Corruption and Money Laundering

In recent weeks and months, corruption has become an area of intense public and media interest as a result of events in national politics.

So much so that the Prime Minister of Spain has announced a series of measures within the framework of a national anti-corruption plan. The purpose of this article is briefly to set out the relationship between corruption and measures to prevent money laundering—an area of analysis that does not always receive the attention it deserves.

Whenever an offence of this nature occurs, that is, whenever an act of corruption is committed, the need inevitably arises to conceal the money directly derived from such conduct. This concealment activity, which “blackens” funds that may have been initially lawful and derived from legitimate economic activity, arises from actions designed to remove the capital from the financial system so that it cannot be traced or tracked—nor those who have been corrupted. Although the corrupt act itself constitutes the relevant criminal offence, at this stage the offence of money laundering has not yet technically been committed.

It is only at the point where an attempt is made to reintegrate the previously concealed capital into the legal system—that is, to “surface” the funds deriving from the predicate offence—that the criminal offence of money laundering arises. At that moment, the funds are reintroduced into lawful channels, providing illegitimate financial oxygen to the beneficiary—oxygen without which the corrupt or criminal activity might even lose its rationale or not be worth pursuing. It is here that the insufficiency of Law 10/2010, of 28 April, on the prevention of money laundering and terrorist financing becomes apparent. Although this legislation targets precisely that indispensable oxygen on which criminal organisations depend to operate and survive, it is not sufficient to combat corruption.

The Law transposes the Directive 2005/60/EC of the European Parliament and of the Council, of 26 October 2005, on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, further developed by the Commission Directive 2006/70/EC of 1 August 2006. Perhaps due more to the origins and motivations of the Law than to any drafting or legislative shortcomings, the preventive measures it establishes do not adequately address money laundering linked to or arising from political corruption. From this perspective, it may indeed be said—as the Spanish Government itself has acknowledged through its new set of measures—that the legislation is inadequate.

Corruption cases have been numerous in Spain’s recent history, and some have even served to advance both legislative development in this area and its judicial application. However, the increasing sophistication of systems and mechanisms in the field of corruption also requires that legislation and judicial interpretation continue to evolve and deepen their analysis, in order precisely to prevent or deter such acts.

In this context, Operation Malaya constitutes a milestone that should not be overlooked. The investigation into urban planning corruption began in 2005 and centred on Marbella Town Council and a network of individuals and legal entities concealing criminal activities. The case is significant because it directly linked institutional corruption with money laundering mechanisms, and the Provincial Court of Málaga Judgment 535/2013 (press release) established criteria for holding public officials liable in relation to money laundering practices. In addition, the official CENDOJ database can be consulted to locate judgments. In short, combating money laundering also entails its prevention when the funds originate from criminal offences arising out of corrupt acts. This applies not only to public institutions but also to companies, which must implement compliance and control mechanisms demonstrating due diligence in order to avoid becoming embroiled in unlawful activities.

Europe, for its part, has been unequivocal and has pointed the way forward. This is evident from the measures adopted by the Council of the European Union on 30 May 2024, which, as a key element, introduced a package consisting of a Regulation on anti-money laundering obligations applicable to the private sector, the new Directive (AMLD6), and the Regulation establishing the European Anti-Money Laundering Authority (AMLA). European legislation comprehensively harmonises anti-money laundering rules, explicitly linking the phenomenon with corruption, and extends such obligations to new sectors and obliged entities, including much of the crypto-asset industry, luxury goods traders, and football agents.

In July of this year, the European Commission, through the 2024 Rule of Law Report – Spain Chapter, called on Spain to “redouble its efforts” to expedite investigations into high-level corruption cases. As indicated above, the private sector is by no means immune to these realities. On the contrary, it is under an obligation to adopt mechanisms to prevent and deter money laundering, under pain of incurring liability—even if only administrative—in the two interrelated areas that this article has sought to highlight.