Existence of Previous Criminal Activity

Article 301 of the Spanish Criminal Code defines money laundering as the action of possessing, using, converting or transmitting assets, “knowing that these have their origin in a criminal activity” committed by the same or another person. This requirement leads us to ask various questions:

1. (a) In the first place, the concept of criminal activity itself. In a strict application of the principles of Criminal Law and especially that of minimal intervention, it should be considered in this context as a synonym for crime, also excluding other behaviours, necessarily less serious but also unlawful, classified as misdemeanours or as administrative offences. Concerning this, the modification of the Spanish regulations to reduce the scope of misdemeanours and their conversion into minor crimes meant a clear expansion of the possible previous behaviours to money laundering (Abel Souto Reference Abel Souto2017a:92; Abel Souto Reference Abel Souto2017b:2; González Uriel Reference González Uriel2019a:8).

2. (b) Second, is any previous crime sufficient to give rise to the commission of money laundering? The Spanish legal system has successively expanded this area, from its origins linked to organized crime, then moving on to serious crimes (drafting of the Criminal Code in 1995), simply to crime (reform of 2003) to the current “criminal activity” (Organic Law 5/2010, of June 22, 2010). Such expansion has raised important doctrinal criticisms, as it is not logical that any crime could give rise to money laundering (Abel Souto Reference Abel Souto2017a:90; Castro Moreno Reference Castro Moreno2017:140–2; Quintero Olivares Reference Quintero Olivares2006:6).

3. (c) Another important question (especially due to the typology of crimes of fraud) is whether crimes of omission are valid as a previous criminal activity to money laundering. Some authors consider that the omission prevents a causal link between the commission of the crime and the existence of assets derived from it, which already existed in the offender’s assets previously (Adrada De la Torre Reference Adrada De la Torre2016; Choclán Montalvo Reference Choclán Montalvo2007:163). This position is not acceptable since even by omission, tax fraud produces a fraudulent enrichment in the author, who disposes of the unpaid tax in an unlawful way (assets derived from criminal activity) and therefore may be followed by the laundering of capital.

4. (d) It is also important to determine if the previous criminal activity requires the existence of a conviction. The jurisprudence has denied the need for a previous conviction and even the delimitation of authorship or participation. It would be sufficient to prove that there has been criminal activity. However, we agree with the authors who point out that this test must be carried out in criminal proceedings, even if it does not result in an effective conviction (Quintero Olivares Reference Quintero Olivares2018:37–8). Besides, it must be taken into account that in some crimes, such as tax offences, the concrete accreditation of the criminal act will be necessary, since both malicious conduct and a minimum amount of fraud are required, issues that must be proven (Blanco Cordero Reference Blanco Cordero2011:01:33).

5. (e) The existence of prior criminal activity also raises doubts concerning the possible violation of the non-bis in idem principle, especially in self-laundering and due to the behaviours of the tax offence’s consummation.

The figure of self-laundering has been discussed because it is understood that in reality, whoever defrauds and then hides or possesses what was defrauded (typical laundering behaviours) would be carrying out a single criminal act, since “concealment is part of the tax crime’s commission dynamic”, in the same way that whoever carries out previous activities (creation of structures for tax fraud and, where appropriate, generation of expenses in those structures) could not be sanctioned for such activities (which could fit into the concept of money laundering). Both would be preparatory acts for the tax offence and, therefore, not punishable (Castro Moreno Reference Castro Moreno2017:145–6).

Some authors and court decisions (Spanish Supreme Court rulings 1505/2005, of November 25, 2005; 801/2008, of November 26, 2008; and 1046/2009, of October 27, 2009; Blanco Cordero Reference Blanco Cordero1997:470; Palma Herrera Reference Palma and José2000:390–5) have affirmed that by the essential nature of concealment in tax fraud, the reproach would already be contemplated in the punishment of the tax offence itself so that the eventual punishment corresponding to money laundering would be a clear case of punitive reiteration by the same behaviour. At the most, we would be facing criminal conduct that would give rise to a concurrence of rules and if the sanction for tax crime proceeds, the one corresponding to money laundering would not be viable. To this was also added the conceptualization of the eventual sanction of self-laundering as contrary to the right not to incriminate oneself (Carrión Morillo Reference Carrión Morillo2005:5–6).

