U.S. Department Of State Reports On Cuba's Banking System And Illicit Drug Activity
/United States Department of State
Bureau of International Narcotics and Law Enforcement Affairs
Washington DC
2 March 2021
2021 INCSR–Volume II: Money Laundering (As submitted to Congress) Report
Cuba- OVERVIEW
Cuba is not a regional financial center. Cuban financial practices and U.S. sanctions continue to
prevent Cuba’s banking system from fully integrating into the international financial system.
The government-controlled banking sector renders Cuba an unattractive location for large-scale,
third-party money laundering through financial institutions. The centrally-planned economy
allows for little, and extremely regulated, private activity. However, a significant black market
operates parallel to the heavily subsidized and rationed formal market dominated by the state and
which state authorities actively participate in and benefit from. The Cuban government does not
identify money laundering as a major problem.
The Cuban government and state-controlled businesses actively engage in international money
laundering in order to evade U.S. sanctions. Cuba should strengthen the transparency of its
financial sector by engaging regional and international AML/CFT communities and increase
criminal investigations and prosecutions.
VULNERABILITIES AND MONEY LAUNDERING METHODOLOGIES
Although it is largely disconnected from the international financial system, there are some
factors and conditions in Cuba that are conducive to money laundering and make Cuba a
potential destination for illicit funds. These include a poorly regulated and opaque banking
sector, Cuba’s cash-based economy, the Cuban government’s desperation for hard currency,
ubiquitous government corruption and overall lack of transparency, and connections to high
profile current and former government leaders of countries in the region accused of corruption.
Cuba’s geographic location places it between drug-supplying and drug-consuming countries.
Cuba has little foreign investment compared to similar nations in the Caribbean, a small
international business presence, and no known offshore casinos or internet gaming sites. There
are no known issues with or abuse of NPOs, ARS, offshore sectors, FTZs, bearer shares, or other
specific sectors or situations.
Cuba’s first special economic development zone at the port of Mariel in northwestern Cuba was
established in November 2013 and is still under development. It is potentially located on
expropriated property, built by the government in partnership with Brazilian engineering firm
Odebrecht, subject of numerous corruption investigations throughout Latin America.
KEY AML LAWS AND REGULATIONS
Cuba claims to take into account international AML/CFT standards. Legislation released in
2013 outlines regulations regarding enhanced CDD for foreign PEPs, although it continues to
exempt domestic PEPs from the reach of the legislation.
The FIU shares financial intelligence with the Revolutionary National Police, the Attorney
General's Office, and General Comptroller of the Republic. In addition to its core FIU functions,
the FIU can suspend transactions and freeze funds, both domestically and upon request from a
foreign counterpart.
The United States and Cuba have very limited engagement in law enforcement matters. Cuba
has bilateral agreements with a number of countries related to combating drug trafficking.
Cuba is a member of the GAFILAT, a FATF-style regional body. Its most recent MER is
available at: http://www.fatf-gafi.org/countries/a-c/cuba/documents/mer-cuba-2015.html.
AML LEGAL, POLICY, AND REGULATORY DEFICIENCIES
Cuba has a number of strategic deficiencies in its AML regime. These include a lack of SAR
reporting to its FIU by financial institutions and DNFBPs, and weak supervision and
enforcement within its DNFBP and NPO sectors. These deficiencies stem from Cuba’s opaque
national banking system, which hampers efforts to monitor the effectiveness and progress of
Cuba’s AML efforts.
The U.S. government issued the Cuban Assets Control Regulations in 1963, under the Trading
with the Enemy Act. The embargo remains in place and restricts travel and most investment and
prohibits the import of most products of Cuban origin. With some notable exceptions, including
agricultural products, medicines and medical devices, telecommunications equipment, and
consumer communications devices, most exports from the United States to Cuba require a
license.
Additionally, a number of U.S.-based assets of the Cuban government or Cuban nationals are
frozen.
ENFORCEMENT/IMPLEMENTATION ISSUES AND COMMENTS
In April 2019, the Cuban government convicted Cuban-American Orelvis Olivera in absentia
and sentenced him to 10 years in prison for money laundering, tax evasion, forgery of public
documents, and illicit enrichment, among other crimes. The conviction was based on his
convictions in the United States and his investments in Cuba, which the Cuban government
proceeded to confiscate.
Major international banks have participated in transferring funds involving Cuba in apparent
violation of U.S. sanctions. In April 2019, British bank Standard Chartered agreed to pay $1.1
billion to settle allegations by the authorities in the United States and Britain that it violated
money laundering laws and economic sanctions, including those involving Cuba. This follows a
$1.34 billion settlement French bank Société Générale agreed to in November 2018 that also
implicated U.S. sanctions on Cuba.
Cuba should increase the transparency of its financial sector and increase its engagement with
the regional and international AML communities. Cuba should ensure its CDD measures and
SAR requirements include domestic PEPs, all DNFBPs, and the NPO sector, and create
appropriate laws and procedures to enhance international cooperation and mutual legal
assistance. Cuba should increase the transparency of criminal investigations and prosecutions.
Actions by Governments Y- Yes. N- No.)
Criminalized Drug Money Laundering- Y
Know-Your-Customer Provisions- Y
Report Suspicious Transactions (YPN)- Y
Maintain Records Over Time- Y
Cross-Border Transportation of Currency- Y
Financial Intelligence Unit is a Member of the Egmont- Y
Group of FIUs- Y
Intl Law Enforcement Cooperation- Y
System for Identifying/Forfeiting Assets- Y
Arrangements for Asset Sharing- N
Information exchange agreements with non-U.S. govts- Y
States Party to 1988 UN Drug Convention- Y
States Party to UNTOC- Y
States Party to UNCAC- Y
Financial Institutions transact in proceeds from international drug trafficking that significantly affects the U.S.- N
United States Department of State
Bureau of International Narcotics and Law Enforcement Affairs
Washington DC
2 March 2021
2021 INCSR–Volume I: Drug and Chemical Control Report
Cuba- OVERVIEW
Cuba is not a major consumer, producer, or transit point of illicit drugs. Cuba’s domestic production and consumption remain low due to active policing, strict sentencing, and nationwide prevention and public information programs. Cuba’s intensive security presence and interdiction efforts have kept supplies of illicit drugs down and prevented traffickers from establishing a foothold. Cuba concentrates supply reduction efforts on preventing smuggling through its territorial waters, collecting abandoned drugs found washed up on coastal shores and conducting thorough airport searches. Cuba dedicates significant resources to prevent illicit drugs and drug use from entering or spreading within the country, and regional traffickers typically avoid Cuba. Most maritime seizures are found washed up on the shores of Cuba’s coast after being jettisoned by traffickers being pursued by law enforcement. With respect to international cooperation, the Cuban government reports 40 bilateral agreements for counterdrug cooperation, including the U.S.-Cuba Operational Cooperation Arrangement to Counter Illicit Traffic in Narcotics and Psychotropic Substances (signed in July 2016). The U.S. Embassy maintains a U.S. Coast Guard
liaison to coordinate with Cuban law enforcement, particularly the Cuban Border Guards. The United States and Cuba exchange limited drug control information at the working level. Prescription drug abuse is increasing in Cuba, though it remains low compared to other countries, partly due to severe pharmaceutical shortages. Steroids, psychoactive drugs, sedatives, and painkillers are available in the black market through diversion from the legitimate supply chain (including drugs intended for veterinary use) and illicit importation.
