On September 6, 2019 the U.S. Office of Foreign Assets Control (“OFAC”) amended the Cuban Assets Control Regulations (“CACR”) to implement President Donald Trump’s June 2017 National Security Presidential Memorandum Strengthening the Policy of the United States Toward Cuba, which takes additional steps to roll back the Obama administration’s relaxation of sanctions against Cuba. The changes, which take effect on October 9, 2019, impact authorizations for remittances to Cuba by U.S. persons and prohibit U.S. financial institutions from processing ‘’U-turn transactions’’ involving Cuba.
These changes follow amendments made to the CACR on June 5, 2019, which limited U.S. person travel to Cuba to family visits, journalistic activities, professional research and meetings, humanitarian projects, and certain educational activities under the auspices of academic institutions. Those changes also barred U.S.-origin vessels and airplanes from traveling to Cuba unless an exception or other authorization applied. Previously, U.S. persons were permitted to travel to Cuba for “people-to-people contact” under the supervision of a sponsoring organization.
The amendments eliminate “U-Turn” transactions at 31 CFR 515.584(d), which authorizes banking institutions subject to U.S. jurisdiction to process Cuba-related financial transactions that originate and terminate outside the United States where neither the originator nor the beneficiary is a person subject to U.S. jurisdiction. Once effective, United States banking institutions will be authorized to reject these transactions, but will not be required to freeze/block the funds. The practical effect of this change is that U.S. dollars may no longer be used for Cuba-related transactions unless an exemption applies, because virtually all transactions in U.S. dollars are processed through/by U.S. financial institutions.
The latest amendments also impact the ability of U.S. persons to provide remittances to Cuba. Family remittances have been capped at $1,000 per quarter, per Cuban national. Additionally, remittances by U.S. persons to “close relatives” of “prohibited officials of the Government of Cuba” and “prohibited members of the Cuban Communist Party” will become prohibited. See 31 CFR 515.570.
In an effort to further encourage the development and operation of private business, OFAC has also amended the general license authorizing remittances to certain individuals and independent non-government organizations in Cuba. Specifically, OFAC will authorize remittances to individuals and independent non-governmental entities in Cuba “[t]o support the development of private businesses, and operation of economic activity in the non-state sector by ‘self-employed’ individuals.” See 31 CFR 515.570. In this context, OFAC has defined “self-employed individual” to mean a Cuban national who is an owner or employee of a small private business or a sole proprietorship, including restaurants (paladares), taxis, and bed-and-breakfasts (casas particulares); an independent contractor or consultant; a small farmer who owns his or her own land; or a small usufruct farmer who cultivates state-owned land to sell products on the open market. See 31 CFR 515.340.
Finally, OFAC is eliminating the general license at 31 CFR 515.570(b) that authorized unlimited non-family donative remittances to persons in Cuba. OFAC is, however, leaving in place emigration-related remittances, which assists Cubans seeking to emigrate to the United States.
These actions come at a time of heightened tension between Cuba and the United States, arising from Cuba’s support of the Maduro regime in Venezuela. The Trump administration appears to be pursuing a dual-pronged strategy, to undermine both the Cuban and Venezuelan governments. This latest step expands the U.S. sanctions already in place against Cuba and will further isolate Cuba from global financial markets.