The Spanish Official National Gazette have just published a new regulation developing the Spanish AML legislation (Royal Decree 304/2014, of 5 May 2014, approving the regulation developing Law 10/2010, of 28 April 2010, on prevention of money laundering and terrorism financing).  http://www.boe.es/diario_boe/txt.php?id=BOE-A-2014-4742

This new regulation develops and clarifies many issues connected with AML matters affecting all regulated entities including gambling operators.

Although the preliminary draft published by the Spanish AML regulator (“Secretaría del Tesoro”) did not include any specific regime applicable to gambling operators, the final regulation does include particular rules affecting lottery and gambling operators. This special regime is essentially contained in Articles 4.1, 21.2 and 43 of the Royal Decree, and aims at defining the minimum AML standards that all lottery and gambling operators must implement in the development of their activities.

It is established, as a general rule, that

• “the criteria for accrediting the identity of clients in relation with the regulated entities subject to Law 13/2011, of 27 May 2011, regulating gambling, and its developing regulations, will be defined by the General Directorate for Gambling Regulation in the process for granting general licenses, after favourable opinion by the Executive Service of the Commission for the Prevention of Money Laundering and Monetary offences [the Spanish FIU].”

This approach appears to confirm that the AML law identification requirements should be interpreted/ applied in the light of the gambling law and developing regulations’ regime and, therefore, that the current system -as approved by the Spanish gambling authorities- could be deemed as acceptable under the Spanish AML regulations.

Not withstanding the above, Article 4 of the Royal Decree clarifies that obtaining copy of authentic documents for verifying the identity of the player cannot be avoided for payment of a prize/ winnings for an amount equal or above €2,500.

This threshold is to be calculated in accordance with Article 2.1 of the same regulation, which sets forth that

• “the quantitative thresholds set forth in this regulation will be applicable regardless whether they are reached in a sole transaction or in several transactions when they are connected“.

This means that bets/ wagers resulting in different prizes that are however connected shall be jointly considered. It is crucial therefore to understand what the authorities will deem to be “connected transactions”. As for the moment, all indicates that this will have to be analysed on a case by case basis.

On top of this, the regulation develops the minimum internal control procedures to be applied by operators for payment of lottery or gambling games’ prizes.

Article 43 of the Royal Decree set forth that lottery/ gambling operators must, at least:
 

• Count with an AML manual, which shall cover at least:

1. the procedure implemented for identifying participants awarded with prizes/ winnings of an amount equal to or above €2,500, without prejudice of the identification duties applicable according to the gambling statutory regime;
2. a risk matrix, paying special attention to repetitive prize payments;
3. a suspicious activities’ (activities subject to special examination) detection procedure, describing those tools or computer programs implemented and pre-set alerts; and
4. a special examination scheme, defining the analysis procedures in place and the information sources to be used, and covering the need to formalize in writing the results of said examination and the decisions adopted.

• Appoint a Money Laundering Reporting Officer (MLRO).
• Implement a training annual program

It is also clarified that an external examination of the implementation of the internal control procedures by the regulated entity is required. In this respect, please note that , according to Article 28 of the Spanish AML Act, all regulated entities must have their AML practice reviewed by an external expert on an annual basis.

This developing regulation covers many other matters that will be of interest for gambling operators, such as the special examination record keeping duties, or the profile of regulated entities that need to have an internal control unit in addition to a MLRO, the above being specific rules applying only to lottery/gambling operators.