Entry into force of European regulation on controls of cash entering or leaving the EU

The new Regulation (EU) 2018/1672, which entered into force on June 3, 2021 (except for article 16, in force since December 2, 2018), contains a new obligation to report all cash movements made within the European Union, in order to combat tax evasion and money laundering.

Any person entering or leaving the EU carrying €10,000 or more in cash (irrespective of whether they own it) must declare that cash.

The Regulation also broadens the definition of cash to include not only currency (banknotes and coins) but also instruments considered highly liquid, such as gold, checks, travelers’ checks and prepaid cards.

The Regulation repeals and replaces the previous legislation on the matter (Regulation (EC) No 1889/2005), with the goal of unifying the different laws throughout the EU to ensure an equivalent level of control over cash movements. The Regulation is directly applicable to member states and therefore compliance is mandatory. However, member states may establish, in accordance with their own laws, additional controls on cash movements within the Union, provided such controls observe the fundamental freedoms established in articles 63 and 65 of the Treaty on the Functioning of the European Union.

Spanish law was amended (through Legislative Royal Decree 7/2021, of April 27, 2021, on the transposition of European Union directives) to adapt Law 11/2010 to the new EU Regulation. In this sense, the definition of cash has been extended to encompass commodities used as highly-liquid stores of value. Under the new rules, parties carrying out transit services for cash or other payment means are required to disclose unaccompanied cash and to declare cash moved into or out of the EU. In addition, administrative claims may be lodged against the temporary detention of payment means.

The new rules join those already in place for cash movements in Spain: articles 34 to 37 of Law 10/2010, on the obligation to report and control payment means; articles 45 and 46 of the Regulations for Law 10/2010, approved by Royal Decree 304/2014, on detention of payment means moved in order to prevent money laundering, and Ministerial Order EHA 1439/2006 on reporting movements of payment means in order to prevent money laundering. In Spain, movements of cash totaling €10,000 or more into or out of the country must be reported, as must the conveyance of payment means within the country, if the value is above €100,000.

Iberpay´s remote identification procedure, pending review by Sepblac

The remote identification procedure of Sociedad Española de Sistemas de Pago S.A. (Iberpay), known as the “Procedure for requesting account ownership confirmation between entities”, has incorporated some changes which are pending review by Sepblac. As a result, the current procedure will become ineffective on 30 September 2021, unless the supervisory authority decides before that date to grant a new authorisation.

In March 2021, Iberpay informed Sepblac of a series of changes in its Account Ownership Service Procedure. Iberpay also reported that this service will soon include a verification system for clients wishing to open accounts remotely, making use of its banking credentials with enhanced authentication, in order to enhance security when accounts are opened online.

Under article 21.1.d) of the Regulations for Law 10/2010, of April 28, 2010, obliged entities may establish business relationships or perform transactions by telephone or electronic or virtual means with customers who are not physically present, provided the customer’s identity is evidenced, using secure customer identification procedures for remote transactions and such procedures have been previously authorized by Sepblac. In accordance with this authorisation, Sepblac authorised Iberpay's procedure on 22 May 2015, in accordance with certain specifications.

Moneyval’s annual report emphasizes that its members need to improve their AML/CFT practices

In its 2020 Annual Report, Moneyval, the Council of Europe’s monitoring body assessing compliance with AML/CFT standards, noted that despite their efforts, the measures implemented by member states, including Spain, are ineffective or insufficient.

The June 4, 2021 report finds that the member states reviewed demonstrate a moderate level of effectiveness in their anti-money laundering and combating the financing of terrorism efforts, suggesting that the degree of implementation of the Financial Action Task Force (FATF) Recommendations (2019) is not entirely satisfactory.

In addition, Moneyval notes that criminals have found new ways to abuse the financial system by committing cybercrimes and misusing virtual currencies and that members must therefore focus their work on monitoring and disrupting these crimes.

The report also states that members demonstrate the best results in the areas of risk assessment, international cooperation and use of financial intelligence.

The European Central Bank (ECB) takes over supervision of systemic investment firms

Starting June 26, 2021, large and systemic investment firms will fall under the supervision of the ECB. The central bank will supervise investment firms that have total consolidated assets of €30 billion or more, as they are seen as holding important risks on their balance sheets.

