FATF AML Deficiency List
US Dept of State Money Laundering assessment
Corruption Index (Transparency International & W.G.I.)
Spain is not on the FATF List of Countries that have been identified as having strategic AML deficiencies
Compliance with FATF Recommendations
The latest follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Spain was undertaken in 2019. According to that Evaluation, Spain was deemed Compliant for 28 and Largely Compliant for 10 of the FATF 40 Recommendations. It was also deemed Highly Effective for 1 and Substantially Effective for 9 with regard to the 11 areas of Effectiveness of its AML/CFT Regime.
Money Laundering / Terrorism Financing Risks (FATF Mutual Evaluation)
Spain faces a range of money laundering (ML) and terrorist financing (TF) risks, and the following are particularly important in the Spanish context.
Organised criminal groups, comprised of both Spanish nationals and/or foreign criminals, are active in Spain. Criminals from several countries live in Spain, often taking advantage of the sometimes large resident communities of fellow citizens, and may continue their business from Spain, launder the proceeds of crime in Spain, or even invest criminal proceeds in Spain after they have been laundered elsewhere.
Real estate transactions have been involved in recent significant criminal cases and appear to be a major means of ML in Spain. ML through real estate is internationally a subject of concern in its own right. Many cases have involved foreign criminals resident in Spain laundering the proceeds of foreign crime through the Spanish real estate sector. The real estate and construction sectors in Spain underwent a boom in the years before 2009, followed by a significant contraction (during which illicit activity generally becomes more visible). Several high-profile ML cases in recent years (for example, White Whale, and Operation Malaya) have involved major real estate transactions, including the use of cash purchases, and complex networks of companies (and, on occasion trusts) often constituted abroad in nearby off-shore centres, such as Andorra or Gibraltar. There have also been some corruption cases linked to this sector, as described in more detail below.
Spain is a trans-shipment point for cross-border illicit flows of drugs entering Europe from North Africa and South America. Criminals also use Spain as a location to launder the proceeds of the crimes committed in Spain prior to transferring them back to their country of origin. The market for illicit drugs remains dynamic within Europe’s criminal markets, with approximately one third of European organised crime groups involved in its distribution and production. While drug offences and official seizures in Spain have declined slightly in the past several years, Spain remains a logistical hotspot for African and Latin American organised crime groups, with linguistic and cultural ties to the region. While Colombian cocaine dealers represent the traditional threat, Romanian, Nigerian, Mexican and North African groups have recently entered the drug trade. These groups often import synthetic drugs and hashish from Asia and Northern Africa respectively.
Spain’s geographic position, including the North African enclaves Melilla and Ceuta, expose it to the risk of ML and TF through illicit movement of cash across Spain’s borders. The volume of cash movement associated to cross-border trading and to the informal economy across Spain’s borders with Morocco in Ceuta and Melilla poses a high risk to camouflage cash flows associated with drug trafficking, tax and customs fraud, counterfeiting and human trafficking.
The money or value transfer service (MVTS) sector has proven vulnerable to exploitation by organised criminal groups seeking to move their illicit gains out of the country.
Spain’s general economic situation also affects the ML risks. The recent recession has put pressure on Spain’s fiscal position (leading to increased taxation), and has left persistent high unemployment (relative to other EU members). Spain’s black economy6 represents a significant share of economic activity, comparable with other countries in the region. These factors indicate an elevated risk of tax crimes. Tax crimes, including VAT fraud and evasion of customs duties, are a problem, and there have been a number of large cases in this area which highlight the significant scale of tax crimes in Spain.
Spain faces significant TF risks, and has been the victim of terrorist attacks, from two main groups—the home-grown separatist terrorist groups such as Euskadi ta Askatasuna (ETA), and Islamist terrorist groups (many of which have links to the al-Qaeda network).