However, this conclusion is not automatic since the mere concealment of assets derived from the crime could be more than a simple consequence of the commission of the crime and violate other protected legal assets, giving rise to new crimes, in our case, money laundering (Campos Navas Reference Campos Navas2005; Carrión Morillo Reference Carrión Morillo2005:6; González Uriel Reference González Uriel2019b:7–8).

Furthermore, the Constitutional Court has clearly stated that non-bis in idem requires the triple identity of subject, fact and foundation (Constitutional Court rulings 2/2003, of January 16, 2003; 229/2003, of December 18, 2003; and 188/2005, of July 4, 2005). Although the self-laundering presents the first two identities in some cases, it is clear that the basis is different (protection of another legal asset), thus the existence of bis in idem (García Bañuelos Reference García and José2015).

1. (f) Some authors discuss whether all the modalities of commission of crimes against the Public Treasury are equally suitable to be considered before the crime of money laundering. However, we believe that this issue does not have so much relation with the existence of criminal activity, which occurs in all cases, for example, subsidy fraud, obtaining improper returns, as with the existence of assets derived from the crime that may be subject to laundering, so we put off this issue to the next section.

2. (g) Finally, some authors deny the possibility of the existence of money laundering as a consequence of a tax crime due to the nature of the crime and the possible difference between dirty money and black money (Quintero Olivares Reference Quintero Olivares2018:29). This opinion is erroneous since it supposes a lesser reproach to the person who commits a tax crime than to the author of other crimes (by way of excluding the possible commission of the second crime), implying a low fiscal awareness (García Bañuelos Reference García and José2015).

Existence of Assets with Origin in the Criminal Activity: The Unpaid Tax

The suitability of tax crime as a precedent for money laundering has been discussed, among other reasons, due to the possible absence of assets originating from criminal activity. Thus, some authors, starting from the distinction between dirty money (from crimes) and black money (hidden from the treasury), argue that only the laundering of the first of them is possible (Castro Moreno Reference Castro Moreno2017:145; Delgado Sancho Reference Delgado Sancho2018:2; Quintero Olivares Reference Quintero Olivares2018:29; Sánchez Stewart Reference Sánchez Stewart2014:7–8). This doctrinal group understands that the defrauded tax cannot be considered an asset with its origin in criminal activity, as required by criminal law. This would not exclude that later, once the tax offence has been committed, other acts could be committed that, without proper to the consummation of that offence, give rise to a possible crime of money laundering.

As we have pointed out, we consider that hiding money from the tax administration is a reprehensible crime as the others, and the benefits derived from the crime are just as illicit, so the distinction between black money and dirty money may not be so clear from this perspective.

The key in Spanish law is the wording of article 1.2 of Law 10/2010, of April 28, 2010, on the prevention of money laundering and terrorist financing, according to which, for this rule, it will be included among the assets derived from criminal activity, expressly, the tax defrauded (quota) in crimes against the Public Treasury. This reference followed international instruments on the subject and was well received by the doctrine (Delgado Sancho Reference Delgado Sancho2018:9), but it has not been enough to resolve the issue definitively. A group of authors argue that the normative reference is for the law in question and that the non-inclusion in the criminal law (which was processed in parliament in parallel) is a sign that the inclusion of unpaid tax is only for administrative offences, but not for criminal offences (Del Rosal Blasco Reference Del Rosal Blasco2013:4–5; Sánchez Stewart Reference Sánchez Stewart2014:7). Due to the absence of organic law status of the cited act,^{Footnote 2} other authors think that it cannot be considered sufficient to comply with the reserve of regulatory status (Rebollo Vargas Reference Rebollo Vargas2013:214). However, it should be understood that, at this point, the Criminal Code acts as a blank criminal norm and that the concept of Law 10/2010 would fill in the definition of the penal code (Blanco Cordero Reference Blanco Cordero2011:01:4–6).

