Spain presents Madrid for the anti-money laundering agency on the same day the EC opens two tax cases against it

Representatives of the Ministry of Economy and Madrid City Council met this Thursday in Brussels with members of the European Parliament and the European Commission to promote the Spanish capital’s candidacy to become the headquarters of the future European Union’s Anti-Money Laundering Authority. On Thursday it was announced that Brussels has opened two cases against Spain in tax matters: one, for not applying anti-money laundering rules properly, and the other, for the mechanism used to resolve tax disputes.

Although the official process to present the candidates to host the agency, which should be up and running by 2024, has not yet begun, the visit is part of the efforts of the central government and the city council to ensure that Madrid ends up beating other potential candidates such as Paris, Frankfurt, Brussels, Luxembourg, Vienna, Vilnius and Riga, according to sources from both delegations.

Today’s visit, they announced, will be followed by further contacts at the level of the European Parliament and the member countries, since the decision will be in the hands of both, as well as events in Brussels and Madrid to promote the candidacy.

The Anti-Money Laundering Authority will initially have 250 employees, which could later be increased to half a thousand, and will be responsible for directly supervising some entities to prevent and detect money laundering and terrorist financing, as well as collaborating with national supervisors, who will retain part of the powers to monitor these risks.

The government and the Madrid City Council argue that this is a united candidacy, which has the support of both administrations, as well as that of civil society and the business community, and has strengths both from a technical point of view and due to the characteristics of the city itself.

On the regulatory side, Spain has a framework of reference at international level, including in Latin America, to combat money laundering and terrorist financing, as well as highly qualified personnel in the field, argue sources from the Ministry of Economy, who rule out that the Brussels proceedings against Spain for its transposition of the European anti-money laundering directive will represent a stumbling block.

As for the city, Madrid offers a building that could be operational at the beginning of 2024, as required by the EU, for which two possibilities are being considered in the financial district – which have not yet been made public – that would be just a few kilometres from Barajas Airport and the train stations.

City Council sources point out that Madrid, home to the majority of multinationals with a presence in Spain and the main destination for foreign investment in the country, also offers employment opportunities for workers’ families, international schools, good digital connections, a wide range of cultural activities, and a better quality of life/cost of living ratio than in other European capitals.

It would also be in its favour not to have any other EU agency and its distance from other financial organisations could even be an added value for an Authority that requires guarantees of independence, they add.

The next step in the race is for the Council and Parliament to agree on the new criteria for choosing the seat of EU agencies, after which the official race for the Authority will begin.

The European Parliament will set its position between March and April, so the final decision could be taken in the second half of the year, under the Spanish EU presidency.

The Commission proposed setting up an EU anti-money laundering agency after finding that the current system, which leaves oversight of money laundering cases to national authorities, was not working, as demonstrated by cases of money laundering in banks in the Netherlands, Estonia and Latvia at the end of the last decade.

EC anti-money laundering rules case against Spain

The European Commission on Thursday opened infringement proceedings against Spain for failing to correctly apply the latest European anti-money laundering directive, specifically with regard to the creation of a central register of beneficial owners of legal entities.

The EU executive, which also opened proceedings against Italy for the same reason, urged both countries to ensure the correct application of the directive and gave them two months to respond to its request. Otherwise, it could go ahead with a procedure that ultimately allows the Commission to take states to the European Court of Justice.

Both Spain and Italy have reported that they have transposed the directive into their national laws, but the Commission “has identified several instances of incorrect application of the directive which relate to the functioning of one of its key parts: the establishment of central registers of beneficial owners”, the EU executive explained in a statement.

States can opt for a central database or use existing business registers or other existing registers to collect information on who the beneficial owners of these legal entities are, a measure aimed at improving transparency to combat the use of these companies for money laundering.

“Confidence in financial markets on the part of investors and the general public depends to a large extent on the existence of a disclosure regime that provides transparency on the beneficial ownership and control structures of companies,” the Commission said, noting that this is even more relevant in regions such as the EU, which are characterised by highly concentrated ownership of companies.

The dossier relates in particular to the implementation of the fifth version of the EU’s anti-money laundering directive (AMLD5), a standard on which the EU is already negotiating a further update, the sixth.

Brussels files an infringement case against Spain over the mechanism for resolving tax disputes

The European Commission on Thursday opened infringement proceedings against Spain for not correctly applying the new mechanism for resolving tax disputes between European Union countries and urged it to solve it, the institution said in a statement.

Spain now has two months to respond to the request from the EU executive, which, if it does not receive a reply or is not satisfied with it, can continue to move forward in a procedure that ultimately allows it to take non-compliant countries to the European courts.

“The mechanism ensures a faster and more effective resolution of tax disputes between member states, giving much more certainty to companies and citizens who have double taxation problems,” the Commission said of a directive dating back to 2017.

In assessing how Spain has transposed this rule into national law, the EU executive has found that Spanish legislation “does not provide a number of key elements of the new rules”, it said.

Also on taxation, the Commission has sent Spain a reasoned opinion – the second step in infringement proceedings – in the case it opened last year for failing to implement the latest EU directive on excise duties in its legislation.

Brussels set common rules for all products subject to excise duties – alcohol, alcoholic beverages, tobacco, electricity and energy products – and it will start to apply on 13 February.

Spain “has not notified any measures” to transpose the rule into Spanish law despite the fact that it had until 31 December 2021 to do so and that the Commission had already urged it to do so in January last year.

After this second warning, Spain now has two months to respond and, if it fails to do so or provides a response that does not satisfy Brussels, the Commission could take Spain to the EU Court of Justice.