ETA has been characterised by a sophisticated structure, including a branch of operations responsible for financing its activities. The organisation also has strong ties with the Basque region of France, which adds a trans-national element. ETA’s methods of TF have ranged from fundraising through raffles, lotteries, and mobile taverns (txoznas), through to extortion (a so-called revolutionary tax), through to operating a complex network of revenue-generating companies. Some abuse of non-profit organisations (NPOs) has also been observed. Through successful investigations and prosecutions, Spain has effectively dismantled the economic wing of ETA and a cease-fire has held for some years. However, ETA has not entirely disappeared and remains a very real risk in Spain.
Spain also faces high terrorism and TF risk from Islamist terrorist groups, many of which have links to the al-Qaeda network. Unlike ETA, these groups tend to operate through small cells that are primarily self back to neighbouring countries in North Africa and the Maghreb, often using informal MVTS (hawaladar) to do so.
Spain is a major advanced economy with a well-developed financial sector, and is exposed to the same general ML/TF risks that affect other advanced economies. The risks affecting the financial sector are also influenced by the financial crisis of 2009-10, which saw significant consolidation in the banking sector in particular.
Spain has no official estimate of the overall value of criminal proceeds or specific types of crime. However, Spanish officials estimate that the value of assets held by high-intensity criminal organisations and standard criminal organisations is EUR 427 million and EUR 1 billion respectively.
US Department of State Money Laundering assessment (INCSR)
Spain is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.
Spain proactively identifies, assesses, and understands its money laundering vulnerabilities and works to mitigate risks. Organized crime groups based in Africa, Latin America, and the former Soviet Union use Spain as a logistical hotspot. Illicit drugs entering Europe from North Africa and South America use Spain as a transshipment point. Spain largely complies with international AML standards and, in general, has updated AML regulations and competent authorities.
The government continues to build on its already strong measures to combat money laundering.
In 2018, Spain approved measures to modify its money laundering legislation to comply with the EU’s Fourth AML Directive. In November 2019, Spain joined five other EU member states to call for the establishment of a new supervisory authority to lead the bloc’s AML efforts as well as updated AML regulations.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 62
World Governance Indicator – Control of Corruption 74
Bribery is not widespread in business dealings in Spain, yet companies cite corruption as a business impediment. Many corruption cases have been initiated in recent years, revealing corruption risks and mismanagement in local-level public procurement in urban planning and construction. The Criminal Code (in Spanish) makes it illegal for individuals to offer and accept bribes, and corporate entities can be held criminally liable for corruption offences committed by their representatives. Facilitation payments are prohibited, and gifts and hospitality may be considered illegal depending on the intent and benefit obtained. Spain's attempts to limit corruption have intensified in recent years. New anti-corruption units have been created, new transparency-enhancing legislation has been passed, and efforts have been made to improve public control and governance systems. As a result, corruption investigations, arrests and prosecutions have significantly increased. For further information - GAN Integrity Business Anti-Corruption Portal
After experiencing a prolonged recession in the wake of the global financial crisis that began in 2008, in 2014 Spain marked the first full year of positive economic growth in seven years, largely due to increased private consumption. At the onset of the financial crisis, Spain's GDP contracted by 3.7% in 2009, ending a 16-year growth trend, and continued contracting through most of 2013. In 2013, the government successfully shored up struggling banks - exposed to the collapse of Spain's depressed real estate and construction sectors - and in January 2014 completed an EU-funded restructuring and recapitalization program.
Until 2014, credit contraction in the private sector, fiscal austerity, and high unemployment weighed on domestic consumption and investment. The unemployment rate rose from a low of about 8% in 2007 to more than 26% in 2013, but labour reforms prompted a modest reduction to 22% in 2015. High unemployment strained Spain's public finances, as spending on social benefits increased while tax revenues fell. Spain’s budget deficit peaked at 11.4% of GDP in 2010, but Spain gradually reduced the deficit to just under 7% of GDP in 2013-14, and 4.7% of GDP in 2015. Public debt has increased substantially – from 60.1% of GDP in 2010 to nearly 101% in 2015.
