PEPs, Sanctions & High-Risk Clients

What is a politically exposed person?

In force nowLey 10/2010, art. 14; RD 304/2014, arts. 22-24

A PEP is a person entrusted with prominent public functions — heads of state and government, ministers, members of parliament, senior judiciary, courts of auditors and central bank boards, ambassadors, senior armed forces officers, senior executives of state-owned enterprises, and senior officials of political parties and international organisations. Spanish law covers both foreign and domestic PEPs, as well as those holding such functions at regional and local level in defined cases.

Family members and close associates

In force nowLey 10/2010, art. 14

PEP treatment extends to close family members — spouse or equivalent partner, parents, children and the children's spouses or equivalent partners — and to persons publicly known to hold joint beneficial ownership or a close business relationship with the PEP. In coastal luxury property, the buyer is frequently the family member rather than the PEP.

What you must actually do with a PEP

In force nowLey 10/2010, art. 14

PEP status is not a prohibition. It triggers specific enhanced measures that must be evidenced on file.

• Obtain authorisation from senior management before establishing or continuing the business relationship.
• Take adequate measures to establish the origin of the wealth and of the funds involved.
• Apply reinforced, continuous monitoring of the relationship.
• Continue applying enhanced measures for a defined period after the person ceases to hold the public function, on a risk-sensitive basis, until they no longer present a heightened risk.

Sanctions: which lists actually bind you

In force nowEU restrictive measures regulations, directly applicable; Ley 10/2010, arts. 42 and 46

Restrictive measures adopted by the European Union are directly binding on firms operating in Spain, as are the UN measures implemented through EU instruments. These are legal obligations, not screening preferences.

• EU consolidated list of persons, groups and entities subject to financial sanctions — binding.
• UN Security Council designations, given effect through EU regulations — binding.
• Third-country lists such as the US OFAC list are not binding on you as a matter of Spanish or EU law, but firms with US exposure, US dollar funding routes or US counterparties frequently screen against them for commercial and correspondent-banking reasons. Treat this as a business decision, not a legal duty.

A sanctions match: freeze, do not tip off, escalate

In force nowLey 10/2010, arts. 19, 24 and 42

A confirmed match is the one situation where speed matters more than analysis. The obligation is to freeze — not to warn, not to negotiate, not to return the funds.

• Do not execute the operation and do not release funds or documentation.
• Do not inform the customer of the reason. The prohibition on disclosure applies here as elsewhere.
• Escalate immediately to the internal control body and the representative before SEPBLAC, who handles the communication to the authorities.
• Record the match, the evidence reviewed and the time of escalation.
• Rule out false positives through your firm's process, not by asking the client whether they are sanctioned.

High-risk third countries and geographic risk

In force nowLey 10/2010, arts. 11 and 42

Apply enhanced measures where the customer, the beneficial owner, the funds or a relevant counterparty is connected to a country identified as high-risk, or with strategic AML/CFT deficiencies. SEPBLAC's guidance on geographic risk is the practical reference for weighing country factors — and note that country risk is one factor among several, not an automatic verdict.

Adverse media and open-source checks

Credible reporting linking a customer or beneficial owner to fraud, corruption, money laundering, tax offences or organised crime is a material risk factor even where no sanction or conviction exists. Search in the client's own language and jurisdiction, keep a dated copy of what you found, and record how you assessed it. 'We googled the name' is not a record.

Never resolve a hit alone

In force nowLey 10/2010, art. 26

PEP matches, sanctions matches and serious adverse media are decisions for the internal control body or the representative before SEPBLAC — not for the individual agent or advisor. Your job is to detect, document and escalate promptly.