If in recent years you have tried to buy a property or rent it, or if you are doing so right now, you will surely have been asked for various very private documents, such as the tax income statement, pay slips and others, depending on the case, to comply with the Prevention of Money Laundering (PBC). Particularly, if you buy it from a developer or from a bank servicer, who have compliance departments dedicated to these matters. No one likes to air their financial privacy. That is why we have often been asked on it.
What are the documents that truly must be provided? Am I obliged to request certain documents if I want to rent or sell my house or flat? Surely these are questions that we have all asked ourselves.
In today’s article we will try to answer all these questions based on Law 10/2010, of April 28, on the prevention of money laundering and the financing of terrorism and its regulatory development of RD 304/2014.
Let’s begin with identifying those subjects that are bound by the law: art. 2 and specifically for the real estate case in Section l.
The only obliged in the real estate field are (1) real estate developers; (2) those who professionally carry out brokerage in sale of assets; or (3) those who professionally carry out leasing activities for rents higuer than €120,000 per year, or €10,000 per month.
Thus, as buyers of a property (whether we are a company or an individual) we will be obliged to provide certain documentation if we buy the property from an owner who is professionally dedicated to that, or if we acquire it through a real estate acting as an intermediary. The same thing will happen to us if we want to lease a property worth more than €10,000 per month as tenants from someone who is professionally dedicated to leasing.
However, we will not have to provide any documentation related to the PBC when we buy from a natural or legal person whose activity is not the sale of real estate (for example, a company that simply wants to sell a property that it owns), nor if we lease a property from a natural or legal person whose activity is not the leasing of real estate. But beware: if a real estate agency is involved in the purchase or lease operation (if it is greater than €10,000), as is usually happen with non-residents, it will be mandatory to comply with certain obligations.
If we are private sellers or lessors, we should not worry about anything related to the formal obligations to prevent money laundering.
What are the documents that can be required of me, or that must be required, to comply with the money laundering prevention law?
The truth is that neither the law, nor the regulations, clearly specify the level of diligence required, and it will depend a lot on the risk that the professional perceives, being able to establish different degrees of diligence in their entire judgment, role of the client and its internal procedures.
Strictly speaking, the only thing required by law is the identification of the client (art. 3 of the law, by ID, passport, or CIF card for companies), the identification of the nature of the professional activity of the client, the purpose of the operation (art. 5), and the monitoring of the business relationship, in order to ensure that there are no relevant changes in the client’s condition (art. 6).
Thus, neither the law nor the regulations at any time clearly indicate to us which documents are to be requested, and which are not, which in practice means that professionals end up requesting many more documents than are really necessary in order to have a solid defence file in case of the money laundering watchdog audits them.
Finally, we must not forget that art. 26 of the law requires having client admission policies in writing. And of course, comply with all privacy and data protection requirements.
Do you have doubts about money laundering? We are at your disposal.
