Another Obama (Ben Rhodes) Administration Legacy Decision Harms Major League Baseball
/Ben Rhodes Again Takes Credit; Leaves Orphaned Failure About Payments
MLB Challenge: Prove No Funds Benefiting Cuba’s Military
Trump Administration Challenge: Ending Third-Country Benefit For MLB Transactions
Once again, Mr. Ben Rhodes, Assistant to the President and Deputy National Security Advisor for Communications at the National Security Council (NSC) during the Obama Administration has offered his perspective on a commercial transaction involving the United States and the Republic of Cuba. And, as expected, leaves unspoken his role in a third-country receiving financial benefits when there is no reason for doing so.
From Mr. Rhodes: “Huge deal. We spent the end of the Obama Administration trying to set the conditions to make this possible, including Obama and Raul attending an MLB game in Havana. At a time of political division baseball is something that can bring Americans and Cubans together.”
New York, New York-based Major League Baseball (MLB) has announced an agreement with Republic of Cuba-based Federacion Cubana de Beisbol (FCB) a component of which will require potentially tens of millions of dollars payments by electronic transfer from MLB to FCB. LINK To English Text & LINK to Spanish Text.
The current process: MLB will transfer funds from a United States-based financial institution to a financial institution located in a third-country and then that third-country financial institution will transfer the funds to a Republic of Cuba government-operated financial institution in the Republic of Cuba. Third-country financial institutions will receive commissions for every transaction from MLB to FCB.
The Trump Administration and Members of the United States Congress have expressed qualifications about the MLB/FCB agreement. They want to know how MLB will ensure no funds delivered to FCB are directed to entities controlled by or affiliated with the Revolutionary Armed Forces of the Republic of Cuba (FAR). The Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury may require MLB and FCB to certify, in writing, that no funds delivered from MLB to FCB will be subject to the influence of FAR. For the government of the Republic of Cuba to put that type of clause into a document may be problematic. And, the Trump Administration may require FCB to certify, subject to audit, that no payments from MLB will be used by the government of the Republic of Cuba to make payments on non-athletic-related debt or be used for Venezuela-related and Nicaragua-related transactions.
MLB will look to the Trump Administration, and specifically to the NSC and then to the OFAC to solve the electronic payment process issue. The solution is a simple one. No regulation needs to be changed. OFAC just issues the 50% of a license that it previously issued 2015 to a financial institution located in Florida and which is now owned by a financial institution in Arkansas.
Had Mr. Rhodes (and the Obama Administration) thought more about, or more accurately, listened to what others were urging from 20 January 2009 through 20 January 2017, what was required to re-establish a United States-Republic of Cuba bilateral commercial infrastructure, the Obama Administration would have fully-implemented Direct Correspondent Banking (DCB) for authorized transactions.
The Trump Administration appreciates that DCB benefits United States entities: It’s faster, It’s less expensive and it requires increased transparency on the part of the Republic of Cuba government-operated financial institutions. DCB means less time for United States entities to be paid and less cost to receive those payments; and less cost, less time and more transparency for those United States entities which send payments to the Republic of Cuba. It also means that financial institutions in Canada, Europe and in The Americas will not be receiving commissions on every transaction.
DCB Background
For the last seventeen years, financial institutions in Canada, Europe and in The Americas have received a commission on every authorized United States export to the Republic of Cuba; that’s a percentage on more than US$5.8 billion since December 2001. It’s the equivalent of winning a bank lottery.
This triangular payment process has remained in force because the Obama Administration (channeling Mr. Rhodes) instructed the OFAC to only issue 50% of a license to Pompano Beach, Florida-based Stonegate Bank.
The Obama Administration provided a license to a U.S. bank to have an account at a bank in Cuba but did not provide a license for the bank in Cuba to have an account at the U.S. bank. Thus, no DCB.
In September 2017, Conway, Arkansas-based Home BancShares (2018 assets approximately US$14 billion) through its Centennial Bank subsidiary purchased Stonegate Bank. In 2015, the OFAC authorized Stonegate Bank (2017 assets approximately US$2.9 billion) to have an account with Republic of Cuba government-operated Banco Internacional de Comercia SA (BICSA), a member of Republic of Cuba government-operated Grupo Nuevo Banca SA, created by Corporate Charter No. 49 on 29 October 1993 and commenced operation on 3 January 1994. Stonegate Bank also provides commercial operating accounts for the Embassy of the Republic of Cuba in Washington, DC.
Trade Sanctions Reform and Export Enhancement Act of 2000 (TSREEA) exports (agricultural commodities and food products) since first use by the Republic of Cuba in December 2001 are US$5,849,925,838.00 through October 2018: Clinton Administration: US$0.00. Bush Administration: US$2,697,501,426.00. Obama Administration: US$2,700,145,225.00. Trump Administration: US$452,279,187.00 (through October 2018). TSREEA requires that payments be made on a cash-in-advance basis; no other payment terms are permitted.
With DCB, the Republic of Cuba-based entity would transfer funds (using SWIFT codes) from its account at BICSA directly to Stonegate or would use existing funds at the BICSA account at Stonegate. The funds would then be transferred from Stonegate to the financial institution selected by the United States-based company. The process generally can be confirmed in hours; and the transfer costs are substantially less.
Why did the Obama Administration refuse to issue the 50% of the license that would be required to implement DCB? Because the Obama Administration did not comprehend what companies require to engage globally. They were so excited about doing something, that there was little focus upon the consequences of what they did.
After the OFAC issued the 50% of the license to Stonegate Bank, representatives of the United States business community pleaded with the Obama Administration to issue the complete license. Their response was “we have done as much as we can do.”
The Trump Administration can eliminate a three-way payment process and create a two-way payment process resulting in more efficiency and less cost to United States entities; and, important to the Trump Administration, removing an unnecessary seventeen-year (17) multi-million-dollar revenue stream for third-country financial institutions that the Obama Administration unwisely permitted to remain in place.
An unnecessary and painful and egregious irony that the Obama Administration’s lack of follow-through negatively impacts “America’s Greatest Pastime.” Another mind-meld gone awry.
