Healthcare Crisis In Cuba Provides Additional Questions And Opportunities For Biden-Harris Administration To Address Electronic Remittance Transfers... And Do So Practically
/The partial collapse of the Republic of Cuba government-operated healthcare system managed by the Diaz-Canel-Valdes Mesa Administration (2019- ) has provided additional questions and additional opportunities for the Biden-Harris Administration (2021- ). Can citizen anger be managed?
First, how to craft an electronic remittance transfer regulatory and policy construct which is perceived in the United States (specifically from some members of the 117th United States Congress and to populations residing in certain areas of the State of Florida) as “helping to rescue” the 11.3 million citizens of the Republic of Cuba while not perceived as “helping to rescue” the government of the Republic of Cuba.
Second, how to craft an electronic remittance transfer regulatory and policy construct whereby Republic of Cuba nationals direct responsibility toward the government of the Republic of Cuba for commercial, economic, and political inadequacies rather than toward the government of the United States.
Third, opportunities exist that were absent two months ago for the Biden-Harris Administration to further lessen the dependency of Republic of Cuba nationals upon the government of the Republic of Cuba. One of these opportunities is through the implementation of a regulatory and policy construct to authorize direct investment to and direct financing for the re-emerging private sectors in the Republic of Cuba, which are fragile and subject to internal and external disruption. They require nurturing. They require resources. They require capital. They require financing. And those providing the capital and the financing require a direct means to obtain dividends from their investment and payment for the loans provided.
The most efficient and cost-effective means for the Biden-Harris Administration to further separate the citizens of the Republic of Cuba from the commercial and economic constraints of the government of the Republic of Cuba is to provide financial sector authorizations that encourage the development of and create an efficient resource delivery marketplace.
If the Biden-Harris Administration wants to meaningfully provide for United States-based companies and individuals subject to United States jurisdiction to invest in and provide financing for micro, small and medium-size enterprises (SME’s) located in the Republic of Cuba, then essential to remove constraints upon the movement of funds.
This requires sending and receiving funds directly rather than through third countries. This requires financial institutions in third countries be authorized to process transactions relating to the Republic of Cuba.
If the Biden-Harris Administration wants to create stress points throughout the banking system in the Republic of Cuba, then [from its current impractical status] authorize Direct Correspondent Banking and U-turn transactions.
Critical to Biden-Harris Administration thinking: Not to sacrifice the re-emerging private sectors in the Republic of Cuba to make a political point. Meaning, escape the trap of authorizing the processing, delivery, and distribution of electronic remittance transfers, authorizing implementation of direct correspondent banking, re-authorizing U-turn financial transactions… but doing each with onerous restrictions that results in United States companies and financial institutions unable to make practical use of the regulatory and policy decisions. All participants require clarity rather than uncertainty. When faced with uncertainty, United States companies and financial institutions will not engage.
The best example of such regulatory malpractice was during the Obama-Biden Administration (2009-2017). In 2015, the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury authorized Pompano Beach, Florida-based Stonegate Bank (2017 assets approximately US$2.9 billion) to have a correspondent 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 provided commercial operating accounts for the Embassy of the Republic of Cuba in Washington DC, the Permanent Mission of the Republic of Cuba to the United Nations in New York City, and other types of OFAC-authorized transactions for more than eighty customers. In September 2017, Stonegate Bank was purchased by Conway, Arkansas-based Home BancShares (2019 assets approximately US$14 billion) through its Centennial Bank subsidiary. Despite intense advocacy, the Obama-Biden Administration National Security Council (NSC) inexplicably refused to permit BICSA a correspondent account with Stonegate Bank, so Stonegate Bank processed transactions for approximately eighty (80) customers on a regular basis through Panama City, Panama-based Multibank, which had dealings with the Republic of Cuba. However, on 16 June 2020, Bogota, Colombia-based Grupo Aval reported: “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.”
The OFAC should focus upon making the most basic possible. This means electronic transfer remittances where the recipient receives their choice of currency- in Cuban Pesos (CUP) or United States Dollars and bank account to bank account. Don’t complicate the process.
Also vital for the Biden-Harris Administration to authorize United States companies and individuals subject to United States jurisdiction with access to all delivery platforms that currently exist in the Republic of Cuba- whether sending funds to the Republic of Cuba government-operated American International Services (AIS) Moneda Libremente Convertible (MLC) cards, through Empresa de Telecomunicaciones de Cuba S.A. (ETECSA) to wireless devices, or the use of digital currencies. Caution with respect to supporting the use of digital currencies as the product remains unregulated, volatile in value, speculative, and susceptible to theft. Not beneficial for the Biden-Harris Administration to introduce further economic and commercial instability to the Republic of Cuba- for which it will certainly be blamed when holders loose value.
