Biden-Harris Administration Issues OFAC Regulations To Help Cuba's "Entrepreneurs" But Again Fails To Make The Most Important Change.
/While useful for the Biden-Harris Administration (2021- ) to redefine the word "entrepreneur" and to further expand Internet-related activities for entrepreneurs, and to permit entrepreneurs to possibly have a less complex banking transaction process outside of United States, and to authorize entrepreneurs to have bank accounts in the United States, there remains one glaring omission- the continuing prohibition upon direct correspondent banking.
As long as financing, investment, and payments need to be routed through third countries, the Biden-Harris Administration will be constraining precisely the activity it professes to support.
UNITED STATES DEPARTMENT OF THE TREASURY
Office of Foreign Assets Control
31 CFR Part 515
Cuban Assets Control Regulations
AGENCY: Office of Foreign Assets Control, Treasury.
ACTION: Final rule.
SUMMARY: The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is amending the Cuban Assets Control Regulations (the “Regulations”) to further implement elements of the policy announced by the Administration on May 16, 2022, to increase support for the Cuban people. Among other things, these amendments increase support for internet
freedom for the Cuban people and independent Cuban private sector entrepreneurs by expanding authorizations for internet-based services and a range of financial transactions. These amendments also include several additional or updated cross references and one updated definition.
LINK TO DOCUMENT IN PDF FORMAT
LINK TO FEDERAL REGISTER DOCUMENT
Treasury Amends Regulations to Increase Support for the Cuban People and Independent Private Sector Entrepreneurs
WASHINGTON – Today, the Department of the Treasury’s (Treasury) Office of Foreign Assets Control (OFAC) amended the Cuban Assets Control Regulations, 31 CFR part 515, (CACR) to further implement the policy announced by the Biden-Harris Administration on May 16, 2022 to increase support for the Cuban people. These regulatory amendments update and clarify authorizations in support of internet-based services to promote internet freedom in Cuba, support independent Cuban private sector entrepreneurs, and expand access to certain financial services for the Cuban people. These regulatory amendments will become effective upon publication in the Federal Register on May 28, 2024.
The latest changes to the CACR are available here. OFAC also updated Frequently Asked Questions (FAQs) on its website related to Cuba. Major elements of the revisions in the CACR include:
Authorized Internet-Based Services and Software
OFAC is amending the CACR to update and clarify the scope of authorized internet-based services, including by adding examples of authorized services incident to the exchange of communications over the internet and updating the authorization for services in support of such communication. Additional examples of authorized services include social media platforms, collaboration platforms, video conferencing, e-gaming and e-learning platforms, automated translation, web maps, and user authentication services. OFAC is also clarifying that persons subject to U.S. jurisdiction may provide cloud-based services (including remote data storage, data transport service, content distribution networks, virtual machines, software-as-a-service, and infrastructure-as-a-service) to support services incident to the exchange of communications over the internet.
In addition, OFAC is amending the CACR to expand the authorization for services, including training, to install, repair, or replace items related to communication, or items used to develop software that improves the free flow of information or that will support private sector activities in Cuba consistent with the export or reexport licensing policy of the Department of Commerce, including by removing the requirement that referenced items fall within specific export control classification parameters. OFAC is further authorizing the export or reexport of Cuban-origin software and mobile applications from the United States to third countries, which will expand the ability for independent Cuban entrepreneurs to offer their software and mobile applications on global application stores.
Independent Private Sector Entrepreneurs
OFAC is replacing the defined term “self-employed individual” with the new term “independent private sector entrepreneur.” The new term continues to include self-employed individuals, such as owners or employees of private businesses or sole proprietorships, but the amended definition now also includes private cooperatives or small private businesses that are wholly owned by or consisting solely of such individuals. In each case, the new term is limited to private cooperatives, small private businesses, and sole proprietorships located in Cuba of up to 100 employees. The amended definition better reflects Cuba’s non-state sector, as Cuba now authorizes the establishment of small- and medium-sized private enterprises. Finally, OFAC is excluding prohibited Cuban officials and prohibited Cuban Communist Party members from the new term to ensure they do not take advantage of U.S. actions intended to benefit independent private sector entrepreneurs.
U.S. Bank Account
OFAC is authorizing independent private sector entrepreneurs who are Cuban nationals to open, maintain, and remotely use U.S. bank accounts, including through online payment platforms, to conduct authorized or exempt transactions, whether the independent private sector entrepreneur is physically located in the United States, Cuba, or another country.
