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.