Anti-Money Laundering Newsletter - November 2021 | Sanctions and judgments

Supreme Court acknowledges importance of criminal compliance programs at companies

The importance of criminal compliance programs at companies was acknowledged by the Supreme Court in a judgment delivered on May 2, 2021(STS 2197/2021).

In the judgment, the court convicted a company director for a subsidies fraud offense reliant on an offense of forgery and misrepresentation and misappropriation, and noted that the company’s lack of control because it had not implemented a compliance program allowed those fraudulent activities to be carried out.

The court also explained that not having these programs “brings us into a domain where their implementation is not confined simply to the criminal liability of legal entities, and instead also includes the self-protection of businesses, bearing in mind that very possibly the facts held to be proven herein would not have occurred had there been a good legal compliance program, unless the appellant had fraudulently evaded the control mechanisms (article 31 bis. 2.3, Criminal Code)

Despite this, the Supreme Court held that these internal control measures do not release the appellant of liability and shift it to the company. It noted instead that the existence of these control mechanisms could have ensured at least that the criminal conduct could have been identified in time or the compliance program would at least have acted as a deterrent to prevent offenses of the type committed.

Supreme Court clarifies which cases determine need to alert Sepblac of money laundering indicators

The Supreme Court, in a judgment delivered on May 27, 2021, explained the assessment that obliged entities must make when faced with the existence of money laundering indicators.

The supreme court judgment reaches the opposite conclusion to that confirmed earlier by the National Appellate Court, and despite an apparently common understanding of what both courts consider to be an “indicator” (neither believe that an indicator is equivalent to prima facie evidence), the two judgments produced significantly different findings.

While for the Supreme Court, from “the list of indicators set out in the sanctioning decision (…) it may reasonably be suspected that movements of funds from an allegedly illegal origin were made  which have no apparent economic purpose, and we consider that to be a determining factor for fulfilling the obligation to report them”.

For the National Appellate Court, “the complex or unusual nature of the transactions or their not having any apparent economic or legal purpose may be considered to be risk factors which must lead to a special examination, although in themselves they are not indicators related to money laundering or terrorist financing activities”. So, the National Appellate Court concluded in its judgment that in the case under examination there were no “circumstances in relation to which we could strictly be talking about indicators within the meaning mentioned because in none of them would the alleged indicators mentioned by the sanctioning decision take us, after a logical process of determining a relationship - not even an approximate one -, to the illegal activities”.

The Supreme Court explained that the National Appellate Court’s interpretation is based on the term “indicator”, which confers that room for opinion on the obliged entity, which it considers “detracts from the subject-matter and aim of the anti-money laundering legislation itself, by making it lose its useful effect, concerning the legal duty to report any fact or transaction of which it is aware, as a result of the financial activities it has conducted, over which there is certainty, suspicion or founded reasons to suspect that it may be related to money laundering, after performing the special examination, under article 17”.

Navarra Provincial Appellate Court dismisses money laundering complaint contrary to a report by public finance authority

Navarra  Provincial Appellate Court (Panel 1, Decision  310/2021, JUR\2021\236716) dismissed a complaint against a Navarra family who settled their tax affairs in relation to assets in Switzerland and investments in the Caribbean, despite having tax reports from the Spanish central and provincial governments’ public finance authorities which supported the accusation.

This decision, which had already been taken by Pamplona Investigative Court number 3, was corroborated by the provincial appellate court. The judge took the view in her decision that “the statements made in auditors’ tax reports cannot be regarded as actual indicators rather than simple suspicions that do not invalidate the explanations and reasons provided (by the defendants)”.

In 2012, with a view to settling the tax affairs of all their companies and funds abroad, a father and his sons had contacted an advisor in 2012, and that advisor had contacted the provincial public finance authority, to prepare all their personal income tax and wealth tax returns for non-statute barred years, and they also carried out a corporate restructuring, in which they centralized all the assets they owned abroad at a new company created in Spain, at which the only owners were the sons.