Information required by banks for compliance with money laundering regulations
Legal and Tax advice from Fernando Aliaga Almost certainly many readers will have received over the past few years a letter from their bank asking for information about the holders of their bank accounts. Many people after having received such a letter contact us asking why this information is required and if one should provide it or not.
Law 10/2010 on Money Laundering and the Prevention of Terrorism obliges Spanish banks to:
Correctly identity their clients,
To obtain information about their financial activities (by means of tax returns for example), and in the case of companies or entities,
To identity the “real owner” of the company, namely the individual who ultimately holds a controlling interest in the company.
The bank is obliged to collect this information and if it is not provided, the bank may freeze the corresponding accounts. In addition to the banks, insurance companies are also obliged to request the same information as well as investment companies, currency exchange companies, brokers involved in obtaining loans, property developers and those people who carry out intermediary or agency activities in the real estate market, auditors, fiscal advisors and external accountants, notaries and registrars in Land Registry, lawyers, court proctors and other independent professionals who are involved in the providing of services regarding the purchase of real estate, fund management, the opening and management of bank accounts and other similar activities.
Additional legislation has regulated in fine detail the general requirements of Law 10/2010 that establishes a prohibition to carry out commercial activities with entities, with regard to which the ultimate individual with a controlling interest cannot be identified, due to the refusal of the client to provide the necessary information or due to the client’s obstructive behaviour.
Specifically, the legislation applicable establishes that in the case of the typical British institution of the “Trust”, those professionals mentioned above are obliged to identify the trustees and beneficiaries of the trust and any other individual that exercises the effective ultimate control over the trust, even if this is exercised by means of a chain of different entities/individuals.
The persons obliged to comply with money laundering regulations must obtain from their clients information that permits them to be aware of the nature of the client’s professional or commercial activity and will make a record of this prior to starting their professional relationship with the client. A check will be carried out on the client’s professional or commercial background in the following cases:
when the client is involved in a business activity that is considered to constitute an above average risk on the basis of the risk analysis of the client,
when the nature and volume of the active and passive transactions of the client are not consistent with their declared activity,
when a large number of deposits in cash are made in an account by the same person or by many different persons,
when multiple transfers are made by several different persons to the same beneficiary outside of Spain or by one person outside of Spain to several beneficiaries within Spain,
when transfers are received from places that are marked down as high risk countries.
when transfers are received without any identification of the ordering party or without the identity details of the ordering account. The persons obliged to comply with the money laundering regulations must examine with special attention all those transactions which show unusual behaviour, an unusual degree of complexity or which do not reveal an obvious economic or licit objective. If indicators of the above are evident, they must be notified to the Executive Service of the Commission for Prevention of Money Laundering (SEPBLAC). The compliance with the money laundering regulations referred to above is given such importance by the banks due to the possible fines that could be applied which, in the case of serious breaches of the legislation, may amount to 150.000€ rising to a potential 1.500.000€ or either double the amount of the transaction or 5% of the net wealth of the person who breached their money laundering obligations.