Regulatory intelligence for US exporters

OFAC Lifts Certain Cuba Sanctions on Financial, Internet Services

The Office of Foreign Assets Control revised its Cuba sanctions this week to loosen restrictions on a range of activities and transactions, including for certain financial and internet services. Some changes will allow certain Cuban nationals to open and remotely use U.S. bank accounts and will authorize certain Cuba-related remittances and payments that were restricted by the Trump administration.

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The updates are meant to help the “Cuban people,” the Treasury Department said in a May 28 news release, which it issued along with a set of new and updated frequently asked questions. In a final rule effective May 29, OFAC said the changes to the Cuban Assets Control Regulations will help “increase support for internet freedom for the Cuban people and independent Cuban private sector entrepreneurs by expanding authorizations for internet-based services and a range of financial transactions.”

The agency said the rule will allow Cuban nationals who are “independent private sector entrepreneurs” to open, maintain and remotely use U.S. bank accounts -- including through online payment platforms -- for certain transactions. Those activities will be allowed whether that person is physically located in the U.S., Cuba or another country, OFAC said, and those entrepreneurs are “limited to private cooperatives, small private businesses, and sole proprietorships located in Cuba of up to 100 employees.”

OFAC said it’s now using the term “independent private sector entrepreneurs” for this authorization instead of the previous term, “self-employed individual,” to recognize small, private cooperatives or businesses. The agency also stressed that this authorization can’t be used by Cuban government officials or Cuban Communist Party members.

“The amended definition better reflects Cuba’s non-state sector, as Cuba now authorizes the establishment of small- and medium-sized private enterprises,” OFAC said.

The agency is also allowing people to send certain remittances and other payments to Cuba by reinstating its authorization for “U-turn” transactions, which it had removed in 2019 during the Trump administration (see 1909060027). This will allow people to transfer funds if those transfers originate in the U.S. and “terminate” outside the U.S. and “where neither the originator nor beneficiary is subject to U.S. jurisdiction.”

U.S. banks are now “authorized to process ‘U-turn’ funds transfers in which Cuba or a Cuban national has an interest” as long as neither party is subject to U.S. jurisdiction,” Treasury said, adding that it’s also authorizing banks to unblock and return any of these “U-turn” funds transfers that were blocked prior to now. “This reinstated authorization is intended to help the Cuban people, including independent private sector entrepreneurs,” the agency said.

OFAC also updated and clarified the scope of internet-based services that can be provided to Cuba, which now includes social media platforms, “collaboration platforms,” video conferencing, e-gaming platforms, e-learning platforms, automated translation, web maps and user authentication services. The agency also said people subject to U.S. jurisdiction can provide “cloud-based services (including remote data storage, data transport service, content distribution networks, virtual machines, software-as-a-service, and infrastructure-as-a-service) to support services incident to the exchange of communications over the internet.”

The final rule also expanded authorizations for other services, including training to install, repair or replace communication-related items or items used to “develop software that improves the free flow of information or that will support private sector activities in Cuba,” as long as those services are “consistent” with Commerce Department export licensing rules. OFAC is also “removing the requirement that referenced items fall within specific export control classification parameters.”

Another change will allow exports or reexports of Cuban-origin software and mobile applications from the U.S. to third countries, which Treasury said “will expand the ability for independent Cuban entrepreneurs to offer their software and mobile applications on global application stores.”

New and updated OFAC guidance outlines the types of remittances now allowed, under what circumstances the U.S. dollar can be used in transactions involving Cuba, what types of transactions banks can now process and more.

The agency said U.S. banks can open and operate accounts for Cuban nationals to receive certain payments, including, for example, Cuban authors living on the island who want to receive payments for sales of their books. U.S. banks can also open accounts for a Cuban independent private sector entrepreneur for certain transactions, including for payments of imports to the U.S. of certain goods and services produced by that Cuban entrepreneur. One FAQ details what types of imports are allowed.

OFAC also said several types of small businesses may qualify as Cuban independent private sector entrepreneurs, including: agricultural businesses and farming cooperatives, animal feed and veterinary services, information technology services, food and beverage importers, fashion design companies, historic preservation and cultural preservation businesses, arts-related businesses, manufacturing companies and travel services. Under certain circumstances, the agency said goods can still be considered produced by an independent private sector entrepreneur if, for example, Cuban state-owned entities are involved "only in packing of the final product or acting solely as an export agent."

Other FAQs include a list of the types of internet services that can be exported to Cuba and the level of due diligence internet service providers need to take before exporting or providing those services. OFAC said companies can't provide those services or exports if they have "knowledge or reason to know" that they're intended for a "prohibited official" of the Cuban government.

"Internet-based service providers subject to U.S. jurisdiction may reasonably rely on information provided to them by their customers in the ordinary course of business, unless they know or have reason to know a transaction is not authorized," OFAC said.

The agency also said web-hosting providers need to make sure a website isn't “for the promotion of tourism" in Cuba. Those providers may also "reasonably rely on information provided to them by their customers in the ordinary course of business" in order to conduct due diligence, OFAC said, "unless they know or have reason to know their provision of web hosting services is for the promotion of tourism."