In our opinion, there are sufficient arguments to configure the tax crime as a precedent for money laundering, both of a normative and dogmatic nature. Perhaps the problems that some authors have when refusing this conclusion derives from doubts concerning the various commission of crimes against the Public Treasury and not from a generic conceptualization of them.

It seems indisputable that in the crimes of fraud of subsidies (article 308 of the Spanish Criminal Code) or the crime of fraud against the European Union budgets contemplated in article 306 of the same norm, and even in some modalities of commission of the general type of article 305 of the Spanish Criminal Code (undue obtaining of returns, absence of income amounts effectively withheld or passed on) there is a direct and quantifiable enrichment in the perpetrator of the crime that derives from the commission of the criminal act. We believe that it is clear that such funds are proceeds of crime and are liable to be laundered in such cases.

This reduces the conceptual problem to the defrauded tax (García Bañuelos Reference García and José2015). On this issue, some authors maintain that there is no capital increase because the amount owed was already in the taxpayer’s power before the breach of their obligations. In our opinion, in this case, it is indifferent whether or not there is an immediate equity increase, since although the subject’s equity maintains its value (the existing debt offsets the unpaid tax to the Public Treasury), the increase will occur if there is no intervention of the public powers, at the moment in which the tax debt is extinguished by prescription. At that moment, the subject will have assets that he would not have if he had not committed the crime.

On the contrary, we believe that it will not be possible to speak of money laundering in those cases of tax crime in which the offending citizen does not obtain any advantage (forced to withhold or pass on that he does not pay but has not withheld or passed on the tax, the debtor who does not comply with its tax obligations for non-malicious insolvency). There are no assets from the tax offence in these cases, and, therefore, there can be no money laundering. Besides, it is the confirmation that money laundering does not arise automatically whenever there is a tax crime as some doctrinal sector seems to be determined to maintain (Quintero Olivares Reference Quintero Olivares2018:35), and that each case must be analysed without making generalizations about it and even distinguishing between the different taxes involved (García Bañuelos Reference García and José2015).

Assuming this point, two key questions can fundamentally arise:

1. (a) The causal link: that the fraudster citizen evidences an increase in assets that would not exist if he had complied with the corresponding tax obligations. This simple link is relatively simple to determine: it would be enough to think about the non-commission of the crime and verify if the situation would be the same or if the money in question would cease to exist in their equity or would change its status (Blanco Cordero Reference Blanco Cordero2011:01:22).

2. (b) The temporal issue, which generates more conceptual problems. The relationship between cause and consequence is also a temporal relationship in which the first precedes the second. Moreover, this is the main problem that is generated in the question that concerns us (Blanco Cordero Reference Blanco Cordero2011:01:24): by definition, the goods “derived from the crime” would be in possession of the offending subject before the commission of the offence, which is in itself paradoxical (the “McFly Paradox”: Luzón Campos Reference Luzón Campos2012:3–4). The approach is simple: in tax matters, administrative deadlines are generally always after the manifestation of wealth that gives rise to the tax so that the citizen obtains assets whose origin and ownership are legal. If the taxpayer fails to comply with the tax obligations over time and the amount defrauded reaches the limits indicated in the Criminal Code, will he have committed a crime? If the citizen owns, uses, converts or transmits these assets between the two moments, it would not be possible to think that they are laundering money to the extent that there has been no prior crime, and therefore, they will not be “contaminated” assets (Luzón Campos Reference Luzón Campos2012:4). However, the majority of the doctrine and the applicants of the law understand that such an effect of “contamination” occurs retroactively, so that we could resort to the classification as money laundering of these previous behaviours (especially striking in the case of simple possession). Given this temporal paradox, Castro Moreno (Reference Castro Moreno2017:148) has spoken of “pre-laundering” or “re-laundering”.

