What is cash laundering?
Cash laundering, as defined in legislation1.2 of Law 10/2010, comprises a set of activities designed to conceal the illicit origin of funds or assets derived from criminal activities. The stages and key aspects of the process are detailed here:
Conversion or Transfer of Property: This stage involves changing the form or location of criminal assets to hide their illicit origin and help those involved avoid legal consequences.
Concealing or Disguising: Refers to actions intended to disguise the true nature and origin of assets, including their location, disposition, and movement, knowing that they stem from a crime.
Acquisition, Possession, or Use of Property: Involves receiving property with knowledge of its criminal origin and its subsequent use.
Participation and Association: Includes collaboration in any of the aforementioned activities, attempts to carry them out, and assistance or advice to facilitate their execution.
These activities usually take place in three main phases:
- Placement: Introduction of illegal money into the financial system.
- Layering: Execution of multiple transactions to confuse the trail and unlink the money from its illegal source.
- Integration: Reintroduction of clean money into the formal economy, where it is used without raising suspicions about its origin.
How to convert undeclared money into declared money: the only legal path
Vamos al grano, porque es lo que de verdad busca quien llega hasta aquí: there is no legal way to «launder» money. What does exist is regularizing, which is exactly the opposite: bringing it to light by paying what was left unpaid.
And the difference between one thing and the other is the difference between paying a surcharge or facing a crime under article 305 of the Penal Code.
Voluntary regularization, step by step
- Identify the fiscal year and the tax to which those undeclared income correspond.
- Submit a supplementary tax return for that fiscal year, including what was missing.
- Pay the fee plus the surcharge of art. 27 LGT for late submission.
- Do it before any requirement notice. It is the condition that changes everything.
| Situation | Consequence |
|---|---|
| You regularize yourself, before a requirement notice | Surcharge (art. 27 LGT) · no penalty · excludes criminal liability |
| The Treasury detects it | Fee + interest + penalty (can reach 150%) |
| More than €120,000 defrauded per fiscal year | Tax crime (art. 305 CP) |
The most expensive mistake is waiting. The surcharge grows with the months, and the moment the requirement notice arrives, the good door is closed. If you have undeclared money, the calculation is not «if I take it out», it is how much it costs me to take it out now versus what it will cost me if they find it.
Frequently asked questions about regularizing cash
How is undeclared money legally converted into declared money?
The only legal path is regularizing: declaring the income that was not declared at the time to the Treasury, through a supplementary tax return for the corresponding fiscal year. The tax that was due is paid plus surcharges for late submission under article 27 of the General Tax Law. Any other route (fake invoices, straw men, front companies, casinos) is a crime.
What surcharge does voluntary regularization have?
Article 27 LGT establishes a growing surcharge of 1% plus an additional 1% for each full month of delay during the first year. Starting from 12 months, the surcharge is 15% plus late payment interest. The key is that it is voluntary and before any requirement notice: if the Spanish tax agency claims it from you first, there is no reduced surcharge, there is a penalty.
Can I go to jail for not declaring cash?
Tax fraud under article 305 of the Penal Code applies starting from €120,000 defrauded per fiscal year and tax. Below that, it is an administrative infraction with a financial penalty. Important: voluntary and complete regularization before you are notified of proceedings excludes criminal liability.
How much cash can I deposit in the bank without justifying it?
There is no limit that "authorizes" depositing without justification. Banks report relevant cash deposits to SEPBLAC, and since Law 11/2021, the limit for cash payments between businesses and professionals is €1,000. What matters is not the amount of the deposit, but that you can prove the lawful and declared origin of the money.
Is it legal to use a front man to hide money?
No. Using an intermediary to hide beneficial ownership is a simulation and may constitute a crime. We explain this thoroughly in our guide on the front man and his legal alternatives.
If you have undeclared money, this is looked at on a case-by-case basis. The amount, the years, and how it was generated completely change the strategy and the cost. Review it with us in a €99 consultation — with confidentiality and without judgment. And if what you want is to stop generating undeclared cash, start by structuring yourself well.
How to launder cash?
Common methods to launder cash
Cash smuggling
- Transport of large sums: Moving large amounts of cash across borders to deposit it in jurisdictions with lax bank secrecy laws or no effective anti-money laundering regulations.
