At Welex, your trusted law firm in Marbella, we write this blog to share with our readers the reasons why developers of new housing projects require so much information from buyers to comply with the Anti-Money Laundering Law, as this is a question many of our clients ask.

What is Law 10/2010 on the Prevention of Money Laundering?

In April 2010, a new law was enacted in Spain. This law is called:

“Law 10/2010, of April 28, on the prevention of money laundering and the financing of terrorism, was introduced as a response to concerns about financial crimes related to drug trafficking.”

And as the name suggests, it was enacted to prevent money laundering within Spanish territory. In its first article, we find the objective of the law:

“The protection of the integrity of the financial system and other sectors of economic activity through the establishment of obligations to prevent money laundering and the financing of terrorism,” meaning it is a series of measures established by different states to prevent the introduction of illicit money into their financial systems.

We have all heard the term “money laundering” at some point, but what does the law mean by money laundering? Continuing with Article 1, the following is considered money laundering:

  • a) The conversion or transfer of property, knowing that such property comes from criminal activity or participation in such activity, with the intent to conceal or disguise the illicit origin of the property or to assist persons involved in evading the legal consequences of their actions.
  • b) The concealment or disguise of the nature, source, location, disposition, movement, or ownership of property or rights to property, knowing that such property comes from criminal activity or participation in such activity.
  • c) The acquisition, possession, or use of property, knowing at the time of receipt that it comes from criminal activity or participation in such activity.
  • d) Participation in any of the activities mentioned in the previous paragraphs, association for the purpose of committing such acts, attempts to perpetrate them, and assisting, instigating, or advising others to do so or facilitating their execution.”

Additionally, this law provides a list of professionals who must comply with it. There are more than 27 professional groups, so here we will highlight the most relevant ones for our clients:

  • a) Credit institutions.
  • b) Insurance companies authorized to operate in life insurance or other investment-related insurances, and insurance brokers when acting in relation to life insurance or other investment-related services, with the exceptions established by regulation.
  • l) Real estate developers and those who professionally engage in agency, commission, or intermediation activities in the purchase and sale of real estate or in the leasing of real estate involving a total annual rent equal to or greater than €120,000 or a monthly rent equal to or greater than €10,000.
  • n) Notaries and registrars of property, commercial, and movable assets.
  • ñ) Lawyers, legal representatives, or other independent professionals when involved in the design, execution, or advice of operations on behalf of clients concerning the purchase and sale of real estate or commercial entities, the management of funds, securities, or other assets, the opening or management of current accounts, savings accounts, or securities accounts, the organization of the contributions necessary for the creation, operation, or management of companies or the creation, operation, or management of trusts, companies, or similar structures, or when acting on behalf of clients in any financial or real estate operation.”

Contact us today for legal advice on purchasing property in Spain.

Why Do Real Estate Developers Request So Much Information from Buyers?

In this blog, we will focus on the Anti-Money Laundering prevention measures taken by developers. As we have seen in Law 10/2010 of April 28, developers must verify the source of funds used by property buyers.
To do so, the developer requests the completion of Know Your Client (KYC) forms, where the following information is required.

Necessary Documentation to Comply with KYC Requirements When Buying a Property”

What is the “Know Your Client” (KYC) Form?

A “Know Your Client” (KYC) form is a document that financial institutions, banks, investment companies, and other intermediaries must use to collect information about their clients. The goal of the KYC form is to verify the identity and assess the legitimacy of individuals or companies seeking to establish a business relationship with the institution. This is part of the regulations set forth for the prevention of money laundering and the financing of terrorism. In summary, the KYC form helps entities know their clients and maintain the security and legality of their operations.
These forms collect different data depending on whether the buyer is an individual or a legal entity:

1. For Individuals:

  1. Personal identification details (passport, NIE, ID).
  2. Information about economic status (self-employed or employee).
  3. Information regarding the purpose of purchasing the property, i.e., whether it will be used as a primary residence or a second home.
  4. Information about the source of income, i.e., whether the funds are personal or if bank financing will be used.

As a general rule, individuals must provide at least the following documentation:

  • Their ID, passport, or identity card.
  • The last two pay slips, self-employed declarations, or retirement pension.
  • The most recent personal income tax return.

2. For Legal Entities:

In addition to all the requirements for individuals acting as the company administrator, the following must also be provided:

  • The company’s tax ID (CIF).
  • The company’s deed of incorporation, bylaws, or certificate from the Commercial Register.
  • Corporate tax return.
  • Annual VAT returns.
  • Other documents justifying the origin of the funds and the company’s activity.

The developer reviews the documentation received and if sufficient gives the green light for the transaction. If so, the parties will proceed with the signing of the private contract. If they need additional information, they will requested further documentation at any time during the process.

By adopting these measures, developers not only comply with legal obligations but also contribute to a safe and transparent real estate environment. Anti-money laundering efforts thus become an essential pillar for ensuring trustworthy transactions and protecting the integrity of the sector. Invest with confidence, invest safely!

One of the main functions of the real estate law specialists at our office in Marbella is to assist our foreign clients in meeting the developers’ requirements for completing the Know Your Client forms, thereby receiving approval to move forward with the purchase. If you have any questions, do not hesitate to consult your trusted lawyers in Spain.