Spain is different.” So said that famous Spanish tourist-authority slogan – and so it is, though not in the ways they want to crow about. The sun, sea and sangria destination that attracts 55m tourists a year has, over the past four or five years, acquired a dark underbelly, as the demand for a place in the sun has turned Spain into the money-laundering capital of Europe. Vast sums amassed through arms-smuggling, drugs and prostitution are being recycled into holiday homes for us British and other north Europeans.
Three headlines that have appeared during the past few months sum up what has been happening here since 2001, the year before the introduction of the euro: “Spain, Europe’s brothel”, proclaimed El Pais. “Spain, Europe’s second home”, said La Vanguardia. “Black money gathers strength in Spain”, ran a story, also in El Pais.
“People come to Spain to launder their money because there is an end market made up of people who want to take up residence here. Everyone depends on the end user, the Mr and Mrs Smith from Britain. That’s the way it works,” says Antonio Flores, a property lawyer in Marbella, a town which has become a paradigm of the corrupting power of the dirty money washing up on Spain’s Mediterranean shore.
Various events and forces – the collapse of the Soviet Union, the Balkan wars and the peculiar characteristics of the Spanish economy – have combined to bring organised crime, practically nonexistent here before the mid-1990s, to Spain. The other is the euro. Sometime before “E-day” on January 1, 2002, a lot of people woke up to the fact that the francs, deutschmarks and pesetas under the mattress were about to become worthless, so they looked around for ways of converting them into something more durable. What they found was property, and in Spain they found not only a booming property market but a culture where, thanks to a stamp duty of around 10%, almost every property transaction involves a degree of black money as both buyer and seller agree on a lower, fictitious official price, and settle the difference in cash.
All property transactions in Spain are overseen by a public notary, who takes care of conveyancing and pockets 2.5% of the purchase price. When it comes to completing the transaction, the notary will clear his throat and announce that he has to go to the lavatory, thus allowing the parties to complete whatever part of the deal is being done in cash without having to witness it himself. Everyone does it, rich and poor alike.
According to the Bank of Spain, in 2001, 100,000 Spanish properties changed hands for cash. In June, the Agencia Tributaria (Spain’s Inland Revenue) announced that it was trying to recover tax on €11 billion that changed hands during the first nine months of 2001, most of it spent on property, luxury cars and works of art. Critics of the tax department say that there was a Europe-wide agreement to turn a blind eye to money-laundering in 2001 so as to smooth the transition to the new money.
“There’s a big difference between the person who had some money stashed in a sock in francs or deutschmarks and needed to get rid of them before the euro, many of whom did so by buying property, and the huge sums we’re dealing with now that originate in drug-trafficking or the traffic of arms or human beings. These are people who are looking for legitimate ways to recycle their dirty money,” says Ines Barba, a criminal lawyer in Malaga. Leaving aside the fact that €11 billion would fill a pretty big sock, the point she is making is that the pre-euro spree opened people’s eyes to Spain’s potential as a place to launder money. “The suitcases of money didn’t start arriving until after the euro was introduced,” says Antonio Flores.
In the days of the peseta you needed a big suitcase, if not a sea trunk, but with the advent of the euro and the €500 note (worth about £345), even a small briefcase can fit millions. In a new twist on drug mules, women transport cash back to eastern Europe in condoms stuffed with €500 notes which are inserted into their vaginas. When the deputy mayor of Marbella, Isabel Garcia Marcos, was arrested, police found €350,000 worth of €500 notes in her house. Nearly two-thirds of all the €500 notes in circulation in the EU are to be found in Spain.
In 2005 the police investigations into organised crime and money-laundering led to the confiscation of €4 billion in money and property, a hundredfold increase on the year 2000. This increase is attributed not just to the euro. While at first the money was brought into the country from criminal operations conducted abroad, now, increasingly, the money originates from criminal activities in Spain. Bear in mind that Spain is the main European entry point for hashish from Morocco and cocaine from Latin America. Cocaine busts in Spain, typically in the northwest province of Galicia, where many have family links to South America, tend to be measured in tonnes, not kilograms. Recorded crime, however, remains low, at 49.3 offences per 1,000 inhabitants, about 20 points below the EU average.