- Morocco, Romania, Bulgaria are some of the jurisdictions where cash is moved to later convert it. Regulation in these countries is minimal regarding cash since it is common currency.
Gambling
- Purchase of winning lottery tickets: Tickets that have already won are purchased at a price higher than the prize, allowing the buyer (launderer) to legitimize large sums of money as if they were legitimate lottery winnings.
Casinos
- Purchase of chips: Chips are purchased with cash and, after playing a minimum amount or none at all, the remaining chips are exchanged for a casino check, presenting it as a legitimate win.
Purchase and sale of high-value goods
- Real estate and works of art: High-value transactions where a purchase price different from the real one is declared to justify large money flows. This can involve both overvaluing and undervaluing assets depending on the launderer's objectives.
- It is important to keep in mind that buying real estate or luxury items with cash will instantly attract the attention of the Spanish tax agency.
Corporate structures
- Creation of interposed companies: Using multiple corporate entities in different jurisdictions to move funds and create confusion about the origin of the money.
- Physical Businesses: There are businesses that move a lot of cash, hospitality, clubs, etc., which can introduce cash into the legal circuit.
Cryptocurrencies (Bitcoin)
- Use of cryptocurrencies: Conducting transactions in cryptocurrencies to take advantage of the lack of centralized regulation and make it difficult to trace the flow of funds.
- There are P2P providers who will convert your cash to USDT for a small %.
Fictitious loans
- Movement of money through loans: Creating loan documents to justify money transfers as if they were repayments of legitimate debts between related parties.
Prepaid cards and fragmented transfers
- Use of prepaid cards: Buying and selling prepaid cards to move money without the need for an associated bank account or with front men.
- Fragmented transfers: Splitting large sums of money into multiple small transactions to avoid detection by financial authorities.
Anti-Money Laundering Measures
Financial institutions and other regulated entities implement compliance programs that integrate various strategies to combat money laundering and terrorist financing. These measures include:
Customer Due Diligence (CDD or KYC):
- Identifying and verifying the identity of clients before establishing financial relationships.
- Understanding the nature of the client's business activities to assess the risk profile.
Ongoing Transaction Monitoring:
- Monitoring clients' financial operations to detect unusual or anomalous patterns that may indicate money laundering.
- Implementing automated systems that help identify suspicious transactions more efficiently.
Suspicious Transaction Report (STR):
- Reporting suspicious financial activities to the corresponding regulatory and financial control authorities.
- Maintaining an effective and secure communication channel for reporting these activities.
Implementation of the Common Reporting Standard (CRS):
- Complying with the automatic exchange of financial information to improve international tax transparency.
- Collecting detailed data on accounts held by non-residents and reporting them to relevant tax authorities.
Application of Controlled Foreign Corporation (CFC) Rules:
- Assessing and reporting the income of controlled foreign entities to prevent tax evasion and the use of offshore structures in money laundering.
- Ensuring that entities in low-tax jurisdictions comply with local and international tax regulations.
International Cooperation:
- Collaborating with regulators and other financial institutions globally to share information and best practices.
- Participating in anti-money laundering networks to strengthen compliance efforts internationally.
Limits for Cash Payments
The Spanish tax agency and Europe, under treaties such as European Directive 2015/849 on the prevention of money laundering and terrorist financing, impose strict limits on cash movements, payments, and transfers. Although the stated objective is to reinforce financial control and transparency, these measures, along with regulations such as Regulation (EU) 2018/1672, deprive the vast majority of citizens who use cash lawfully of their freedom.
1. Cash Payment Thresholds
- Between companies and professionals: Since July 2021, the limit for cash payments between companies or professionals is 1,000 euros. This limit was implemented as a measure to combat the shadow economy and tax fraud.
- For individuals: The limit is 2,500 euros when one of the parties has their tax domicile outside of Spain. This threshold is for private transactions, such as the purchase of a good or service.
2. Border Cash Transport
- European Union: Anyone entering or leaving EU territory with 10,000 euros or more in cash (or its equivalent in other currencies) is obliged to declare it to customs authorities. This limit includes:
- Coins and banknotes.