U-Turn Transactions
OFAC is reinstating an authorization for “U-turn” transactions, which are funds transfers that originate and terminate outside the United States where neither the originator nor beneficiary is subject to U.S. jurisdiction. OFAC previously removed the authorization for “U-turn” transactions in September 2019. This reinstated authorization is intended to help the Cuban people, including independent private sector entrepreneurs, by facilitating remittances and payments for transactions in the Cuban private sector that are authorized by various provisions of the CACR. Under this reinstated authorization, U.S banks are authorized to process “U-turn” funds transfers in which Cuba or a Cuban national has an interest, provided that neither the originator nor the beneficiary is a person subject to U.S. jurisdiction.
OFAC is also authorizing the unblocking and return of any “U-turn” funds transfer that was blocked prior to this reinstatement of the “U-turn” authorization. For more information on Cuba sanctions, see here.
The White House
Senior Administration Officials on the Cuba OFAC Rollout
Special Briefing- May 28, 2024
MODERATOR: Okay. Good morning, everyone, and welcome to our background call on Cuba. Today’s call is on background, attributable to senior administration officials. For your information only and not for reporting, joining us today are , , and . We will start with brief opening remarks from each of our speakers, then we’ll turn it over to you for questions. If you’d like to ask questions, please use the “raise hand” function on Zoom. And so with that, let’s turn it over to our first speaker, . Please go ahead.
SENIOR ADMINISTRATION OFFICIAL ONE: Great. Good morning, everybody. Thank you for joining us. I hope everyone had a good Memorial Day. We are on the call today because today we’re taking an important step to support the expansion of free enterprise and the expansion of the entrepreneurial business sector in Cuba. These steps follow upon an announcement that was made in May 16th, 2022, which concluded several measures to support the evolution of a freer, more open society in Cuba. One of the steps mentioned at that time was increasing support for independent Cuban entrepreneurs. And we recognize that this is a growing and dynamic sector of economic activity in Cuba, where people are gaining greater independence from the state, and we felt that it was essential as part of the Biden administration’s Cuba policy to ensure that this sector continues to expand and is supported. Increasing opportunities for independent Cuban entrepreneurs is a critical tenet of our overall Cuba policy, and today we are amending the Cuban Assets Control Regulations which are managed by the Office of Foreign Assets Control at Treasury to implement aspects of this policy to support entrepreneurship and free enterprise in Cuba. These amendments will facilitate greater access to internet-based services for the Cuban people, as well as provide the independent Cuban private sector greater access to international transactions and U.S. banking services, including through online payment platforms. With this announcement, the administration is now fully implementing the May 2022 commitments to the Cuban people. We believe that the growth of an independent entrepreneurial private sector in Cuba is fully aligned with our values, is the best hope for generating economic development and employment in Cuba, and the growth of this sector is also consistent with the President’s guidance to implement measures that will benefit the Cuban people while continuing to minimize resources to the Cuban Government.
These measures also will work in the United States interest, as providing this support for Cuba’s private sector will help to stem irregular migration from the island by creating more economic opportunity on the island. It further allows Cuba to be self-sufficient without relying on their government for all of their daily necessities. Furthermore, we believe that engaging in support of Cuba’s independent private sector will ensure that these important entrepreneurial actors are supported by the United States and make it more difficult for other state actors who wish to engage economically in Cuba only in support of the government and without supporting this private entrepreneurial sector. Additionally, the expansion of internet services aligns with our belief of the importance of inclusive, open, and secure access to the internet, which will foster equitable economic prosperity, and facilitate the enjoyment of human rights and fundamental freedoms, which is what all the people of Cuba deserve. So with that, I will turn it over to my colleague from the State Department.