European Union legislation on the supervisory framework for these firms includes the Investment Services Directive, which member states must transpose into national law, and the Investment Firms Regulation, which becomes directly applicable to all EU member states on June 26, 2021. The ECB explained that, like credit institutions and banks, these firms are exposed to large credit and market risks and therefore, as required by that Regulation, they need to apply for a license from the ECB.

Within the context of a licensing procedure, the criteria used for assessing shareholders are the same as those used for assessing an acquirer of a qualifying holding in an existing credit institution. These criteria are:

  • the reputation of the shareholder
  • the financial soundness of the shareholder
  • the lack of suspicion of money laundering or terrorist financing.

The first set of investment firms newly authorized as banks are expected to be added to the list of supervised banks in the second half of 2021, at which point they will effectively fall under ECB supervision.

FinCEN issues memorandum on national anti-money laundering and combating terrorist financing priorities

On June 30, 2021, FinCEN, the United States’ main AML/CFT body, issued the priorities for the most important anti-money laundering/countering the financing of terrorism efforts in the United States. The priorities were issued after consulting with other key offices of the US Department of the Treasury, as well as federal and state regulators and relevant law enforcement and national security agencies.

The AML/CFT priorities include corruption, cybercrime, foreign and domestic terrorist financing, fraud, transnational criminal organization activity, drug trafficking organization activity, human trafficking and human smuggling, and proliferation financing.

FinCEN also released two statements (the AML/CFT Priorities Statements) offering obliged entities guidance on how to incorporate the priorities into their programs and how to put their efforts and resources to appropriate use.

The ECB issues its draft guide to fit and proper assessments for senior officers of credit institutions

The European Central Bank has issued its draft Fit and Proper Guide and the New Fit and Proper Questionnaire, which will replace the previous versions from 2018 and 2016, respectively. Both documents are open for public consultation until August 2, 2021.

The draft guide explains how the ECB, in its supervisory role, assesses the qualifications, skills and suitability of candidates for senior posts within a credit institution, such as chief executive officer or member of the control committee.

The purpose of these documents is to enhance transparency and the quality and effectiveness of the fit and proper assessment. In particular, the ECB proposes a stricter approach to supervisory findings that could affect the suitability of candidates, whereby even if they do not have sole responsibility for an issue, they could be held individually accountable for sound management and appropriate decision-making, collectively with the other members of the managing body.

Lastly, the new guide gives details on how suitability can be reassessed when new facts emerge that were not known at the time of the initial appointment but that could affect suitability for the post.

The Council of the EU approves conclusions on the impact of the COVID-19 pandemic on internal security and the terrorist threat

The Council of the European Union approved two sets of conclusions on the impact of the COVID-19 pandemic on internal security and on the threat posed by terrorism.

In addition to recommending that member states prevent hindrances to cross-border law enforcement, the Council stressed the need for the Commission to support Europol and the Innovation Lab in setting up a common, resilient and secure instrument for communications, and underlined the need to prevent the infiltration of criminal networks in the implementation of the Next Generation EU.

The Council also recommended that member states promote awareness campaigns for their citizens in order to prevent the impact of cybercrime activities, as well as misinformation and hate speech.

In its second conclusion document, the Council noted that although terrorism did not increase during the pandemic, certain extremist groups have already incorporated COVID-19 into their narratives, which could have repercussions in the medium to long term. The Council therefore asked member states to monitor terrorism and to provide information to the EU Intelligence and Situation Centre (EU INTCEN) and to Europol.

The Council also highlighted the need for member states to swiftly apply the provisions of the Regulation to address the dissemination of terrorist content online, and invited the Commission and the EU Internet Referral Unit to provide continuing support for member states with their technical and operational expertise. Lastly, the Council noted that increased attention should be paid to emerging security risks, as well as opportunities stemming from new technologies, and underlined the role of the EU Innovation Hub.

A reminder: Documents, including Sepblac filings, can now be filed with the Bank of Spain through its electronic register

The following documents can now be filed through the Bank of Spain’s electronic register:

  • Suspicious transaction reports, except for those filed by credit institutions, as these institutions must continue using the CTL software for these reports.
  • Appointment of representatives and authorized individuals.
  • External expert activity.
  • Form for a computer component certificate for external entities.

Information on the process and on how to begin procedures can be viewed at this link, and general information, technical requirements and instructions for using the electronic register can be found here.