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

The Supreme Court rules that the police can access certain bank account information without a court warrant

In a recent judgment, the Supreme Court’s Second Criminal Chamber ruled that, in exceptional cases, the police can access certain taxpayer bank information without authorization from the court, provided the accounts do not reveal details of suspects’ private lives.

The Supreme Court reasoned that such a practice would not violate suspects’ privacy if the data gathered is “not sufficient for painting a picture of how a given individual carries out their private life.”

With this conclusion, the court confirmed that a police investigation into a money laundering scheme in Madrid was lawful. According to the facts cited in the judgment, a group of friends and family members used a web of fictitious companies to transfer funds to China without paying taxes.

The convicted defendants had argued that their right to privacy was infringed when the authorities looked into their accounts without first securing a warrant from a court. However, the Court ruled that there was no violation of banking secrecy, on the basis of two fundamental premises: firstly, the crime under investigation was serious, and the information of interest was essential for shedding light on the alleged crime. Secondly, the magnitude of any infringement caused by the activities performed must be balanced against the severity of the facts investigated.

After examining the facts of the matter, the Supreme Court ruled that by looking into the bank accounts, the authorities verified the “identification of account numbers and owners” but did not gain access to personal information such as spending habits, paychecks or electricity bills, among others, and that the law enforcement agencies' activities were proportionate and necessary to clarify the facts.

Financial institutions will have to identify the beneficial owners of securities accounts segregated from omnibus accounts

In a May 27, 2021 judgment, the Supreme Court ruled that financial institutions resident in Spain will be required to identify the beneficial owners of securities accounts segregated from omnibus accounts that operate abroad.

The reasoning given in the judgment is that article 42.a) of the Anti-Money Laundering Law should be interpreted in accordance with the principles underlying Directive (EU) 2015/849. Therefore financial institutions must comply strictly with the obligation to accurately identify beneficial owners and to adopt appropriate measures to verify their identity, including for segregated accounts where their beneficial owner is not exclusively an institutional investor but rather direct clients of the financial institution abroad, in order to “completely, truthfully and exactly” verify who the beneficial owner is.

The court considers that simplified due diligence measures are not sufficient in these cases and that ordinary procedures must be adopted instead, given that this is a “key component for preventing individuals and legal entities from circumventing anti-money laundering rules by concealing their identities behind complex financial structures or arrangements”.