Javier Gaspar, of the Guardia Civil police force and a specialist in organised crime, says: “Around 2000, these mafiosi from various countries, mainly in the East, set up operations centres in Murcia and Levante. They brought their bodyguards and conducted operations in their own countries from Spain. But now they have bases in Barcelona, Malaga, Valencia and Madrid. Their three main sources of income are arms, prostitution and drugs, and all of this produces money that has to be laundered.”
As we shall see, there are many factors that attract money-launderers to Spain, but the key element is construction, and to understand this, the sheer scale of building in Spain – and not just on the costa – has to be appreciated. In 2005, 800,000 new homes were built in Spain, more than in Britain, France and Germany put together. Another 860,000 are scheduled for 2006. One in every three new buildings in Europe is being built in Spain, to the point that there are now 23m homes for a population a of a little over 40m. Nearly 2m of these are officially empty, and far more are unoccupied for most of the year. Of the 800,000 built in 2005, only 350,000 were needed to cope with population growth and immigration. The rest, therefore, are second homes, concentrated on the Mediterranean coast. Altogether, 34% of Spain’s Mediterranean coast is already built up; the figure rises to above 50% in areas such as the Costa del Sol and Costa Blanca.
And it’s not just the coast. Up to 15 miles inland, in parts of Valencia and Andalusia, the countryside is disappearing. On the 25-mile stretch of road that runs inland from Marbella to Malaga, there are dozens of holiday developments. Marbella itself is a place apart, geographically in Spain but otherwise in a world of its own. It is not just some Skegness-in-the-sun like Torremolinos: it is more international than that, far more Dolce & Gabbana than fish and chips, a place for the pampered who can choose between any number of beauty and health clinics to prepare them for a browse around Prada or Cartier. Women with big hair and implants, 50-year-old men sporting 30-year-old abdominals – like an animated version of Hello!
This frenetic pace of development poses serious questions of sustainability, both because of Spain’s limited ability to generate electricity and its even more fragile water supplies. A huge new urban development of 13,500 flats near Toledo, south of Madrid, was given the green light despite the fact that there was insufficient water to maintain it. Water has since been diverted from hundreds of miles away.
The Toledo development, where permission had been granted by successive Partido Popular (the People’s party; conservative) and Socialist administrations, reflects official ambivalence towards the funding of property development.
All parties are implicated in, effectively, selling planning permissions. It is an open secret that this is a significant part of how political parties fund themselves, so nobody is in a position to throw stones. While it is impossible to say to what degree the government benefits directly from money-laundering (aside from the 16% Vat on all transactions), it is clear that if you took construction out of the Spanish economy, the country would be in a state of collapse.
Despite fears that Spain may be killing the golden goose if overdevelopment destroys its innate attractions, at present there is no sign of
a slowdown, and with demand high and supply sustained by dirty money, no power on earth seems capable of putting a brake on construction.
Close to 250,000 Britons are registered as permanent residents in Spain, with a further 133,000 Germans and about 300,000 other European nationals. These are figures for people who live here year-round, and don’t take into account those who spend a few weeks a year in their holiday villa or time-share. According to the Madrid Association of Construction Companies, 80,000 foreigners will buy homes in Spain this year, as they did in 2005, spending an average of e280,000 per home. Close to 2m Spanish homes are owned by foreigners. According to a study by Barclays, 65.7% of Britons choose Spain for their second home.
Even before the introduction of the euro and the arrival of organised crime, it was estimated that the black economy accounted for about
22% of Spain’s gross domestic product (GDP). Some of this derives from tax evasion – property isn’t always involved. But it is also the result
of a bureaucracy that places so many obstacles in the way of legitimate enterprises, such as setting up your own business. “It’s certainly much higher than 22%, because nobody knows how much black money is circulating. We’re dealing with something much more professional, and on a much bigger scale, than before,” say Ines Barba. She adds that competition between government and police agencies over who should control money-laundering and organised crime plays into the hands of the criminals. Spain did not set up an organised-crime squad until May this year. It is not that the police are overstretched, she says, so much as a lack of co-ordination, as well as a need to update the law.
What has changed is the level of corruption.
