KYC and AML Regulations in Spain: Everything You Need to Know

Key Takeaways

Key requirements for KYC and AML in Spain: identity verification, risk assessment, transaction monitoring, and record-keeping.

Sanctions for non-compliance with AML regulations in Spain: up to €10,000,000 for companies and executives, disqualification, and public reprimand.

Tips for implementing KYC and AML in Spain: use of advanced technology, process automation, regulatory updates, and reputable providers.

Didit's free identity verification solution: unlimited KYC with document verification, facial recognition, and optional AML Screening in 30 seconds.

Did you know that non-compliance with KYC and AML regulations in Spain can cost your company up to €10,000,000 in fines? In today's digital world, where Generative Artificial Intelligence (AGI), bots, and identity fraud are commonplace, implementing a robust identity verification process (KYC, Know Your Customer) is a fundamental necessity for all companies operating in Spain. However, for many businesses, keeping track of all the regulations and staying up-to-date with all the rules can be challenging.

The KYC regulations in Spain aim to protect consumers, but also to ensure that companies lay the foundation for complying with strict regulations that help prevent money laundering and terrorist financing (AML). We will detail this regulatory framework to ensure that your company is up-to-date with all these crucial regulations.

Whether your company is a growing startup or an established business looking to enter the Spanish market, this article will explain how KYC and AML regulations work in Spain so that you can turn this challenge into a competitive advantage.

What are KYC, AML, and why are they important in Spain?

KYC is defined as the process for verifying a person's identity by the business. It is the way for companies to know, before entering into a commercial relationship with the customer, that they are really who they claim to be. In addition, it is the starting point for complying with other regulations related to the prevention of money laundering or terrorist financing (AML). In Spain, the identity verification process (KYC) is mandatory for many companies, especially within the financial sector (fintechs, banks, neobanks, etc.).

Thus, identity verification is important mainly for two reasons:

• Regulatory compliance: KYC regulations help companies comply with identity verification regulations and, subsequently, with anti-money laundering and counter-terrorist financing regulations.
• Fraud prevention: It provides an additional layer of security in online transactions.

KYC and AML regulations in Spain: the legal framework

KYC regulations in Spain take into account the following laws and regulatory frameworks, both national and international:

• Law 10/2010, of April 28, on the prevention of money laundering and terrorist financing.
• Royal Decree 304/2014, which approves the Regulation of Law 10/2010.
• Directive (EU) 2024/1640 of the European Parliament and of the Council, of May 31, 2024, on the mechanisms to be established by Member States for the prevention of the use of the financial system for money laundering or terrorist financing (AMLD6).
• eIDAS Regulation (EU Regulation 910/2014), which regulates electronic identification and trust services for digital transactions.

Key requirements for identity verification and anti-money laundering (AML) in Spain

To comply with identity verification (KYC) regulations in Spain, companies must authenticate the user's identity through official documentation, such as a national ID card or passport. This is the fundamental first step in the anti-money laundering (AML) process.

In addition to identity verification, as part of the overall AML framework, companies must assess the customer's risk to classify them according to their profile, monitor transactions to detect possible suspicious activities, and maintain records of documentation and information obtained for at least 10 years. These additional steps are necessary to effectively prevent money laundering and terrorist financing.

It is important to note that the sanctions for non-compliance with anti-money laundering regulations in Spain are severe. They can reach €10,000,000 for the obliged entity, in addition to other measures such as public reprimand, revocation, or suspension of authorization. For executives, fines can reach up to €10,000,000, disqualification for 10 years, and public reprimand.

4 tips for implementing a KYC and AML solution in Spain

Do you need to implement an identity verification and anti-money laundering solution in Spain? These four recommendations for complying with KYC and AML regulations will help you:

• Use advanced technology: Developments that include advances such as artificial intelligence (AI), biometrics, or advanced algorithms make verifications more accurate, efficient, and secure.
• Automate processes: Having automated verification solutions will help reduce human errors to almost zero, improve efficiency, and provide a better user experience.
• Monitor regulations and update processes: It is important to stay up-to-date in terms of regulatory compliance; regulations are constantly evolving.
• Look for reputable providers: Outsourcing the KYC and AML service will help you reduce operational costs, optimize processes, and not worry about regulatory compliance.

Conclusion: A necessary regulation against fraud

The regulatory frameworks for identity verification (KYC) and anti-money laundering (AML) in Spain are rigorous but necessary. Having a solid identity verification system is the first step, as it lays the foundation for regulatory compliance, builds a relationship of trust, and closes the door to fraud.

At Didit, we understand all this regulatory complexity of KYC and AML, and we offer cutting-edge solutions that allow organizations to meet legal requirements efficiently and securely. To do this, we offer a free, unlimited, and forever identity verification solution. This free KYC service consists of:

• Document verification, which allows us to extract information and ensure its legitimacy.
• Facial recognition, to ensure that the person is really who they claim to be, without deepfakes or other types of fraud.

Complementary to our free KYC service, we offer an optional AML Screening service. With this, we check the already verified identity against different databases, public, private, and international, to find Politically Exposed Persons (PEPs), sanctions, or other issues related to the prevention of money laundering.

And all this, in just about 30 seconds, providing the best possible user experience.

Do you want to know more about our free KYC solution and protect your company in Spain? Click on the banner below and our colleagues will answer any questions you may have!