The OFAC could require payout (in currency and bank account to bank account) in the Republic of Cuba to be made in U.S. Dollars or CUP, at the discretion of the recipient. The result would place pressure upon the Central Bank of the Republic of Cuba to further align the official value of the CUP at 24 to US$1.00 nearer to the unofficial rate of the CUP at 70 to the US$1.00. Authorizing direct correspondent banking would permit electronic remittance transfers to settle respective accounts within hours rather than days- meaning a process less expensive, more efficient, and more transparent.
The OFAC could place a “consistent with the global marketplace limit” upon electronic remittance transfer fees arriving to the Republic of Cuba that are processed by and create benefit to the government of the Republic of Cuba primarily through Revolutionary Armed Forces (FAR) of the Republic of Cuba-connected Banco Financiero Internacional S.A. (BFI), Republic of Cuba government-operated Financiera Cimex (Fincimex) and Republic of Cuba government-operated American International Services (AIS).
The OFAC could also carve-out from the Cuba Restricted List (CRL) maintained by the United States Department of State an authorization for BFI, Fincimex, and AIS to engage solely in electronic remittance transfers, but remain subject to all other provisions of the CRL.
Seizing Funds Remains Issue For Financial Institutions
The use of direct correspondent banking could result in an attorney on behalf of a client asking a court to seize funds controlled by a United States-based company or financial institution with the argument that the Republic of Cuba “has an interest” in the funds. However, there are two relevant points:
First, important to authorize direct correspondent banking and then allow the marketplace to determine the risk associated with transactions and when direct correspondent banking is implemented.
Second, an attorney would find that case law, OFAC license wording authorizing the process, the public benefits of direct correspondent banking, and public discourse about the consequences to United States exporters of expropriating funds owed to them as persuasive in deterring a request.
Since December 2001, approximately US$6,455,169,592.00 (through June 2021) of agricultural commodities and food products have been exported from the United States to the Republic of Cuba through provisions of the Trade Sanctions Reform and Export Enhancement Act (TREEA) of 2000. Since 2003, approximately US$26,807,700.00 of healthcare products (medical equipment, medical instruments, medical supplies, pharmaceuticals) have been exported from the United States to the Republic of Cuba through provisions of the Cuban Democracy Act (CDA) of 1992. All of these funds have been received by United States exporters through third countries rather than directly from the Republic of Cuba. As a result, transactions take more time to complete, are more costly to the United States exporter, and are less transparent.
The government of the Republic of Cuba was estimated to receive on an annual basis approximately US$20 million as fees for the processing and delivery of electronic remittance transfers from the United States to the Republic of Cuba. The approximately US$20 million represented approximately 2% of the total value of electronic remittance transfers of approximately US$1.5 billion. The approximately 2% was in line with global norms. Daily, the fee to the Republic of Cuba was approximately US$54,000.00. If the OFAC were to authorize direct correspondent banking, then Denver, Colorado-based Western Union Company (2019 revenues approximately US$5.3 billion) and other companies could settle accounts daily, thus limiting the amount of funds which could be subject to court action.
The Central Bank of the Republic of Cuba may determine that making operational direct correspondent banking between, for example, BICSA and Home BancShares, BICSA and Western Union Company, or BFI and Western Union Company would not be in their interest due to United States statutes and regulations relating to compliance and transparency which, in their opinion, may result in financial information used to their determent. Important to permit the Central Bank of the Republic of Cuba to make that decision rather than the Biden-Harris Administration make that decision. Removal of obstacles places additional pressures upon the government of the Republic of Cuba to choose between engagement under conditions similar to how financial institutions in other countries make use of direct correspondent banking or continue with the third-country transfer process.
Historical Consideration
Conditionality, important to note, was neither effective nor sustainable during the Fidel Castro Administration (1976-2008), the Raul Castro Administration (2008-2018), or thus far with the Diaz-Canel-Valdes Mesa Administration.
Paraphrasing a comment shared in the early 1990’s from a diplomat residing in the Republic of Cuba: Successive governments of the Republic of Cuba have been prepared for its citizens to suffer. For the Biden-Harris Administration, the question is if it is prepared to permit the citizens of the Republic of Cuba to suffer.
LINK To Complete Analysis In PDF Format
Relevant Analyses
If Western Union Ends Remittance Services To Cuba, That Means A Return Of “Mules On Steroids”- The Impact Could Cripple MIA November 16, 2020
Will United States Airlines Now Post A Link To FinCEN Form 105 On Their Internet Sites For Passengers Traveling To Cuba? November 23, 2020
Biden-Harris Administration Confirms Cuba "Remittance Working Group" Has No Private Sector Members Aug 12, 2021
Cuba Expands Again Role Of Private Sector- Suppliers, Foreign Currency Access Aug 5, 2021