As the Guardia Civil’s Javier Gaspar comments, “Money doesn’t give you power in itself, but it does in respect to what you can offer me.” In other words, everyone has their price. Corruption has always been widespread in Spain, especially in relation to large construction projects, but this has tended to be corrupción blanca (“white corruption”), which effectively amounts to nepotism, as distinct from cases full of banknotes. The sheer quantity of bad money looking for a good home has changed all that, and Gaspar says the challenge for the police and society is to stop the political corruption that this money can buy.
“We’re dealing with sums greater than a local official could hope to earn in a lifetime,” says Barba. “We’re not just talking about tens of thousands of euros, but enormous sums.”
“The Mediterranean has always been more corrupt than the north,” says Flores. “Someone like a mayor who is earning maybe €4,000-5,000 a month, which is not a bad salary, given the opportunity of earning €500,000 for putting his signature on a document… Obviously, it’s going to be hard to resist.”
Corruption in Marbella has produced the clearest picture yet of how dirty money goes hand in hand with development. It is alleged that Juan Antonio Roca, an unelected town-hall official, controlled all planning permission in the Marbella area, said to have generated €12 billion over the past 15 years. Planning permissions – as many as 10,000, it is alleged – were bought with black money, which Roca then used to enrich himself and to pay off local officials with sums of €6,000 to €200,000. At present, 18 local officials, including the mayor and 11 construction-company executives, are either in jail or on bail in connection with the investigation.
If organised criminals were using Spain as a money laundry, it is clear that they are now also using it to make more dirty money, much of
it through prostitution. Since 1995, prostitution has been legal here, though living off immoral earnings is not.
Once a country synonymous with sexual repression, post-Franco Spain now offers sex at every turn, whether in the form of sex shops and cinemas, or street prostitution and the ubiquitous roadside puticlubs (brothels). There are as many as 4,000 of these clubs, some of which house up to 200 prostitutes. They are easy to spot by their neon signs, which often say no more than “club”. In the tiny Galician village named with ironic bitterness Esclavitude (Slavery), a huge neon sign announces baldly: “Sex club”. As for street prostitution, it is not a matter of red-light districts. It is everywhere. The area around FC Barcelona’s football ground is a favourite.
To get a sense of the sheer intensity of the Spanish sex market, you need only take a stroll along the Ronda Sant Antoni in central Barcelona on a summer night. By day it is the place to go for bargain cameras and DVD players, but by night the only thing for sale is sex. At 10.30pm, along a 200-yard stretch, there are about 50 women dressed in the trademark skintight white Lycra; by midnight that number doubles. They are all either Latinas or eastern European. Some just stand, but others are more forceful, blocking your path, demanding that you go with them. One woman takes my arm and tells me to come with her. She has a Colombian accent. I say no thanks. “Frances sin,” she offers – “French without”, meaning oral sex without a condom. I politely shake her off. Behind her come-on look it’s clear she’s scared. She’s this pushy because somewhere among the men sitting at the cafe tables, her pimp is keeping an eye on her, making sure she isn’t slacking.
The scale of prostitution in Spain has grown exponentially, fuelled by women from eastern Europe and Latin America (fewer than 5% are Spanish). Police now estimate that there are as many as 200,000 prostitutes in Spain, performing 1m sexual services daily in a business estimated to be worth €50m a day. As Eduardo Martin de Pozuelo, a La Vanguardia journalist who has made a special study of the subject, says, “If the money was going into the women’s pockets, they’d be the ones buying houses on the costa, instead of renting in a brothel.”
“Spain is Europe’s gateway to prostitution and Catalonia is its capital,” says Gaspar, who is among those who believe that Spain is becoming a destination for sex tourists. Marcela Torres, of the Barcelona group Ambit Dona, which offers health and other advice to prostitutes, says: “There are three types: freelance prostitutes, generally working in the street, there are the semi-freelance who work in clubs but have to hand over some of their earnings to the club owners, and those who have been trafficked.”
“In Catalonia alone there are 20,000-30,000 prostitutes,” says Gaspar. “On the main highway from Alcanar in the south and La Jonquera in the north there are an enormous number. Here, 78% are Romanians, who have pushed out the Russians, and the Romanian mafias share the territory with Albanians. We know for a fact that in Moldova, Romania and Albania, women are even kidnapped on trains in their own countries.”
