Last updated on October 28th, 2019 at 04:57 pm
Post Panama, more people are probably aware of the issues around money laundering. In Spain, long gone are the days when few questions were asked about the source of your finance. We explain.
If you buy a property now in Spain you will be asked to disclose the source of your money. This isn’t because you are being singled out or treated any differently from anyone else. But because Spain is doing its best to make sure that there is transparency when it comes to money transfer.
Money laundering is at the core of this concern. In the past, purchasing property was one of the ways in which those involved in illicit money making, such as through drugs and people trafficking, ‘hid’ their money. Sometimes this money was used for terrorism and it’s understandable that the need to become alert to this possibility is at an all-time high.
The term ‘laundering’ is used to reflect the fact that money obtained illegally is ‘cleaned up’ to make it accepted revenue. It is first ‘placed’ and then involved in a financial transaction to cover up its actual source. It might be split up into smaller amounts or placed in an off-shore bank where there is less monitoring of its origins.
Property is one of the favourite means of legitimising laundered money. Other methods include ‘black’ salaries, fictitious loans, casinos and the purchase of other valuable items such as pieces of art. Spain has always been a relatively high risk country due to its positioning between Europe and Central and South America and North Africa.
Spain passed the law, 10/2010 on the 28th April 2010. This legislation means that businesses need to be registered with the money laundering commission in Madrid. This law is an adaptation of the EU law 2015/60/CE that was passed on the 26th October 2005.
Banks have policy statements which explain what they are doing and why they use IT tools to monitor transactions to detect unusual or suspicious activity. If they do have their suspicions they are required to report them.
Every law firm is also bound by the new legislation and must make enquiries about the source of the money when large financial transactions are taking place. Staff are trained to be alert to the possibility of money laundering and an audit can be set in motion to make sure a business is complying.
Banks, real estate agents, currency exchange companies and accountants all have a responsibility to be clear about the source of property purchasers’ finance and ask questions if they’re not. If they do not comply with this legislation then they risk being fined very heavily.
What this might mean for you
Purchasers of property in Spain have been surprised to be asked where the money they are using to buy their property has come from. The questions can include what their profession is and their income and it can feel like an intrusion into your personal space. However, this is what is required by these regulations.
If you are purchasing a property through Abaco’s conveyancing department and need to open a bank account, either as a resident or a non-resident, you will be asked to produce evidence of where that money has come from. This could be a pension certificate, salary slip or other piece of documentation. It isn’t just enough to state the source, you must prove it too.
Spanish banks need to know their customers and it’s not only those who have been purchasing property who have been affected by this. Both resident and non-residents have been asked for additional information to clarify exactly who they are, and in some cases to ask for sources of income. Banks will also be on the look out for sudden and substantial increases in funds and large withdrawals.
The money trail
There needs to be a money trail for any substantial amount of money arriving in Spain. This can create some unusual complications; for example, if a member of your family is making a contribution to the total cost of a property but does not wish to be included on the Deed. In this case, you will need to arrange for them to have placed their money into your account outside of Spain before the complete funds are transferred.
Above all, do not take offence. These procedures are simply established in order to comply with the legal requirements. The reasons behind this tightening up on arrangements are sound ones. Hopefully they should go some way towards addressing the problem of money illegally obtained and used for other illegal purposes.