If it is some time since you have instructed a lawyer or other professional to act for you, you may have been surprised and even shocked at the extent to which you may be asked to prove your identity and general “bona fides” to the person or firm which you have chosen to represent you.  

In February this year the consultation stage came to an end for the reform of law 19/1993 for the prevention of money laundering.  When it comes into force later this year, the revised law will impose severe penalties on those who attempt to conceal or disguise financial transactions.  Any funds concealed or disguised will be presumed to be the proceeds of crime and those involved, whether managers of financial institutions, professionals, or private individuals will be liable to the penalties of fines and imprisonment laid down in articles 301 to 304 of the Spanish Penal Code.

The most important weapon in the authorities’ armoury will be the obligation on all those involved in financial transactions to keep records of them for 10 years.  These records must be available for inspection by the authorities on demand, and consent to disclosure will not be required from, say, the customer of a bank or the client of a professional firm.

Clients must be properly identified and records kept of who those clients are.

Those involved in financial transactions must have written anti-money laundering procedures in place which will have to be produced to the authorities on demand, and failure to do so will be a criminal offence.

Those responsible for enforcing the regulations will be the Bank of Spain, the Stock Exchange, the Board for the Supervision of Insurance Companies and Pension Funds, the Land Registries and Mercantile Registries, and the professional bodies representing Notaries, Lawyers, and other professions.  Those carrying out enforcement will be required to do so in secret.

Where the regulations have been infringed they will be enforced by fines on the company or firm for which the minimum amount will be €60,001 and the maximum €150,000 per transaction.   The individuals responsible may also face fines of between €3,000 and €60,000 per transaction together with the possibility of being suspended from their posts or carrying on their professions for up to 1 year, or even a term of imprisonment.

The authorities hope that the new rules will bring an end to dealing in large cash transactions, and consequently the “black economy”, which directly or indirectly is seen as funding terrorism, drug trafficking, and other crime.  

For businesses, for example some estate agents and unqualified “asesores” – consultants - who are not members of any professional association, these new rules are going to impose a major additional administrative burden. 

Of course, someone will have to bear to cost of compliance and inevitably this is going to be the customer and client.  Professional fees and bank charges may rise to cover these expenses, although for firms which already act with integrity they may require only minor changes to their working practices.

Dealing with unregulated advisers and consultants has always carried a risk for the client, but the new rules may well drive them out of business which in the long run can only be to the public good.

Written by Michael Olmer of Link Point Legal & Business Services for the RTN 7th April 2010