Another important issue is the asset’s delimitation capable of being laundered, which is limited to the tax quota by legal diction. In this sense, the Spanish General Tax Law defines this concept in multiple ways (full tax quota, net tax quota, differential tax quota), and it must be specified which of these categories it refers to. In our opinion, the quota referred to in the regulations on money laundering is the differential quota, which generally coincides with the amount to be paid under the tax. However, the tax regulations add a later concept in the quantification of the tax, that of tax debt, which adds other elements to the tax quota, such as surcharges and interest, all of them linked to the late or non-voluntary compliance of the tax obligation and it seems clear that they should not be included in the amount that can be bleached, as they have a compensatory or penalizing nuance. However, it also includes “the legally enforceable surcharges on the bases or quotas, in favour of the Treasury or other public entities”, which come to be tax figures typical of other administrations or entities and that do not respond to sanctioning purposes. To this extent, we understand that they should be included in the amount liable to be laundered, although the necessary restrictive interpretation of the types of penalties ends up forcing their exclusion from the criminal sphere.

Admitted that the assets derived from the tax offence may be laundering, another determining question must be raised: the individualization of the affected assets (the scope of the “contamination” in the subject’s assets), since being the tax obligations of pecuniary type and due to the fungible nature of the money, there is great difficulty in the realization of the assets from the crime, so it is also difficult to determine the existence of acts of money laundering.

The doctrine has proposed various solutions for this issue, ranging from denying the possibility of money laundering due to the impossibility of determining which are the assets derived from criminal activity to considering that under the universal patrimonial responsibility of the debtor, all their present and future assets and rights are subject to compliance with the obligation and, therefore, all of them would be “contaminated”. In our opinion, these radical approaches should be discarded: the first would be contradictory to the very concept of tax crime and its configuration as a precedent for money laundering since it is clear that they are assets derived from crime and susceptible to being laundered. The second would place us in an interpretation contrary to the law and carried out to the detriment of the defendant, which is not admissible from the point of view of the basic principles of Criminal Law, since it would be extending the scope of money laundering to the entire patrimony and not just to assets “derived from crime”.

Between the two possibilities, some intermediate positions seem more suitable. Thus, it has been proposed that contamination be limited to goods for which taxes have not been paid, which in our opinion is not acceptable either because it refers to the set of goods on which the tax is not paid (taxable incomes), when the tax quota constitutes the object of the crime. It would be once again an extensive interpretation against the defendant.

Perhaps the simplest solution is to understand that laundering is only committed when goods or quantities are available that necessarily include the tax quota. This proposal, however, is easily evaded by the offending subjects. For this reason, the correct idea is that of percentage contamination: consider that all assets of the subject’s patrimony are contaminated in a percentage equivalent to that of the unpaid tax debt on those assets.

Finally, we must refer to the possible decontamination of the assets, that is, the eventual absence of assets derived from the crime based on supervening circumstances:

1. (a) In the first place, due to the extinction of the responsibility derived from the tax offence, by prescription or for other reasons. In this sense, and based on the diction of article 300 of the Spanish Criminal Code, which considers the crime of money laundering applicable even in the case of criminal irresponsibility, it seems clear that the prescription of the tax crime does not exclude the existence of assets derived from the crime for possible laundering, since the extinction of the responsibility derived from the crime (either by prescription, or by compliance with the sentence) does not exclude the existence of the crime and, therefore, of the assets derived from it (Blanco Cordero Reference Blanco Cordero2011:01:34–6). This allows prosecuting the crime of money laundering beyond the prescription of the tax crime, which is especially interesting given the possible differences between the prescription periods of both crimes (Castro Moreno Reference Castro Moreno2017:149–50; Quintero Olivares Reference Quintero Olivares2018:37). Furthermore, the death of the offender does not exclude the existence of the crime (although it extinguishes the responsibility derived from its commission), so a crime of money laundering would not be avoided in this case if the heirs or successors of the criminal in the ownership of the goods or rights are aware of their origin.

