Banking Law and Laundering of Environmental-Crime Proceeds in Spain

Introduction

Environmental crime can produce substantial illegal profits from unlawful waste disposal, wildlife trafficking, illegal logging, unauthorised mining, pollution, fraudulent recycling schemes and trade in restricted chemicals. When offenders deposit, transfer, invest or conceal those profits through banks, the activity may constitute money laundering.

Spanish banks are important gatekeepers because environmental businesses often use legitimate-looking invoices, transport companies, shell corporations and cross-border payments. Banks must therefore recognise environmental crime as a possible predicate offence, conduct risk-based customer due diligence, monitor suspicious transactions and report relevant suspicions.

Legal and Regulatory Framework

Spanish Criminal Code

Article 301 of the Spanish Criminal Code criminalises acquiring, possessing, using, converting or transferring property while knowing that it originates from criminal activity. It also covers conduct intended to conceal the illegal origin of property or help an offender avoid legal consequences.

Money laundering may arise even where the person laundering the proceeds committed the underlying offence. This is called self-laundering. Liability may also extend to serious negligence where a person deals with criminal property without observing the level of care required by the circumstances.

Environmental predicate offences include:

pollution and unlawful emissions under Articles 325 and following;

unlawful waste management and shipment;

serious damage to protected natural resources;

illegal exploitation of wildlife and protected species;

environmental offences committed through corporate organisations;

related fraud, corruption, forgery, smuggling or organised-crime offences.

Articles 31 bis and following permit criminal liability of legal persons, including companies, where statutory conditions are satisfied. Article 302 provides aggravated treatment for laundering connected with professional or organised structures.

Spanish AML legislation

Law 10/2010 on the Prevention of Money Laundering and Terrorist Financing and Royal Decree 304/2014 establish the main preventive framework. Credit institutions are obliged entities and must:

identify and verify customers;

identify beneficial owners;

understand the purpose of the business relationship;

apply enhanced due diligence in higher-risk situations;

continuously monitor transactions;

conduct special examinations of unusual activity;

report suspicious transactions to SEPBLAC;

retain supporting records;

avoid prohibited tipping-off.

The Bank of Spain supervises banking institutions together with SEPBLAC in relevant AML matters. The Executive Service of the Commission for the Prevention of Money Laundering and Monetary Offences, known as SEPBLAC, receives and analyses suspicious-transaction reports.

How Environmental Proceeds Are Laundered

Illegal environmental activities may be hidden inside legitimate industries. A waste operator may charge customers for lawful treatment but secretly dump or export the waste, keeping the avoided treatment costs as criminal benefit. False invoices may describe hazardous waste as recyclable material or ordinary goods.

Other methods include:

using shell companies to receive waste-management payments;

mixing illegal revenue with legitimate recycling income;

purchasing land, vehicles or machinery with criminal proceeds;

using trade-finance documents to disguise unlawful shipments;

transferring payments through several jurisdictions;

manipulating carbon credits or recycling certificates;

using cash-intensive scrap-metal businesses;

underpricing or overpricing waste shipments;

using nominees to conceal the real controller.

The criminal benefit is not limited to money received from customers. Costs saved through illegal disposal or non-compliance may also represent an economic advantage relevant to confiscation.

Banking Due Diligence Requirements

Customer and beneficial-owner checks

A bank should understand the customer’s licences, ownership, management, operating locations and expected transactions. Complex ownership involving offshore companies, nominee directors or recently created intermediaries deserves closer examination.

For waste, mining, forestry, fisheries and wildlife-related customers, the bank may request permits, environmental authorisations, transport documents and information about major suppliers and customers.

Transaction monitoring

Warning indicators include payments inconsistent with the customer’s declared activity, sudden revenue increases, repeated round-value transfers, substantial cash deposits and payments to jurisdictions unrelated to the business.

Banks should also investigate payments to companies lacking operational capacity, frequent changes of corporate ownership, adverse information about environmental inspections and transactions involving brokers whose role has no clear commercial explanation.

Enhanced due diligence

Enhanced measures may be necessary where the customer operates in a high-risk environmental sector, uses complex cross-border supply chains or has links with corruption-prone jurisdictions. Measures can include senior-management approval, stronger verification of source of funds and wealth, additional beneficial-ownership checks and more frequent account reviews.

Environmental allegations alone do not prove money laundering. A bank must conduct a documented and proportionate assessment.

Reporting, Freezing and Confidentiality

Where a bank identifies facts indicating possible laundering, it must conduct a special examination and document its conclusions. If suspicion remains, it must report the activity to SEPBLAC without informing the customer.

The bank may be required to refrain from executing a suspicious transaction unless delay is impossible or could obstruct an investigation. Judicial authorities may subsequently freeze accounts, seize assets and order confiscation. Criminal confiscation can extend to substituted property and assets transferred to third parties who knew, or should reasonably have known, their unlawful origin.

Relevant Case Laws

Direct reported cases combining Spanish banks, environmental crime and laundering remain limited. The following environmental and laundering decisions collectively establish the applicable principles.

Prestige Oil-Spill Case, Spanish Supreme Court Judgment 865/2015
The Supreme Court addressed criminal responsibility and extensive civil liability arising from the Prestige tanker disaster. It demonstrates the scale of financial proceeds, compensation and asset-tracing issues connected with environmental offences.

Spanish Supreme Court Judgment 974/2012
The Court accepted that money laundering may be proved through circumstantial evidence, including unexplained wealth, unusual transactions and absence of a legitimate economic explanation.

Spanish Supreme Court Judgment 801/2010
The Court identified indicators supporting a laundering conviction, such as links with criminal activity, abnormal financial operations and transactions lacking credible commercial justification.

Spanish Supreme Court Judgment 265/2015
The Court examined self-laundering and explained that not every use of proceeds by the predicate offender automatically constitutes a separate laundering offence. The conduct must involve legally significant concealment or integration.

Spanish Supreme Court Judgment 1080/2010
The Court confirmed that direct proof of the complete history of criminal proceeds is not always necessary. Knowledge and illegal origin may be inferred from consistent objective circumstances.

LG and MH, Case C-790/19
The Court of Justice of the European Union held that EU anti-money-laundering rules do not prevent a predicate offender from also being prosecuted for laundering the proceeds of that offence.

Commission v Spain, Case C-404/09
The Court of Justice found failures involving environmental assessment and nature protection connected with Spanish mining activity. Such regulatory violations can become financially significant where intentional criminal conduct generates unlawful benefits.

Weser Case, Case C-461/13
The Court required strict application of EU water-protection obligations. Continuing an economically profitable project despite prohibited environmental deterioration may create enforcement, confiscation and AML risks.

Conclusion

Under Spanish law, profits and avoided costs generated by environmental crimes can become criminal property. Converting, transferring, concealing or integrating that property may constitute money laundering, including self-laundering.

Spanish banks must include environmental crime within their AML risk assessments, particularly for waste management, extractive industries, forestry, wildlife trade and complex cross-border commodity transactions. Effective beneficial-ownership checks, sector-specific due diligence, transaction monitoring and prompt reporting to SEPBLAC are essential to prevent the banking system from being used to legitimise environmental-crime proceeds.