Financial Crime World

Financial Institution Compliance Requirements in Spain

The Spanish financial regulatory framework is overseen by two main authorities: the Bank of Spain and the National Securities Market Commission (CNMV). These institutions ensure that financial institutions comply with a range of regulations, including those related to authorization, business conduct, capital and liquidity, anti-money laundering, reporting, and penalties.

Authorization

Financial services providers must obtain authorization from the relevant supervisory authority before providing regulated services. This includes obtaining a “passporting” procedure for EU entities, which allows them to provide services on a cross-border basis or with a permanent establishment in Spain without needing additional authorization.

  • Authorization requirements: Financial services providers must meet specific requirements, such as demonstrating financial stability and having adequate internal controls.
  • Passporting procedure: EU entities can obtain a “passport” that allows them to provide services across the European Union without needing additional authorization.

Business Conduct Rules

Financial institutions must adhere to certain business conduct rules throughout the provision of services. These guidelines cover information that must be provided to clients and how services should be delivered.

  • Information disclosure: Financial institutions must provide clear and transparent information about their services, fees, and risks.
  • Service delivery: Financial institutions must deliver services in a fair, honest, and professional manner.

Capital and Liquidity Requirements

Most financial institutions are subject to capital and own resources requirements, while some, such as credit institutions, also maintain liquidity ratios.

  • Capital requirements: Financial institutions must hold a minimum amount of capital to ensure their solvency.
  • Liquidity ratios: Credit institutions must maintain sufficient liquidity to meet their short-term obligations.

Anti-Money Laundering (AML) Regulations

All financial institutions are required to implement customer due diligence measures, have dedicated internal control bodies, and report certain transactions to the Executive Service of the Commission for the Prevention of Money Laundering and Monetary Offenses (Sepblac).

  • Customer due diligence: Financial institutions must verify their customers’ identities and assess the risk of money laundering.
  • Internal controls: Financial institutions must have dedicated internal control bodies to detect and prevent money laundering.

Reporting Requirements

Financial institutions must submit regulatory reports to the competent authorities. The intensity of these reporting requirements varies depending on the institution, service provided, and clients targeted.

  • Reporting frequency: Financial institutions may be required to submit reports on a daily, weekly, or monthly basis.
  • Report content: Reports must include information about transactions, customer due diligence, and internal controls.

Penalties for Infringements

Administrative penalties are imposed by the competent financial supervisory authorities for breaches of financial regulations.

  • Penalty types: Administrative penalties can be fines, warnings, or other disciplinary actions.
  • Penalty amounts: The amount of penalty depends on the severity of the infringement and the institution’s risk profile.

Additional Requirements

Public authorities, such as the Bank of Spain, CNMV, and Sepblac, issue guidelines, Q&As, and other soft law criteria to ensure compliance. State and regional consumer authorities may also provide guidance on protecting consumers, which can be relevant for financial services provision.

  • Guidelines: Public authorities issue guidelines to clarify regulatory requirements.
  • Q&A sessions: Public authorities hold Q&A sessions to address questions from financial institutions.

Relevant Laws and Regulations

The Spanish financial regulatory framework is based on EU Directives, regulations, and Level 3 legislation (guidance and recommendations from EU supervisory authorities). Key laws include Law 13/1994 on the autonomy of the Bank of Spain and Royal Legislative Decree 4/2015 approving the revised text of the Securities Market Law.

  • EU Directives: Financial institutions must comply with EU Directives, such as the Capital Requirements Directive.
  • Regulations: Financial institutions must comply with regulations, such as the Markets in Financial Instruments Regulation.

Scope of Regulation

The main areas of regulation for financial services providers include authorization, business conduct rules, capital and liquidity requirements, AML regulations, reporting requirements, and penalties for infringements.