Money Laundering

Since the 9/11 attacks on the World Trade Center, the battle against terrorism has been dramatically stepped up.

One of the main counter terrorist measures has been the policing of financial markets in order to put a stranglehold on potential terrorist funds. Naturally, those financing terrorists are now clamouring to cover the tracks of where their money has come from using sophisticated techniques to hide their finances.

However, money laundering is not just restricted to terrorist groups. Individuals and corporate bodies use the process to maximise gains, albeit illegally.

Money laundering is the process of disguising the origin of these funds. This is achieved by changing the form or moving the funds to a place where they are less likely to attract attention. Conversely, many new tactics have also been employed by anti-money laundering units such as the Financial Action Task Force (FATF).

Originally established by the G-7 Summit of Paris in 1989 to develop a co-ordinated international response to the problem, members of FATF now include 29 countries and jurisdictions, including Spain.

Although Spain is not a drug producing country, its geographical proximity as well as its linguistic, cultural and social links to notable drug production areas make it a sensitive location for the international trafficking of narcotics. In particular, Spain is used as a transit country for cocaine and hashish to the rest of Europe.

Given these aforementioned circumstances, it is obvious that Spain is confronted with attempts at money laundering. Illicit drug trafficking, forgery, swindling and organised crime are the predominant sources of money which is laundered in Spain. Among the chief money laundering methods within the financial system are: money-changing at banks or bureaux de change, mingling of illicit funds with money generated by lawful activities, and international transfers with incomplete or fictitious data. In addition, the cross-border conveyance of cash as well as investments in the real estate sector in the Canary Islands through front companies, especially in tourist areas, is also used.

Draft legislation on money laundering anticipates that professionals such as Auditors, external accountants and fiscal advisors will be obliged to report any financial transactions that may involve money laundering.

Banks and investment companies who take part in the transactions on behalf of their clients will also have to report. Recently, the Spanish tax office set up specialised units dedicated to investigating tax fraud and supervising financial transactions in key areas considered sensitive for tax evasion purposes… especially in coastal tourist areas.

One of the sectors singled out for close supervision is the property market, particularly in the so-called residential tourism; where the foreign investor is the main source of new sales. Black money deals and undeclared transactions in real estate in Spain are now being closely targeted so think twice before attempting to make a quick buck on property outside the legal system. It could cost a lot more than you save in the long run.