In previous blogs, we have addressed the importance of Anti-Money Laundering (AML) measures in the purchase of properties in Spain, explaining why real estate developers request so much information. This time, at Welex, a law firm in Marbella, we want to delve into the type of documentation required by developers and the reasons behind each request to ensure every transaction is secure and compliant with current regulations.

Anti-Money Laundering, hereinafter AML, (Prevención de Blanqueo de Capitales in Spanish), is of particular relevance to developers, as Spain’s Law 10/2010 on the Prevention of Money Laundering obliges them to conduct appropriate investigations to justify the lawful origin of the funds used to purchase the property.

Developers must conduct these investigations for every homebuyer, without exception.

1. Why is it important to justify the origin of funds in a property purchase in Spain?

The real estate sector is particularly vulnerable to money laundering due to the large sums involved, the difficulty in tracking the origin of funds, and the ease with which real estate can be used to justify illicit income through long-term investments. Additionally, cash payments, international transactions, and the use of complex financial structures further complicate oversight. These characteristics make the sector a focus of attention for authorities that demand strict prevention and control measures.

For these reasons, Law 10/2010 on the Prevention of Money Laundering in Spain, as well as equivalent regulations in other countries, requires companies in the sector to verify the lawful origin of the money invested by their clients.

2. Documentation Required Depending on the Source of Funds

Depending on the source of funds initially declared to the developer in the KYC (Know Your Customer) form (read more about the “Know Your Client” form), the required documentation may vary:

  • Funds from Personal Savings: Developers typically require the following documents:
    1. Bank statements from the last 6–12 months showing the accumulated balance.
    2. Most recent income tax return, demonstrating regular income consistent with the declared savings.
    3. Additional questions regarding the source of savings may result in the need to provide further documentation, detailed below.
    4. Employment Income: If the funds come from wages, the following must be provided:
      • Current employment contract outlining the employment relationship.
      • Payslips for recent months.
      • Income tax return (IRPF) showing wage earnings.
      • Employment history.
    5. For self-employed individuals, the following may be required:
      • Annual tax declaration showing total income.
      • Quarterly tax declarations.
      • Bank statements from accounts linked to the economic activity.
      • Certification of compliance with tax and social security obligations.
  • Bank Loan: If the funds come from a loan, the required documentation includes:
    1. Loan agreement.
    2. Bank certification confirming the transfer of funds from the lending bank to the buyer’s personal account.
  • Private Loan: If a family member or friend lends you the money, the following must be submitted:
    1. Formalized loan agreement specifying the identity of the parties, loan amount, repayment terms, and the date and location of signing.
    2. Evidence of the lender’s source of funds, including tax returns, bank statements, and documents supporting how the funds were obtained (savings, inheritance, gift, etc.).
    3. Proof of the transfer from the lender’s account to the buyer’s personal account.
    4. Copies of any taxes paid.
  • Inheritance: If the funds originate from an inheritance, the required documentation includes:
    1. Will or declaration of heirs.
    2. Deed of adjudication of the inheritance detailing the distribution of assets.
    3. Bank certificate reflecting the deposit of inheritance funds into the buyer’s account.
    4. Copies of taxes paid.
  • Donation: For donations, developers usually request:
    • Notarized deed of donation.
    • Bank receipt showing the deposit of donated funds into the buyer’s personal account.
    • Taxes paid on the donation.
    • In some cases, developers may request documentation from the donor to verify the lawful source of the funds. For example, if the donor claims the funds come from employment income, the above-listed employment income documentation must be provided.
  • Dividends from a Company: If the money originates from business earnings, the required documents include:
    1. Dividend distribution certificate issued by the company, sometimes signed by the company administrator.
    2. Copy of the company’s articles of incorporation and documents proving share ownership.
    3. Annual accounts of the company to verify its ability to generate dividends.
    4. Corporate tax return.
  • Asset Sale: When the funds come from selling a property, vehicle, shares, or another asset, the following documents are necessary:
    1. Deed of sale or sale contract for the asset.
    2. Bank certificate reflecting the deposit of funds from the sale.
    3. Proof of payment of property transfer tax or any associated tax related to the sale.

Request for Additional Documentation

It’s important to note that this list is not exhaustive, as each real estate developer has its own criteria and may request more or less documentation than that listed above. Additionally, after reviewing the submitted documentation, the developer may request further information if deemed necessary to ensure a secure and transparent transaction.

3. Conclusion

Failing to justify the origin of funds can have serious consequences, ranging from halting the purchase process to, in extreme cases, requiring the developer to report potential suspicious activity to Spain’s SEPBLAC, which could lead to deeper investigations.

At Welex, a law firm in Marbella, we are available to advise and assist you throughout the process, ensuring you meet all the necessary Anti-Money Laundering requirements. Contact us for more information.