Others come of their own free will, knowing they will have to work off their debt first. “Some, such as the Nigerians, arrive with a debt to pay off; they pay it, and that’s that,” says Gaspar. “With women from the East, who are often sold on from one pimp to another, the debt can never be paid off. Mafias buy them, put them to work in clubs for a year or two, then sell them, for €15,000 to €45,000. Some are sold by their own families. Some are kidnapped, and some come in order to make money for their families.”
The women from the East, unable to speak Spanish and in the hands of small mafias, are the most vulnerable. “You have to understand that most of these women come from countries where you wouldn’t dream of asking the police for help,” says de Pozuelo.
“We’re not talking about the old days, a pimp with one or two prostitutes,” says Gaspar. “Now one of these pimps, who controls six or seven trafficked women, can make €100,000 a month. The pimps who treat their women with the most respect are the Brazilians and the Russians. The worst are the Romanians.” Women who try to escape the trap are threatened. “They said they would strangle my children,” a Moldovan woman told La Vanguardia. In Madrid, a Nigerian couple were arrested after it was revealed that they had forced a woman into prostitution by kidnapping her baby, which they held hostage for four years until she paid off a €45,000 debt. The only recourse is to bring criminal charges against the pimps, but few women do. “Court cases in Spain take a long time,” says Gaspar. “Few women can stick it out, above all because of threats to their families.”
The sex clubs get around the law against living off immoral earnings by claiming that both the prostitutes who live there and their customers are “clients”. The women pay rent and get a commission for every overpriced drink they get a client to buy. They also pay the owner a percentage of what they charge for their services. Manuel Nieto, a lawyer representing Spanish sex-club owners, hastens to explain that this is not a cut of what they earn from sex, which would be illegal. “They pay between €15 and €18 to the proprietor for cleaning and chambermaid services, changing the sheets, supplying fresh condoms, perhaps a bowl of fruit.” This he claims, comes from a typical €60-100 charge per sex act, although most sources say women can only charge €20-50, as the competition has pushed down prices, making it harder still for them to pay off their debts.
The club owners say that the women turn up of their own free will, but this doesn’t explain how they come to be rotated from one area to another, lest clients complain about the lack of fresh flesh on offer. “Sometimes they are co-owned by pimps or mafias in different parts of the country in order to facilitate the rotation of women from one club or area to another,” says Gaspar. “Most live in the clubs, usually for 21 days at a time,” says Nuria, who works in an HIV/Aids project with prostitutes on the Costa Brava.
So is sex tourism the latest of Spain’s many attractions? “I don’t think Barcelona is turning into a sex-tourism destination,” says Marcela Torres. “Most of the consumption is internal. Spain has always had this relationship with prostitutes. It’s a very Latin attitude that a prostitute is just another worker, like you. Of course tourists will take advantage of what’s on offer, but more people come here for Gaudi’s Sagrada Familia than for prostitutes.”
Gaspar disagrees, believing that supply clearly exceeds internal demand: “Women choose to work the highway because they know that truck drivers and tourists will pass. The man in the car doesn’t have to go to a club: he passes all these women and if he wants one, all he has to do is pull over.”
In a recent raid on a Catalan sex club called Lady’s Dallas, close to the French border, of the 225 clients questioned only 13 were Spanish, while 178 were French. The nationalities of the 142 woman at the club provide a snapshot of prostitution in Spain: 98 were Romanian, the remainder an assortment from eastern Europe and Latin America. Not one was Spanish. The raid provoked an indignant editorial in La Vanguardia that concluded that Spain “needs to decide if it wants to become a destination for sex tourists”. In Andalusia, home to the Costa del Sol, prostitution is said to have a turnover of €2 billion a year.
It is clear that Spain has become an operations base for a lot of dirty business, from trafficking in drugs to human beings, which in turn feeds off the leisure industry and above all the demand for second homes. Forget the cosy, Del Boyish image of the costas. This is not a couple of blokes from Bethnal Green flashing their gold Rolexes while they blow the few thousand quid they stole from a post office. The crimes on the costas these days cast a much darker shadow in the sunshine.