On November 28, 2016, the Spanish Supreme Court confirmed the Spanish Council of Ministers’ decision to impose a €1 million fine on Santander Bank for violating Spanish anti-money laundering (AML) law.
On June 12, 2015, the Spanish Council of Ministers penalized Santander Bank – which had previously acquired Banesto Bank – for a “very serious violation” of recordkeeping obligations under Spain’s AML law. The recordkeeping infringements related to a Banesto Bank account owned by a company which is part of the Nueva Rumasa Group, a group owned by a Spanish family long accused of dubious business practices. The company’s account had been credited with €19.8 million in cash without the bank conducting any customer due diligence or recordkeeping for the transaction. Further, the council decision cited one occasion in which a local branch of Banesto Bank provided €500,000 in cash to individuals, also without conducting any due diligence into the their background. The company also is subject to a separate criminal investigation.
Santander appealed the Council of Ministers’ decision based on three arguments. First, Santander argued that Banesto had substantially complied with its recordkeeping obligations and that the local bank branches knew the identities of the persons involved in the transaction, which had copies of their identification documents. Second, Santander argued in the alternative that the fine was disproportionate and should be reduced to the minimum (i.e., €150,000) because the infringement was neither serious nor systematic. Third, Santander argued that the qualification of the fine as “very serious” was erroneous as Santander had never violated the law before because past similar recordkeeping infringements were made by Banesto prior to the merger by acquisition, and could not be attributed to Santander.
The Supreme Court disregarded Santander’s arguments and determined that the recordkeeping infringements were not occasional. Santander did not comply with its recordkeeping obligations in 304 out of 305 cash transactions conducted at local branches (Banesto at the time). The Supreme Court therefore concluded that the case represented a “continued and massive breach” of the obligations imposed by the AML law. Finally, the Supreme Court – citing Spanish criminal law – confirmed that criminal responsibility is transmitted to the acquirer via a merger. Thus, Banesto – which had committed similar infringements in the past – was the same legal person as Santander after the merger. Thus, repeated past violations could be considered to conclude that the infringement was “serious” for purposes of the law. The Court also clarified that the amount of the fine was proportionate because: (1) the infringements involved transactions amounting to millions of euros; (2) the transactions directly related to a criminal case; and (3) the breach of recordkeeping obligations had the possibility of directly affecting the outcome of a criminal process, reducing the government’s ability to prove a criminal offense. The court went on to affirm that a bank’s due diligence obligations are not limited to suspicious activity, but also extend to “unusual transactions” such as the ones explained above.