Spanish penalties for infringement of anti-money laundering are not proportionate
Spanish law requires individuals to report the cash they take out of the country across the border. The penalties for failure to do so can be up to twice the unreported amount. According to the European Court (CJEU), the penalty is disproportionate.
Indeed, while the Court concluded in its judgment rendered on May 31, 2018 (case C-190/17) that the combating of money laundering constitutes a legitimate aim capable of justifying a barrier to the fundamental freedoms, it also called for observance of the principle of proportionality that must underlie any penalty legislation.
On that basis, it affirmed that those penalties under Spanish legislation are not proportionate, because they go beyond what is necessary to ensure compliance with the obligation to declare. In other words, if the aim of the penalty is not to penalize possible fraudulent or unlawful activities but simply an infringement of the obligation to declare, such a high fine is disproportionate. And for that reason it had to be held that the Spanish legislation is contrary to the free movement of capital.
The arguments used by the CJEU are also transferable to the penalty regime on compliance with the obligation to file Form 720 (to report assets abroad), which levies penalties up to 150% of the tax liability derived from treating foreign assets as an unjustified increase in personal income tax (as the European Commission has already indicated).
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