2. (b) Secondly, it is necessary to ask whether the tax situation’s voluntary regularization excludes the possibility of the existence of the crime of money laundering. In our opinion, the answer must be affirmative, because the current wording of article 305 of the Spanish Criminal Code seems to establish – as occurs in administrative tax offences – that regularization would imply atypical behaviour (Carrión Morillo Reference Carrión Morillo2005:12; Castro Moreno Reference Castro Moreno2017:150–2) and not an acquittal excuse as occurred in the previous regulation (Blanco Cordero Reference Blanco Cordero2011:01:37–8). Consequently, in cases of voluntary regularization of the tax situation, the existence of money laundering cannot be upheld because there is no prior crime (Sanz Díaz-Palacios Reference Sanz and José2014:111).

3. (c) Some authors have affirmed that the consequence of paying the civil liability derived from the crime before carrying out acts of laundering would mean the disappearance of the assets derived from the tax crime, and the existence of the subsequent crime would not be possible. In our opinion, with the current regulation of money laundering, this conclusion would be impossible if we maintain the classification as a crime of the mere possession of the goods, which will always exist before the payment of civil liability.

4. (d) A doctrinal sector also denies the existence of assets derived from the crime if the tax crime is punished with the seizure of the effects of the crime and the amount defrauded is understood as such, by application of the criminal regulations (article 127 of the Spanish Criminal Code), because the tax crime is necessary committed with malice. In these cases, the punishment of the previous crime could involve the absorption of all the damage caused, and the non-existence of assets derived from the tax crime in possession of its author could be sustained, which would prevent the subsequent crime of money laundering. In any case, this could reduce money laundering to the role of residual crime, which would be applicable only when the previous tax crime was not sanctioned (Castellví Monserrat Reference Castellví Monserrat2019; Vidales Rodríguez Reference Vidales Rodríguez2017).

Performing the Typical Behaviours of Article 301 of the Spanish Criminal Code

To conclude, we must analyse the performance of the typical behaviours of article 301 of the Spanish Criminal Code in direct connection with the tax offence. This issue does not require special considerations with laundering through third persons, which does not raise specific problems in this type of crime.

Much more complex is the so-called self-laundering. This generates more uncertainties due to the possible classification as laundering of the mere possession of the assets. This fact would make money laundering considered, in many cases, an unavoidable consequence of the commission of the tax offence (as of the majority of property crimes). Despite the pronouncements of reputed authors in this regard, we have already indicated that this situation will not occur automatically in all tax offences due to the possible absence of assets or capital gains derived from the offence for the author.

Already, the particular vote on the Spanish Supreme Court sentence 974/2012, of December 5, 2012, revealed the automaticity of the existence of money laundering whenever the underlying crime increased assets. Perhaps, for this reason, the jurisprudential interpretation of the precept was softened so that the subjective element included for conduct not specifically typified has been generalized to all money laundering elements, as would be deduced from the Spanish Supreme Court ruling 265/2015, of April 29, 2015. The pronouncement does not refer directly to the tax offence, but it is considered applicable to it by much of the doctrine (García Moreno Reference García Moreno2015) and in the judgement itself. If we follow this interpretation, it seems that the simple possession of assets or the realization of “ordinary expenses” (which this ruling does not define) would not give rise to money laundering, which would only exist if the fruits of the previous crime were invested. This difference between “ordinary expenses” and investments is not clear on many occasions (Quintero Olivares Reference Quintero Olivares2018:34).

This line of jurisprudence does not fit well with the legal provision of the possible imprudent commission of the crime of money laundering. Malicious conduct requires knowledge that the assets originate from criminal activity (which will always exist in the perpetrator of the previous crime); but the reckless conduct will occur if the person is in a position to know its origin by observing the precautions inherent to their activity and has acted outside of such precautions or by not observing the duties of care that were required of them (Delgado Sancho Reference Delgado Sancho2018:8).

In summary, given that tax crime requires fraudulent conduct for its commission, the possibility of punishable self-laundering seems unquestionable since it cannot be argued that the perpetrator of the tax crime who has manifested sufficient malice now lacks a guilty element. This hinders the laxity of the jurisprudential interpretation outlined (Muñoz Cuesta Reference Muñoz Cuesta2013). Also, “not all laundering behaviours have to require a purpose, since, otherwise, if all of them required it, this would be incompatible with their punishment for recklessness” (González Uriel Reference González Uriel2019a:14).