Exports were resilient throughout the economic downturn and helped to bring Spain's current account into surplus in 2013 for the first time since 1986, where it remained in 2014-15. Rising labour productivity and an internal devaluation resulting from moderating labour costs and lower inflation have helped to improve foreign investor interest in the economy and positive FDI flows have been restored.
The government's efforts to implement labour, pension, healthcare, tax, and education reforms - aimed at supporting investor sentiment - have become overshadowed by political activity in 2015 in anticipation of the national parliamentary elections in December. The European Commission criticized Spain’s 2016 budget for its easing of austerity measures and its alleged overly optimistic growth and deficit projections. Spain’s borrowing costs are dramatically lower since their peak in mid-2012, and despite the recent uptick in economic activity, inflation has dropped sharply, from 1.5% in 2013 to a negative 0.6% in 2015.
Agriculture - products:
grain, vegetables, olives, wine grapes, sugar beets, citrus; beef, pork, poultry, dairy products; fish
textiles and apparel (including footwear), food and beverages, metals and metal manufactures, chemicals, shipbuilding, automobiles, machine tools, tourism, clay and refractory products, footwear, pharmaceuticals, medical equipment
Exports - commodities:
machinery, motor vehicles; foodstuffs, pharmaceuticals, medicines, other consumer goods
Exports - partners:
France 15.7%, Germany 11%, Italy 7.4%, UK 7.4%, Portugal 7.1%, US 4.5% (2015)
Imports - commodities:
machinery and equipment, fuels, chemicals, semi-finished goods, foodstuffs, consumer goods, measuring and medical control instruments
Imports - partners:
Germany 14.4%, France 11.7%, China 7.1%, Italy 6.5%, Netherlands 5%, UK 4.9% (2015)
Investment Climate - US State Department
Spain is open and seeking to attract additional foreign investment, particularly to help spur recovery from its recent economic crisis. Spain’s well-educated work force, excellent infrastructure, large domestic market, and export possibilities have attracted foreign companies in large numbers over the past three decades. Spanish law permits foreign ownership in investments up to 100 percent, and capital movements are completely liberalized. In 2015, gross new foreign direct investment reached EUR 22.695 billion, with the six main investors in Spain being the United States, Luxembourg, the Netherlands, Mexico, France, and the United Kingdom. This investment focused particularly on activities related to energy, real estate, finance and insurance, manufacturing and sales.
Spain emerged from its recession in the third quarter of 2013. Even with a high unemployment rate – 20.9 percent at the close of 2015 – and significant stocks of household and public indebtedness, the economy continued to recover in 2015 and has benefited from a resurgence in domestic consumption. The government attributes this turn-around in part to the economic reforms it implemented beginning in 2012, the largest in the country’s democratic history, which streamlined budgets and loosened labor laws to make hiring and firing easier. As part of this effort, the government sharply curbed public spending, which helped stabilize the fiscal situation. Major economic imbalances are being corrected, and competitiveness and flexibility are being restored.
The government implemented a series of labor market reforms and the restructuring of the banking system, all measures aimed at improving the efficiency in the allocation of resources, the full effects of which were visible by the end of 2014. To avoid the fragmentation of the domestic market emerging from differences of central, regional and local regulation, the 2013 Market Unity Guarantee Act was adopted. The law aims to rationalize the regulatory framework for economic activities, eliminating duplicative administrative controls by implementing a single license system that facilitates the free flow of goods and services throughout Spain. Spain has regained access to affordable financing from international financial markets, which has improved Spain’s credibility and solvency, in turn generating more investor confidence. However, the Spanish government has yet to improve significantly access to financing for small and medium-sized enterprises (SMEs), which have some difficulty accessing credit.
In implementing its fiscal consolidation program, the government has taken actions which negatively affect U.S. and other investors in the renewable energy sector on a retroactive basis. As a result, Spain is facing several international arbitration claims. Spain is a member of both the International Centre for Settlement of Investment Disputes (ICSID Convention) and the 1958 Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). Spanish law protects property rights and those of intellectual property. The government has amended the Intellectual Property Act, the Civil Procedure Law, and the Penal Code to strengthen online protection. Still, internet piracy has continued to increase over the past several years.