- Bearer cheques.
- Traveler's cheques.
- Other similar financial instruments.
3. Possession of Large Amounts of Cash in Spain
- Within the country: There is no specific limit on the amount of cash a person can carry within Spain. However, transporting large amounts of cash can raise suspicions by the authorities.
- Justification: If you transport more than 100,000 euros in cash within Spanish territory, you are obliged to notify the authorities (Executive Service of the Commission for the Prevention of Money Laundering, SEPBLAC) and justify the origin of the money.
4. Limits for Banking Operations
- Although there is no maximum limit for bank transfers, any cash transfer or deposit of more than 3,000 euros is automatically reported to the Bank of Spain. This allows for more exhaustive control over potential illegal or suspicious activities.
New Cash Withdrawal Limit at ATMs
Despite the rise of digital payments, thanks to the Tax Agency, the use of cash remains common in Spain. However, with the aim of increasing control and preventing tax fraud, banks have begun to impose new limits on cash withdrawals at ATMs.
For example, CaixaBank has established a maximum limit of 600 euros per transaction, although this limit can be increased to 1,200 euros if the transaction is justified. In any case, withdrawals of more than 1,000 euros may be subject to greater control by the bank, which may request additional information regarding the destination of the money.
For withdrawals exceeding 3,000 euros, it will be necessary to present a receipt and carry out the operation with the assistance of an employee at the branch, due to anti-money laundering and tax fraud prevention regulations. In addition, any cash deposit exceeding 3,000 euros at ATMs must be automatically communicated to the Tax Agency.
How much cash can I carry?
Although there are strict limits for ATM cash withdrawals, the amount of cash that can be carried within Spain is considerable. According to Law 10/2010, it is possible to carry up to 100,000 euros in cash without needing to report it to the authorities, provided that its origin can be justified. In the case of moving more than 10,000 euros inside or outside the European Union, it is mandatory to declare it to customs authorities.
Cryptocurrencies and Money Laundering
Cryptocurrencies, such as Bitcoin and Ethereum, offer new avenues for money laundering due to their decentralized nature and the relative anonymity they can provide. For example, cryptocurrency mixers or tumblers allow users to mix their assets with those of others, complicating the tracing of funds back to their illicit origin.
Forensic Blockchain: Despite the use of cryptocurrencies in illicit activities, blockchain technology offers opportunities to improve transparency. Blockchain analysis companies, such as Chainalysis and Elliptic, work with financial authorities to trace illicit transactions and link digital identities to real individuals.
Money Laundering Cases: A Global and Local Perspective
Money laundering is a widespread illicit practice that affects both the international level and Spain. Below are several landmark cases showing the various techniques and mechanisms used to launder money.
1. Russian Laundromat (2017)
The The Russian Laundromat was a money laundering scheme that operated between 2010 and 2014, allowing the movement of approximately 20 billion dollars out of Russia into bank accounts worldwide. This scheme involved shell companies and simulated transactions, using banks in Moldova and Latvia to transfer illicit funds. The case exposed the ease with which dirty money can be moved across multiple jurisdictions using opaque corporate structures.
2. HSBC – Drug Trafficking Money Laundering (2012)
In 2012, HSBC bank was fined 1.9 billion dollars for facilitating money laundering from drug trafficking, especially in Mexico and Colombia. The lack of internal controls allowed criminal organizations to move large sums of money through the global financial system without raising suspicion, highlighting the vulnerability of financial institutions in the fight against money laundering.
3. Pujol Case
The The Pujol case in Spain involves the family of the former president of the Generalitat of Catalonia, Jordi Pujol, who allegedly hid large sums of money in tax havens. Complex financial structures and shell companies were used to evade detection by Spanish tax authorities, highlighting how political connections can facilitate money laundering.
4. Danske Bank – Money Laundering in Estonia (2018)
The The Danske Bank case involved the Estonian branch of this Danish bank, which allowed the flow of approximately 230 billion suspicious dollars between 2007 and 2015. These funds came mainly from Russia and other former Soviet republics. The case revealed severe failures in internal controls and regulatory supervision, allowing huge amounts of dirty money to be laundered through the European banking system.
