Banking issues must be ironed out as U.S., Cuba repair relations
Banking issues must be ironed out as U.S., Cuba repair relations
BY MIMI WHITEFIELD
01/30/2015 7:00 AM 02/08/2015 2:24 PM
For almost a year, the two Cuban diplomatic missions in the United
States have had no banker. That has meant no checking accounts, using
cash to pay bills, and Cuba travel providers sometimes hauling in
briefcases full of cash to pay for visas.
During normalization talks in Havana last month, Cuba’s chief negotiator
Josefina Vidal said it would be difficult to open respective embassies
while Cuba still had no banker for its diplomatic missions and remained
on the U.S. list of state sponsors of terrorism.
But those are just a few of the sticky issues that must be ironed out as
Cuba and the United States seek to repair their tattered relationship.
While financial regulations outlined by the U.S. Treasury Department’s
Office of Foreign Assets Control in January will allow U.S. travelers to
use credit and debit cards on the island as well as permit U.S. banks to
open correspondent accounts in Cuban banks, there are still more
questions than answers when its comes to the new rules.
“There’s a lot of curiosity at this point,” said David Schwartz,
president and chief executive of the Florida International Bankers
Association, “but there’s a long way to go to understand the meaning of
all these changes.”
But with the U.S. policy shift on Cuba, there is more urgency in finding
a solution to the Cubans’ banking problem, said Roberta Jacobson,
assistant Secretary of State for Western Hemisphere Affairs.
“It’s very important to the functioning of embassies. We have been
trying to help them with it and will continue to work on it,” she told
the Miami Herald.
On July 12, 2013, M&T Bank of Buffalo, N.Y., informed the Cuban
Interests Section in Washington that it was getting out of the business
of handling the accounts of foreign missions and planned to close the
accounts of both the Interests Section and Cuba’s United Nations mission
in New York.
M&T gave Cuba an extension while it looked for a new bank, but the
accounts were finally closed on March 1, 2014 and the bank stopped
taking any deposits from Cuba last Feb. 14. Since then, Cuba hasn’t been
able to find a U.S. bank or international bank with branches in the U.S.
to handle its accounts.
There have been occasional disruptions in consular services as the
banking impasse stretches on and the diplomatic missions can only accept
cash for passport handling, visa fees and other consular matters.
One of the big reasons Cuba is having so much trouble finding a banker
is its continued presence on the U.S. list of state sponsors of
terrorism — countries deemed to have repeatedly provided support for
acts of international terrorism.
“That’s why no bank wants to take a chance,” said Fernando Capablanca,
managing director of Whitecap Consulting Group in Coral Gables.
Cuba has been on the list since 1982, but as part of President Barack
Obama’s policy to normalize relations, he ordered a review of whether
Cuba supports international terrorism. The review began Dec. 17 — the
same day the policy shift was announced — and is to be completed within
In its 2013 report, the State Department said there was “no indication
that the Cuban government provided weapons or paramilitary training to
terrorist groups” but it found the government “continued to harbor
fugitives wanted in the United States.”
Capablanca points out that personal accounts of mission employees in
Washington and New York are also affected.
“A bank might need a whole department just to handle the Cuban
accounts,” said Andy Fernández, who heads Holland & Knight’s Cuba Action
Team/Financial Services. That’s because a bank must monitor whether the
underlying activity generating the money flowing through the accounts is
permitted under the embargo and the new regulations, he said.
Under the new rules, prior approval from OFAC is no longer needed before
engaging in financial transactions with the Cuban missions or their
employees, but banks are still wary.
Many of their compliance policies, for example, prohibit them from doing
business with any country on the terrorism list, which also includes
Iran, Sudan and Syria, Fernández said.
Banks that have run afoul of U.S. prohibitions on doing business with
sanctioned countries have faced stiff penalties. Foreign banks, such as
ING, Credit Suisse, Lloyds, Barclays, and HSBC have paid hundreds of
millions of dollars in fines to the U.S. because of transactions
involving countries on the list.
Last year, the French bank BNP Paribas was fined a record $8.9 billion
for concealing U.S. dollar transactions with Sudan, Iran and Cuba.
Meanwhile, both American Express and MasterCard have said they plan to
do business in Cuba under the new regulations. MasterCard will stop
blocking its cards issued by U.S. banks on March 1 and American Express
is still working out the details.
MasterCards issued by non-U.S. banks are already accepted in Cuba, but
American Express will have to lay the groundwork by signing up merchants
and getting terminals set up.
U.S. banks also will have to decide whether they want to support card
transactions in Cuba. “Because of the demands and pressures from federal
banking regulators, we don’t know if U.S. banks will be comfortable
processing transactions in Cuba,” said Fernández.
Not only do banks worry about federal banking regulations, but some
post-financial-crisis state regulations, which have nothing to do with
Cuba, might also make them hesitant to take on Cuba-related business,
said Augusto Maxwell, who heads the Cuba practice at the Akerman law
firm in Miami.
In the aftermath of the financial crisis, he said, banks have tended to
concentrate on business segments that are the most profitable and the
Venturing into Cuba could be a “compliance nightmare for a bank without
much of a reward,” Schwartz said.
Right now, Schwartz and Fernández said banks are studying the new rules.
“Everyone needs to keep an eye on how the regulations evolve,” said
OFAC is expected to issue further guidance on how the new regulations
should be interpreted, Fernández said.
It also would help if bank regulators provided clarification that banks
won’t be penalized for engaging in authorized activities in Cuba, said
“I think the banks will take a wait-and-see attitude for a few months
before sticking their toes in the water,” Fernández said. But ultimately
what may prompt them to take the plunge is if their customers begin to
do business in Cuba under the new commercial opening.
“If their clients begin to do business in Cuba,” he said, “that will be
Source: Banking issues must be ironed out as U.S., Cuba repair relations
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