacking in the financial sector and in the designated non financial business and professions. Additionally, the FATF report states 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 is difficult to assess more precisely. 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.
General Overview
According to the 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 40+9 recommendations and special recommendations, the overall AML/CFT framework in Spain is generally comprehensive. The FATF published its findings in a 2006 report, in which it concludes that Spain achieves a high degree of compliance with most of the FATF's recommendations. The FATF report states that Spain is compliant with 10 FATF recommendations and special recommendations; largely compliant with 22; partially compliant with 12; non compliant with 3; and two recommendations are not applicable to Spain. The FATF report states that the money laundering offences are broad in scope and easy to apply. 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. On March 6, 2001 Spain's Council of Ministers adopted a decision to implement European Council (EC) Regulation No. 881 of 2002 (amended by EC Regulation No. 803 of 2008), which obliges covered countries such as Spain to execute UNSCR No. 1373. However, while concluding that the terrorist financing offences are broadly satisfactory, the FATF report also observes that these offenses do not appear to cover acts of an individual terrorist not are they related to a larger terrorist group and the collection of funds under some circumstances.
The FATF report points out that Spain's legal framework on confiscation, freezing and seizing of proceeds of crime measures 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 complimented 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). The 2008 U.S. Department of State (DoS) report states that, in 2006 SEPBLAC received 2,251 suspicious transaction reports (STRs), down from 2,502 in 2005. Furthermore, SEPBLAC received 539 requests for information from other FIUs in 2006 and made 231 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 recommends that law enforcement agencies be more involved in the process of deciding which STRs SEPBLAC dispatches.
Pertaining to STRs, the 2008 U.S. DoS report notes that Law No. 19 of 2003 requires financial institutions to make monthly reports on large transactions. According to the report, Law No. 19 of 1993 has imposed AML/CFT obligations on most categories of Designated Non-Financial Business and Professions (DNFBP's) since April 2005, including realty agents, dealers of precious metals and stones, lawyers, accountants, casinos and notaries. However, the mutual evaluation highlights 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.
According to the 2008 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 International Convention for the Suppression of the Financing of Terrorism. Also, SEPBLAC belongs to the Egmont Group of FIUs. However, 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 ("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. There is no further information publicly available regarding Spain's implementation of these requirements.
The Principles
1. Legal Systems and Related Institutional Measures
The 2006 FATF report finds Spain largely compliant with Recommendation (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 largely compliant with Special Recommendation (SR) II on the criminalization of terrorist financing as noted in the 2006 FATF report. 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. Under Articles 572 and 574 of the Spanish Penal Code, prison terms for terrorism financing crimes range from ten to fifteen years. On March 6, 2001 Spain's Council of Ministers adopted a decision to implement UNSCR No. 1373 in Spain's legal framework. Spain implements 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 2001 Spain adopted Law No. 12 of 2003 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. However, regarding deficiencies in Spain's terrorism financing legal framework, the 2006 FATF report notes 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 confiscation, freezing and seizing of proceeds of crime (R 3), the FATF's mutual evaluation rates Spain as largely compliant. The FATF report points out that Spain's legal framework on confiscation, freezing and seizing of proceeds of crime measures up well to the FATF standards. 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. In addition, 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. Spain's legal framework on confiscation, freezing and seizing of proceeds of crime is further complimented 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. 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. Spain implements EU EC No. 881 of 2002, which obliges covered countries such as Spain to execute UNSCR No. 1373, through EC No. 2580 of 27 December 2001. These obligations also allow for the freezing of terrorist assets. However, the FATF report recommends 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). Finally, the 2008 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, for a total value of 83.75 euros (US$106).
In terms of the FIU and its functions, the FATF report classifies Spain as largely compliant on R 26; partially compliant on R 30 about resources, integrity and training; and partially compliant with R 32 on statistics keeping. Created in 1993 as an interdepartmental body chaired by the Secretary for Economic Affairs, the 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" (U.S. DoS 2008). According to the U.S. DoS report, all agencies involved in the prevention of money laundering participate in SEPBLAC, including 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 U.S. DoS report states that, in 2006, SEPBLAC received 2,251 STRs, down from 2,502 in 2005. Furthermore, SEPBLAC received 539 requests for information from other FIUs in 2006 and made 231 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 recommends that law enforcement agencies be more involved in the process of deciding which STRs SEPBLAC dispatches.
The FATF's mutual evaluation observes that Spain is largely compliant with R 27 on law enforcement authorities; largely compliant with R 28 on the powers of competent authorities; partially compliant on resources, integrity and training (R 30); and partially complaint on statistics (R 32). The FATF report commends 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 report also notes that, due to the lack of statistics (i.e. the number of AML/CFT investigations and the percentage of total investigations completed), it is difficult to actually ascertain whether or not Spain's law enforcement and prosecution authorities perform their functions effectively. The 2008 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" (U.S. DoS 2008).
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. Among the shortcomings in Spain's CDD regime the FATF report notes 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) current 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 PEP's and cross-border correspondent banks.
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 rated 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 requires reporting entities to submit STRs to SEPBLAC. The 2008 U.S. DoS report states that, in 2006, SEPBLAC received 2,251 STRs, down from 2,502 in 2005. Furthermore, SEPBLAC received 539 requests for information from other FIUs in 2006 and made 231 requests to other Egmont members. With regards to R 13, the FATF report 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 as compliant, and Spain is given a partially compliant rating with 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.
