Sectoral Risk Assesment of Individuals and Legal Arrangements

Legal persons and legal arrangements are an essential element in the functioning of the economic system, serving as instruments for the organisation of business activity, investment and the channelling of legal and financial relationships.. The vast majority of these entities and structures are used for entirely legitimate purposes and are an indispensable element for economic growth, legal certainty, and the development of the business community. However, certain individuals and legal structures may be misused to conceal the identity of the true owners of assets, hinder the traceability of transactions, or facilitate money Laundering and, to a lesser extent, terrorist financing.

For this reason, the FATF devotes its Recommendations 24 and 25 and Immediate Outcome 5 to promoting the transparency of individuals and legal structures and to preventing their misuse for the purposes of Money Laundering and Terrorist Financing. In this regard, international standards require countries to identify, understand, and assess the risks associated with the various types of legal persons and structures—both domestic and foreign—that have sufficient ties to the jurisdiction, adopting proportionate measures in accordance with a risk-based approach.

Spain conducted an initial assessment of the risks associated with legal entities in the 2020 National Risk Assessment on Money Laundering and Terrorist Financing. Since then, developments in international standards, the strengthening of the European regulatory framework regarding beneficial ownership transparency, and the experience gained by the competent authorities and obliged entities have highlighted the need to prepare a specific sectorial assessment.

The publication of this document aims to deepen understanding of the threats, vulnerabilities, and risks of Money Laundering and Terrorist Financing associated with legal entities and structures in Spain, as well as to contribute to the strengthening of preventive measures through a risk-based approach.

LINK: Sectoral analysis of legal person and legal arrangements.