Cuba Has Options To Retain Western Union Electronic Remittance Services- Transfer To A Bank?
/Cuba Has Options To Retain Western Union Electronic Remittance Services
GASEA Transfers Or Sells Assets Of Fincimex to BICSA Or Another Bank
Cuba Banks Have A History With Transferring Operations
The Trump Administration prohibits United States-based companies from engagement with entities controlled by the Revolutionary Armed Forces (FAR) of the Republic of Cuba.
There is no indication from the Trump Administration that the prohibition will be rescinded or revised.
The United States Department of State added to the Cuba Restricted List Republic of Cuba government-operated American International Services (AIS) and Republic of Cuba government-operated Financiera Cimex (Fincimex), a Panama-registered subsidiary of Republic of Cuba government-operated Corporacion Cimex which is a subsidiary of Grupo de Administracion Empresarial S.A. (GAESA) and controlled by the FAR. Fincimex is the distribution partner in the Republic of Cuba for Western Union Company.
There is also no indication the incoming Biden Administration would make changes to the Cuba Restricted List. There is expectation the Biden Administration will change the current US$1,000.00 per quarter limitation for remittances from the United States to the Republic of Cuba.
The Republic of Cuba continues to evaluate options relating to Fincimex, including the sale or transfer of the subsidiary to a non-FAR-controlled Republic of Cuba government-operated entity, such as a financial institution (Banco de Crédito y Comercio S.A. (BANDEC), Banco Popular de Ahorro S.A. (BPA), Banco Financiero Internacional S.A. (BFI), Banco Internacional de Comercio S.A. (BICSA), and Banco Metropolitano S.A.(BM)) each of which could seamlessly absorb and maintain Fincimex operations.
There is history for one Republic of Cuba government-operated financial institution transferring operations to another Republic of Cuba government-operated financial institution.
From Banco Metropolitano S.A.: “(“BM”) is a Cuban commercial bank that has presence only in Havana. Its corporate object is the pursuit of banking businesses, including but not limited to financial intermediation activities. BM started its operations in 1996 with a Havana branch office specialized in the provision of banking services solely to the diplomatic community, as well as the foreign natural and legal persons who were residents in Cuba. By resolution of Banco Central de Cuba (the Cuban Central Bank of “BCC,” for its Spanish acronym), BM’s corporate object, customer base, product portfolio and services were expanded effectively 2004 when BM acquired 30 offices hitherto held by Banco de Crédito y Comercio (“BANDEC,” for its Spanish acronym) and more than 50 offices hitherto held by Banco Popular de Ahorro (“BPA,” for its Spanish acronym), all located in Havana. As a result, BM established a representative presence in every municipality of the province of Havana.”
In 2015, 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, was vetted by the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury and approved for a correspondent banking relationship with Conway, Arkansas-based Home BancShares (2019 assets approximately US$14 billion) through its subsidiary Centennial Bank which in 2017 purchased Pompano Beach, Florida-based Stonegate Bank.
Stonegate Bank
In 2015, the OFAC authorized Pompano Beach, Florida-based Stonegate Bank (2017 assets approximately US$2.9 billion) to have an account with BICSA. In 2017, Home BancShares through its Centennial Bank subsidiary purchased Pompano Beach, Florida-based Stonegate Bank.
However, because the Obama Administration would not authorize BICSA under a license from the OFAC to have an account with Stonegate Bank, United States export-related funds were sent and received through Panama City, Panama-based Multibank, which had, but no longer has extensive dealings with the Republic of Cuba.
From Bogota, Colombia-based Grupo Aval on 16 June 2020: “On May 25th, Banco de Bogotá, through its subsidiary Leasing Bogotá S.A. Panamá, acquired 96.6% of the ordinary shares of Multi Financial Group. As part of the acquisition process, MFG’s operation in Cuba was closed and as part of the transaction. Grupo Aval complies with OFAC regulations and doesn't have transactional relationships with Cuba.”
From 2017 Home BancShares Annual Report
U.S. persons, including U.S. banks, are restricted in their ability to establish relationships and engage in transactions with Cuba and Cuban persons pursuant to the existing U.S. embargo and the Cuban Assets Control Regulations. However, we maintain a customer relationship to handle the accounts for Cuba’s diplomatic missions at the United Nations and for the Cuban Interests Section (now the Cuban Embassy) in Washington, D.C. This relationship was established in May 2015 pursuant to a special license granted to Stonegate Bank by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) in connection with the reestablishment of diplomatic relations between the U.S. and Cuba. In July 2015, Stonegate Bank established a correspondent banking relationship with Banco Internacional de Comercio, S.A. (“BICSA”) in Havana, Cuba. Cross-border correspondent banking relationships pose unique risks because they create situations in which a U.S. financial institution will be handling funds from a foreign financial institution whose customers may not be transparent to the U.S. financial institution. Moreover, Cuban financial institutions are not subject to the same or similar regulatory guidelines as U.S. banks; therefore, these foreign institutions may pose a higher money laundering risk to their respective U.S. bank correspondent(s). Investigations have determined that, in the past, foreign correspondent accounts have been used by drug traffickers and other criminal elements to launder funds. Shell companies are sometimes used in the layering process to hide the true ownership of accounts at foreign correspondent financial institutions. Because of the large amount of funds, multiple transactions, and the U.S. bank’s potential lack of familiarity with a foreign correspondent financial institution’s customer, criminals and terrorists can more easily conceal the source and use of illicit funds. Consequently, we may have a higher risk of noncompliance with the Bank Secrecy Act and Anti-Money Laundering (“BSA/AML”) rules due to its new correspondent banking relationship with BICSA and will likely need to more closely monitor transactions related to correspondent accounts in Cuba, potentially resulting in increased compliance costs. Our failure to strictly adhere to the terms and requirements of our OFAC license or our failure to adequately manage our BSA/AML compliance risk in light of our new correspondent banking relationship with BICSA could result in regulatory or other actions being taken against us, which could significantly increase our compliance costs and materially and adversely affect our results of operations.
