Spain’s Proposed Anti-Money Laundering Law: Holders Must Prove Origin of Undeclared Cash
The Spanish government has recently published the draft text of a comprehensive law against money laundering and the financing of terrorism, signaling stricter measures to combat illicit financial flows. If passed, this bill will have profound implications for anyone conducting large cash transactions or carrying significant amounts of cash within Spain.
Core Change: Shifting the Burden of Proof from Authorities to Individuals
The most significant change in this draft law is the redistribution of the burden of proof after the seizure of undeclared large cash sums. This means a legal framework, starkly different from current regulations, may soon be established.
Current Regulations: Currently, carrying over €100,000 in cash within Spain, or over €10,000 when entering or leaving the country, must be declared to customs or the tax agency. If undeclared cash is discovered, law enforcement is responsible for investigating and gathering evidence to prove if the funds are linked to illegal activities. If the illicit origin cannot be proven, the seized cash must eventually be returned.
Proposed Changes: The new draft proposes that once authorities seize funds that have not been properly declared, the responsibility to prove the funds’ legal origin shifts to the holder. The holder will then need to provide valid documents such as payslips, bank statements, business contracts, or legal invoices to prove the funds are legitimate. The failure to provide proof of legal origin could itself be considered a separate, serious offense, rather than just an aggravating factor in sentencing.
This “reversal of the burden of proof” has raised concerns among some in the business community, who believe it could challenge the fundamental judicial principle of “presumption of innocence” in practice.
Scope of Regulation Expanded to Precious Metals and Prepaid Cards
The draft not only changes the rules of evidence but also significantly broadens the range of regulated “payment instruments.” In the future, besides traditional banknotes and coins, the following items may also be subject to the same strict regulatory system:
- Bearer prepaid cards: To prevent anonymous fund transfers.
- Highly liquid valuable assets: Specifically including assets that are easily converted to cash, such as gold and diamonds.
- Traditional negotiable instruments: Such as bank checks, promissory notes, and bills of exchange.
Furthermore, the draft emphasizes that even if a declaration is made, it will be considered a failure to comply if the information is incomplete or does not match the actual amount carried, and will be treated accordingly.
Potential Impact on Businesses and Individuals
Although the bill is still in its draft stage and requires approval from the Spanish Parliament to become law, the signal it sends cannot be ignored. This reform is particularly noteworthy for cash-reliant businesses, such as those in the restaurant industry, sole proprietors, and many Chinese merchants who are accustomed to using cash.
Once the new law is enacted, businesses and individuals must pay closer attention to the standardized maintenance of transaction receipts and financial records for large capital flows, cross-border business travel, and daily operations. Whether it’s legitimate business profits, personal savings, or family gifts, keeping clear and complete written evidence will be key to avoiding potential legal risks. It is advisable for those affected to start adjusting their financial habits now, ensuring that all large transactions are well-documented to confidently face the potentially stricter regulatory environment ahead.