Spain and the United States have a Friendship, Navigation and Commerce (FCN) Treaty, and a Bilateral Taxation Treaty (1990), which was subsequently amended in 2013 and went into force in December of 2014.
In 2015, Spain experienced an increase in foreign investment of 9.6 percent over the previous year. This was almost certainly driven by Spain’s significantly improved economic fundamentals; the Spanish economy was one of the fastest growing economies in the EU in 2015, largely driven by a return of consumer confidence and consumption. 84.3 percent (EUR 18.3 billion) of total foreign direct investment went to companies not listed on the stock market. By the end of 2015, productive foreign investment, which excludes Entities Holding Foreign Securities –ETVE, reached EUR 21.7 billion, 10.9 percent more than in 2014 (EUR 19.6 billion), according to data from the Foreign Investment Register of the Ministry of Economy and Competitiveness. The growth was the result of increased influx of foreign capital and less disinvestment. The total growth foreign investment in equity stakes in companies resident in Spain in 2015, including holding companies, amounted to EUR 22.7 billion (9.6 percent year—on-year), up from EUR 20.7 billion in 2014. The six main investors in Spain, defined as the countries of ultimate origin of the investment, are the United States (7.3 percent, EUR 1.581 billion), Luxembourg (16.5 percent, EUR 3.584 billion), Netherlands (12.8 percent, EUR 2.777 billion), France (9.9 percent, EUR 2.140 billion), the United Kingdom (6 percent, EUR 1.311 billion), and Mexico (4.5 percent, EUR 977 million), which represented 57 percent of total gross investment in Spain in 2015. By regions, foreign investment in Spain was highly concentrated in the autonomous communities of Madrid and Catalonia, which received EUR 14.9 billion and 68.5 percent of the total, a decrease of 1.2 percent in Madrid and an increase of 57.8 percent in Catalonia. Companies invested especially in activities related to real estate, building and infrastructures, financial services and insurance, whole and retail sale, and energy. These sectors (EUR 14.8 billion) received 65.1 percent of total gross investment (EUR 22.7 billion).
However, there is growing investor concern about political stability in Spain. So far it does not appear to have translated into a slowdown in investments. Separatist leaders of the region of Catalonia, which accounts for about 19 percent of Spain’s economic activity, have become increasingly vocal about independence and have announced plans to declare independence from Spain, a process that has no clear pathway under the Spanish constitution. Additionally, at the time of publication, the national election on December 20, 2015 has yet to yield a government. The legislature is split between four top parties, each with different policy objectives. As of April, there is no clear outcome in the government formation process, which some economists have said is leading to a domestic slowdown as households and firms are unsure about what future labor and other economic policies will be. Foreign investors so far do not appear to have slowed investments in Spain’s capital markets over this political uncertainty.
Although Spain continues to face an unemployment rate above 20 percent and significant household and public indebtedness, in the third quarter of 2013, the country emerged from recession. In 2014, the country saw a resurgence in domestic consumption, which became the driver of economic recovery. The government attributes this turn-around in part to the reform program it implemented during the past two years, the largest in the country’s democratic history. As part of this effort, the government undertook sharp public budget cuts that have helped to stabilize the fiscal situation. Major economic imbalances have been corrected, and competitiveness and flexibility are being restored. The government also implemented a series of structural reforms such as a labor market reform and the restructuring of the banking system, all measures aimed at improving the efficiency in the allocation of resources, whose full effects were visible by the end of 2014. Spain has regained access to affordable financing from international financial markets, which has improved Spain’s credibility and solvency, generating investor confidence. However, the Spanish government has yet to improve access to financing for small and medium enterprises (SMEs), which still suffer from an important credit crunch. The government took additional steps in 2014 to provide a clear, stable and fair legal, regulatory and policy framework to attract more foreign investment.
Executive Service of the Commission for the Prevention of Money Laundering and Monetary Offences (SEPBLAC)
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