Title: Spanish Authorities Crack Down on Money Laundering: A Look into KYC Processes

Legal Framework for AML Compliance

Money laundering and terrorist financing concerns continue to escalate, leading Spain’s financial sector under heightened scrutiny. The Know Your Customer (KYC) guidelines and regulations aim to identify the risks and determine the suitability of business relationships with clients.

• Act 10/2010: Spain’s regulations against money laundering and terrorist financing are based on Act 10 of 28 April 2010 – The Prevention of Money Laundering and Terrorist Financing Act. It came into force on 30 April 2010.
• Royal Decree 304: The implementing decree is Royal Decree 304 of 5 May 2014.

Regulatory Overwatch

The Executive Service of the Commission for the Prevention of Money Laundering and Monetary Offences (Sepblac) oversees the prevention of money laundering and terrorist financing.

Typical KYC Identification Process

To establish a business relationship, professionals must verify the identity of the parties involved:

1. Identity Verification: Using official documents such as National Identity Documents or passports.
   • Low-risk Transactions: Transactions below €1,000 do not require identity verification.
2. Beneficial Owner Identification: For corporate bodies, identify the beneficial owner. This is typically a natural person who holds at least 25% of the share capital or voting rights.
3. Professional or corporate activities: Professionals must also gather details on their clients’ professional or corporate activities.
4. Continuous Monitoring: Professionals must continuously monitor the business relationship for suspicious activity.
5. Due diligence: Depending on the transaction’s risk profile, various due diligence measures may apply.

Trusted Partnerships

Professionals can delegate KYC procedures to third parties, provided these parties are under the same legal obligation and fall under Act 10/2010. These arrangements require a written agreement outlining each party’s responsibilities.

No Outsourcing Loopholes

There is no leeway for professionals to outsource KYC duties to third parties not bound by the AML regulations.

Entities Adhering to AML Regulations

Third parties authorized by law to comply with AML regulations include:

• Credit institutions and financial institutions
• Auditors, external accountants, and tax advisors
• Other trust or company service providers
• Estate agents
• Notaries