According to the 2006 FATF report, Spain is 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.
3. Preventive Measures - Designated non-Financial Business and Professions
The 2006 FATF report found that Spain is 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 DNFBP's since April 2005, including realty agents, dealers in precious metals and stones, lawyers, accountants, casinos and notaries. However, the mutual evaluation highlights 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 Spanish authorities have not yet designated a supervisor for the DNFBPs, nor have they arranged additional supervisory capacity and resources that will be required. As such, internet casinos and other DNFBP's are not monitored for AML/CFT activities.
4. Legal Person and Arrangements & Non-Profit Organizations
The 2006 FATF mutual evaluation reports that Spain is partially compliant with R 33 relating to legal persons and access to beneficial ownership and control information. The FATF 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 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.
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.
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. According to the 2008 U.S. DoS report, all agencies involved in the prevention of money laundering participate in SEPBLAC, including the National Drug Plan Office, the Ministry of Economy, Federal Prosecutors (Fiscalia), Customs, Spanish National Police, Civil Guard, CNMV, Treasury, Bank of Spain, and the Director General of Insurance and Pension Funds. This enables cooperation however; the FATF report recommends that Spain improve upon its intra-agency co-operation.
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 has not fully implemented Article 2(1), which criminalizes both the provision of funds for terrorist acts and the collection of such funds. According to the 2008 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.
According to the 2006 FATF report, Spain is compliant with R 36 concerning Mutual Legal Assistance (MLA). The 2008 U.S. DoS report notes that Spain has signed criminal mutual legal assistance agreements with Argentina, Australia, Canada, Chile, the Dominican Republic, Mexico, Morocco, Uruguay, and the United States. Spain's MLA with the United States has been in effect since 1993 and permits the sharing of seized assets.
Spain is compliant with R 37 on dual criminality and compliant on R 38 pertaining to MLA on confiscation and freezing as noted in the 2006 FATF report. With regards to SR V on international cooperation, the mutual evaluation rated Spain as largely compliant. The U.S. DoS report adds that, as of March 2008, SEPBLAC has signed memoranda of understanding with 21 other FIU's around the world. The evaluation also adjudged Spain to be compliant with R 39 relating to extraditions. Finally, on R 40 pertaining to other forms of international co-operation, Spain is rated largely compliant.
Financial Action Task Force, "Third Mutual Evaluation Report on Anti-Money Laundering and Combating the Financing of Terrorism: Spain," Paris, France: FATF/OECD, June, 2006. Available from Financial Action Task Force website. Accessed on August 4, 2008. (FATF 2006)
U.S. Department of State, Bureau for International Narcotics and Law Enforcement Affairs, "International Narcotics Control Strategy Report 2008," March 2008. Available from U.S. Department of State website. Accessed on August 4, 2008. (U.S. DoS 2008)
Commission of Vigilance of Terrorist Finance Activities - Comisión de Vigilancia de Actividades de Financiación del Terrorismo (CVAFT) (website in Spanish only)
Executive Service of the Commission for the Prevention of Money Laundering and Monetary Offences - Servicio Ejecutivo de la Comisión de Prevención del Blanqueo de Capitales e Infracciones Monetarias (SEPBLAC)
Law on Specific Measures to Prevent Money Laundering, No. 19, 1993 - Ley sobre Determinadas Medidas de Prevencion del Blanqueo de Capitales, No. 19, 1993 (in Spanish only)
Law on the Prevention and Blocking of the Financing of Terrorism No. 12, 2003 - Ley de Prevención y Bloqueo de la Financiación del Terrorismo No. 12, 2003 (in Spanish only)
Royal Decree Approving the Regulations for the Implementation of the Law No. 19 of 1993 on Specific Measures to Prevent Money Laundering, No. 925, 1995 - Real Decreto por el que se aprueba el Reglamento de la Ley No. 19 de 1993 sobre determinadas medidas de prevención del blanqueo de capitals No. 925, 1995
European Union Directive on the Prevention of the Use of the Financial System for the Purpose of Money Laundering and Terrorist Financing No. 2005/60/EC, 2005 (Third EU Money Laundering Directive)
European Council Decision Concerning Arrangements for Cooperation Between Financial Intelligence Units of the Member States in Respect of Exchanging Information, 2000
European Council Framework Decision on Money Laundering, the Identification, Tracing, Freezing, Seizing and Confiscation of Instrumentalities and the Proceeds of Crime, 2001
European Council Regulation Amending for the 98th time Council Regulation (EC) No. 881 of 2002 Imposing Certain Specific Restrictive Measures Directed Against Certain Persons and Entities Associated with Usama bin Laden, the Al-Qaida Network and the Taliban, No 803, 2008
Executive Service of the Commission for Monitoring Exchange Control Offences, "Annual Report 2004," Madrid, Spain: SEPBLAC, 2005. Available from Executive Service of the Commission for Monitoring Exchange Control Offences. Accessed on August 4, 2008. (SEPBLAC 2005)
US Department of State, Bureau for International Narcotics and Law Enforcement Affairs, "International Narcotics Control Strategy Report 2006," March 2006. Available from U.S. Department of State website. Accessed on August 4, 2008. (U.S. DoS 2006)
Spain