Terrorist Financing

As the 21st anniversary of the fatal terrorist attack in Madrid on 11 March 2004 — the eve of Spain’s general elections — is marked, many aspects of that event have been analysed from political and sociological perspectives. However, it is worth reflecting on the economic angle, as an act of such magnitude could not have taken place without adequate financing.

Terrorism, both past and present, requires financial resources to carry out its devastating mission. In connection with the March 11 attacks, the primary source of funding was illicit drug trafficking and the failure of communication. In response, Europe and Spain have strengthened their efforts in the areas most relevant to preventing terrorism — in particular, the detection of suspicious transactions through financial institutions. Indeed, credit and financial entities are under a legal obligation to report customer transactions suspected of being linked to criminal activity, which makes them key players in this fight.

It is estimated that money laundering moves around €715 billion annually worldwide, while terrorism is financed with around €110 billion per year — figures on a global scale. In Spain, controls over the financial and economic system have increased significantly. Within the EU, 70% of active criminal organisations use money laundering systems to finance their operations. Moreover, 80% of criminal networks misuse legitimate corporate structures to support their illegal activities.

Efforts to prevent money laundering in Spain date back to 1980, when the country recognised the need to implement policies aimed at reducing the risk of terrorists or criminal organisations using the financial system for illicit purposes. In this context, Law 10/2010 of 28 April on the prevention of money laundering and terrorist financing is today the cornerstone of the Spanish legal framework. To oversee its implementation, the Mixed Committee for the Prevention of Money Laundering and Monetary Offences was created, reporting to the State Secretariat for the Economy and Business Support.

The fight against money laundering also holds a prominent place on the European agenda. So much so, that since the first EU Directive in this field was adopted in 1991, increasingly ambitious regulations have been introduced. The most recent are the fifth and sixth directives, which expand both the scope of the legislation and the obligations imposed on covered entities.

Additionally, a new European Anti-Money Laundering Authority (AMLA) is currently being developed. This body will have direct supervisory powers over certain entities and aims to improve coordination and the effectiveness of the European system.

Understanding what constitutes money laundering is essential for legislators, authorities, and also for companies involved in trade and financial markets. Among the most important preventative measures — many of which are rooted in Anglo-Saxon practice — are: know your client; follow the money; keep records; report signs of money laundering; and act on any suspicious transactions. All of this must be guided by a culture of prevention — a principle that underpins not only the legal framework, but also the concrete responsibilities of companies when it comes to preventing money laundering and terrorist financing.

The proper application of these measures requires thorough analysis of client identity and the legitimacy of each transaction. It also entails ongoing due diligence, continuous monitoring of business relationships, and the reporting of suspicious activity — elements that must not be treated as mere formalities, but as critical components of an effective system. A system that must be agile, operational, and compatible with the economic development of legitimate business activity, while safeguarding the fundamental rights of individuals — avoiding any justification for extremism in the name of overregulation.