Cuba: US Eases Financial Transactions and Business

Presence in Cuba for certain US businesses authorized.

LATINVEX SPECIAL
Hunton & Williams

In a continued effort to implement the policy change announced by President Obama on December 17, 2014 to engage and empower the Cuban people, the Office of Foreign Assets Control (“OFAC”) has announced additional amendments to the Cuban Assets Control Regulations (“CACR”). These amendments, which will be effective on March 16, 2016, constitute the fifth time that the various sets of regulations governing Cuba have been amended.

The regulatory changes discussed below are more in the line of the changes made to the regulations since they were last updated on January 27, 2016. Overall, the regulatory changes authorize additional financial transactions relating to Cuba, permit additional persons subject to US jurisdiction to establish a business presence in Cuba, permit the payment of salaries to non-immigrant Cuban nationals and further loosen restrictions on travel to Cuba.

First, the regulatory changes allow additional financial transactions relating to Cuba, including “U-turn transactions” in which Cuba or a Cuban national has an interest and the processing of certain US dollar monetary instruments by US banking institutions. Additionally, the amendments permit exporters of goods authorized for export to Cuba and other US businesses to establish a business presence in Cuba.

The regulatory changes also permit the payment of salaries to non-immigrant Cuban nationals and permit US financial institutions to maintain bank accounts for such Cuban nationals. Finally, the recent amendments permit persons subject to US jurisdiction to engage in people-to-people educational travel to

Cuba that is not conducted under the auspices of an organization that sponsors such exchanges and permit the purchase and acquisition of Cuban-origin merchandise for personal consumption while traveling in a third country.

Financial Transactions Relating to Cuba

Prior to the amendments promulgated by OFAC on March 15, 2016, US depository institutions were authorized to process funds transfers originating and terminating outside the United States relating to transactions that would be authorized pursuant to the CACR if the originator or the beneficiary were a person subject to US jurisdiction. The recent amendments now authorize any banking institution that is a person subject to US jurisdiction to process funds transfers originating and terminating outside the United States, provided that neither the originator nor the beneficiary is a person subject to US jurisdiction.

Notably, the proviso that such funds transfer must be in relation to a transaction that would be authorized for a person subject to US jurisdiction to undertake under the CACR has been removed.

Additionally, the regulatory changes authorize US banking institutions to accept, process and give value to US dollar monetary instruments presented for processing and payment by a banking institution located in a third country that is neither a person subject to US jurisdiction or a Cuban national, so long as the third country banking institution has received the US dollar monetary instrument from a financial institution that is a national of Cuba for which it maintains a correspondent account and the US dollar monetary instrument was received in connection with an underlying transaction that is authorized, exempt or otherwise not prohibited by the CACR, such as dollars spent in Cuba by authorized travelers or any other third-country transaction not prohibited by the CACR.

Business Presence in Cuba of Certain US Entities

In September 2015, OFAC amended the CACR to authorize persons subject to US jurisdiction to establish and maintain a business presence in Cuba, including through subsidiaries, branches, offices, joint ventures, franchises, and agency or other business relationships with any Cuban individual or entity, to facilitate the provision of authorized telecommunications and internet-based services.

Through the recent amendments, OFAC expanded this authorization to establish a business presence to include exporters of goods authorized for export or reexport to Cuba, entities providing mail or parcel transmission services authorized under the CACR, entities providing cargo transportation services in connection with trade involving Cuba authorized by or exempt from the CACR, and providers of travel and carrier services authorized by the CACR. These categories of entities were previously permitted to establish a physical presence in Cuba but were not explicitly authorized to establish a business presence.

Payment of Salaries to Cuban Nationals

OFAC amended the CACR to explicitly authorize the receipt of salary or other compensation by a national of Cuba consistent with the individual’s non-immigrant status or non-immigrant travel authorization, provided that national of Cuba is not subject to any special tax assessments by the Cuban government in connection with the receipt of the salary or other compensation.

Conforming amendments to the CACR also permit any banking institution that is a person subject to US jurisdiction to open and maintain accounts solely in the name of Cuban nationals located in Cuba for the purposes of receiving payments in the United States in connection with transactions authorized pursuant to, or exempt from the prohibitions of, the CACR and remitting such payments to Cuba. More specifically, US banking institutions are permitted to open and maintain such accounts for non-immigrant Cuban nationals while they are present in the United States and may either close such accounts prior to the Cuban national’s departure or maintain the account open, provided that if such account remains open then the Cuban national may only access the account when the Cuban national account holder is lawfully present in the United States in a non-immigrant status or pursuant to other non-immigrant travel authorization issued by the US government.

Further Loosening of Restrictions on Travel to Cuba

Prior to the amendments promulgated by OFAC on March 15, 2016, people-to-people educational travel to Cuba had to be conducted under the auspices of an organization that sponsors such exchanges. The recent amendments now authorize individuals to travel to Cuba for such purposes provided that, among other things, the traveler engages while in Cuba in a full-time schedule of educational exchange activities that are intended to enhance contact with the Cuban people, support civil society in Cuba or promote the Cuban people’s independence from Cuban authorities, and that will result in meaningful interaction between the traveler and individuals in Cuba. However, the traveler must retain records sufficient to demonstrate that each individual traveler has engaged in a full-time schedule of activities that satisfy these requirements. Brief exchanges and casual conversations with Cuban nationals or failure to keep sufficient records will result in the traveler not being able to avail himself or herself of this general license.

Consumption of Certain Cuban Goods

Finally, OFAC has amended the CACR to authorize persons subject to US jurisdiction who are located in a third country to engage in the purchase or acquisition of certain merchandise regulated by the CACR, including Cuban-origin goods, for personal consumption while such person subject to US jurisdiction is in a third country. The amendments do not authorize the importation of such merchandise into the United States, including as accompanied baggage.

This column is based on a client alert from Hunton & Williams prepared by partners Gustavo J. Membiela and Uriel A. Mendieta and associate Rail Seoane.

Republished with permission from Hunton & Williams.


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