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Treasury tightens remittances to Cuba and prohibits “U-turn” transactions

By Ed Krauland, Brian Egan, Martin Willner & Evan Abrams on September 9, 2019
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Today the Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued new restrictions on remittances and “U-turn” transactions to Cuba, which will come into effect on October 9, 2019.  These restrictions are intended to further implement President Trump’s June 2017 National Security Presidential Memorandum, in which he outlined US policy toward Cuba under his administration and various policy actions to be taken by a number of agencies and departments.

These new restrictions build upon those announced on June 4, 2019, in which the US government prohibited US travelers from going to Cuba under the previous ‘group people-to-people educational’ travel authorization and further restricted travel by no longer permitting visits to Cuba via passenger and recreational vessels, including cruise ships and yachts, and private and corporate aircraft.

In addition to amending the Cuban Assets Control Regulations, OFAC issued 46 updated or new FAQs on Cuba. Although many of the changes were either cosmetic or to provide the relevant regulatory citations, some are worth noting.  In particular, FAQs 1, 40, 44, and 65 provide guidance on today’s amendments.  Additionally, FAQ 12 provides guidance on OFAC’s June 5 amendments related to “people-to-people travel.”

The amendments to OFAC regulations on remittances and U-turn transactions to Cuba represent the reinstatement of certain restrictions that were eased under the Obama administration as we described in our 2016 advisory.

Tightening of Remittance Regulations

The amended regulations narrow the general licenses for remittances in two ways: First, by limiting and placing monetary caps on family-related remittances and second, by removing the authorization for donative remittances and replacing it with an authorization for remittances to certain self-employed individuals.

Regarding family remittances, the regulations have been amended to limit an individual’s total remittance to any one Cuban national to $1,000 in any consecutive three-month period.  They also narrow the category of family members that may receive remittances.  Prior to the amendments, family remittances were not permitted to government officials and other prohibited members of the Cuban Communist Party.  In addition to those prohibitions, family remittances will no longer be permitted to “close relatives” of the aforementioned individuals.  The prohibitions on remittances to these “close relatives” also applies to other types of remittances.  In particular, these individuals are also ineligible to receive certain otherwise authorized remittances from blocked sources.  The regulations define close relatives as any individual related to a person by blood, marriage, or adoption who is no more than three generations removed from that person or from a common ancestor with that person.

Regarding donative remittances, prior to these amendments, persons subject to US jurisdiction were authorized to make remittances to any adult Cuban national that was not a prohibited official or member of the communist party and so long as the remittances were not from a blocked source.  Effective October 9, 2019, all such donative remittances are no longer authorized.

In place of authorizing general donative remittances, the amended regulations allow for remittances that encourage the growth of the Cuban private sector independent of government control. In particular, the amended regulations allow for remittances to support the development of “private businesses, and operation of economic activity in the non-state sector by self-employed individuals.” The previous version of the regulations permitted remittances to “private businesses, including small farms.”

Self-employed individuals are now defined to mean a Cuban national who is one or more of the following:

  • 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 land; or
  • A small usufruct farmer who cultivates state-owned land to sell products on the open market.

In effect, this change may expand the scope of certain remittances to some self-employed individuals that may have previously been covered under the donative remittances category.  At the same time, it may limit the scope of authorizations to small farms that have some relationship to the Government of Cuba.

“U-Turn” transactions no longer authorized

As discussed in our 2016 advisory, under the Obama Administration OFAC authorized US banks to engage in so-called U-turn transactions, allowing banks to process transfers of funds where the transfer originated and terminated outside the United States and where neither the originator nor the beneficiary were a US citizen.

Effective October 9, 2019, US banks will no longer be able to process such transactions. Rather than removing the authorization in its entirety, OFAC has effected this change by amending the authorization for banks from being authorized “to process” funds transfers to being authorized “to reject” funds transfers.  In authorizing the ability to reject funds transfers, OFAC appears to be signaling that it will not require US banks to freeze these types of transactions.

 

Photo of Ed Krauland Ed Krauland

Edward J. Krauland focuses on export controls/economic sanctions. Ed’s extensive experience includes representing clients on matters involving US and multilateral economic sanctions, defense and nuclear export controls, dual-use export controls under the EAR, anti-boycott compliance, internal investigations and enforcement work, and review of…

Edward J. Krauland focuses on export controls/economic sanctions. Ed’s extensive experience includes representing clients on matters involving US and multilateral economic sanctions, defense and nuclear export controls, dual-use export controls under the EAR, anti-boycott compliance, internal investigations and enforcement work, and review of government procurement regulations in the cross-border context. His practice spans all aspects of these laws, including counseling, compliance work, transactional advice, licensing and opinion work, internal reviews, disclosures, and enforcement actions. He has served as co-chair of the International Trade Committee of the ABA Section of International Law and Practice. He is former Chairman of an ABA-wide Task Force on Gatekeeper Regulation (anti-money laundering compliance), and senior adviser to the ABA Section of International Law and Practice’s anti-money laundering committee.

Read Ed’s full bio.

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Photo of Brian Egan Brian Egan

Brian Egan advises on a number of international legal issues that affect US and foreign clients, including economic sanctions, export controls, and anti-money laundering programs; national security trade and investment reviews; international arbitration and other cross-border disputes; international cybersecurity and data privacy; and…

Brian Egan advises on a number of international legal issues that affect US and foreign clients, including economic sanctions, export controls, and anti-money laundering programs; national security trade and investment reviews; international arbitration and other cross-border disputes; international cybersecurity and data privacy; and issues of public international law. He has worked in various senior legal positions for the US government, giving him keen insight into domestic and international legal matters that influence US government national security and foreign relations policies and programs. Before joining Steptoe, Brian served as the Legal Adviser to the US Department of State, the Legal Adviser to the National Security Council, Deputy White House Counsel, and Assistant General Counsel for Enforcement and Intelligence with the US Department of the Treasury. Brian has regularly appeared in public fora to speak on international legal issues, including testifying before Congress, public speaking engagements, and panel presentations.

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Photo of Evan Abrams Evan Abrams

Evan Abrams counsels multinational corporations, financial institutions, and individuals on various international regulatory and compliance matters. He assists foreign and domestic companies in navigating national security reviews by the Committee on Foreign Investment in the United States (CFIUS). He has represented companies in…

Evan Abrams counsels multinational corporations, financial institutions, and individuals on various international regulatory and compliance matters. He assists foreign and domestic companies in navigating national security reviews by the Committee on Foreign Investment in the United States (CFIUS). He has represented companies in industries including semiconductors, metals, and digital security. Evan’s anti-money laundering (AML) practice focuses on helping financial institutions comply with federal and state AML rules, particularly money transmitters and entities involved in creating, exchanging, or dealing in cryptocurrencies and tokens. Evan counsels clients in a variety of export controls and sanctions matters related to the Export Administration Regulations (EAR), International Traffic in Arms Regulations (ITAR), and various sanctions programs under US and international law. In addition, Evan routinely assists clients on anti-corruption investigations and enforcement actions.

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  • Posted in:
    Corporate & Commercial, International
  • Blog:
    International Compliance Blog
  • Organization:
    Steptoe & Johnson LLP
  • Article: View Original Source

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