SENIOR ADMINISTRATION OFFICIAL TWO: Thank you very much. And let me say a bit more about why we are taking these important steps to support the expansion of an independent private sector in Cuba, and why now. We know the Cuban economy is in dire straits. Amid recurring shortages of fuel, electricity, and increasingly even food, it’s clear the communist experiment in Cuba has failed and the government is no longer able to provide for its citizens’ most basic needs. In a country where there are no free elections, the Cuban people are voting with their feet, including by using dangerous irregular migration routes. Against this backdrop, we have seen the Cuban Government grudgingly open space to a nascent, yet growing private sector. While cuentapropistas – or self-employed proprietorships – have been legal for some years, in 2021 the Cuban Government also legalized the creation of small- and medium-sized enterprises. With over 11,000 private businesses registered – operating in diverse fields from food distribution, to construction, to auto repair – Cuba’s private sector is now responsible for nearly one-third of all employment on the island. These changes have profoundly affected Cuban culture. Young Cubans are eager to earn private sector wages rather than work for the state. A class of independent business leaders is emerging. I know this because our team, including myself – both in Havana and in Washington – meets with these individuals. These entrepreneurs look to the United States for inspiration and to develop the necessary skills to run successful businesses. In an acute twist of irony, the island’s communist government must now rely on private enterprise to provide food and basic services for its people. It’s not an easy road for these entrepreneurs. The Cuban Government’s mismanagement of its economy has led to unparalleled high inflation. But because it is more nimble and efficient than the government, the private sector currently serves as a life preserver for the Cuban people without which they could not stay afloat. We believe the organic expansion of the private sector and evolution of the digital economy on the island – led by the Cuban people themselves, and not by any foreign government – is critical.
Above all, we must encourage the freedom of Cuban citizens to define their own economic future. Cuban entrepreneurs prefer U.S. values and our economic model and see the United States as their business partner of choice. We are focused on taking measures that inject a real sense of hope among the Cuban people and stem the tide of worsening humanitarian and migration conditions – all while remaining steadfast and promoting accountable for the Cuban’s Government’s continued abuses. So with that, let me now turn to my colleague from the Treasury Department.
SENIOR ADMINISTRATION OFFICIAL THREE: Good morning, everyone. This is . My State and NSC colleagues have discussed the policy contours of today’s action and now I’d like to focus on some of the specific technical information. This morning OFAC amended the Cuban Assets Control Regulations to implement policies intended to support greater freedom and expanded economic opportunities for the Cuban people, including by increasing opportunities for independent Cuban entrepreneurs. In addition to the regulations, OFAC issued a number of guidance documents, including six new frequently asked questions, and amended several additional frequently asked questions. We also released a fact sheet that explains the regulations in simple terms. In short, we’ve made these updates to the regulations to support two priority policy goals: First, we wanted to increase support for the internet freedom in Cuba, but also increase economic support for the Cuban population. On internet freedom, we’ve added examples of authorized internet services and made updates to allow U.S. companies to provide services to install, repair, or replace certain items. So for example, some of the additional services that are now authorized include social media platforms, collaboration platforms, video conferencing, e-gaming and e-learning platforms, automated translation, web maps, and user authentication services.
To help increase economic support to the Cuban people and increase the Cuban private sector’s access to services like online payment platforms, we’ve also made a couple of key changes to the Cuban Asset Control Regulations. First, we redefined the term “self-employed individual” to “independent private sector entrepreneur” to better reflect the types of individuals and entities that operate in the Cuban private sector. This new definition includes not only the definition of self-employed individual from our old regulations, but also includes private sector businesses, and private cooperatives, and sole proprietorships of up to 100 individuals – and this also includes farms.
As of 2021, Cuban entrepreneurs can establish small and medium private enterprises under the Cuban law. By the latest count, there are over 11,000 registered private businesses in Cuba. It’s important to note that the new definition for independent private sector entrepreneurship excludes prohibited officials of the Cuban Government, such as the national assembly members, Cuban military officers, or certain ministry and staff regime propagandists, and prohibited members of the Cuban Communist Party. For a Cuban private sector business to qualify under this definition, its ownership cannot include such insiders.
Second, we will also allow Cuban independent private sector entrepreneurs to establish and remotely access U.S. bank accounts, including through online payment platforms, to conduct authorized or exempt transactions. This will help facilitate independent private sector entrepreneurs in Cuba, importing food, equipment, and other goods that support the Cuban people. Third, to help facilitate remittances in payments for authorized transactions, including authorized transactions to and from the Cuban private sector, we have also reinstated authorization to allow U-turn transactions. These are funds transactions which start and end outside the United States but pass through the U.S. financial system, and they are a common occurrence in international commerce. Ultimately, these regulatory changes are consistent with the LIBERTAD Act, while specifically opening space for the independent Cuban private sector and the Cuban people to access certain financial services, internet services, and information. I want to reiterate that our Cuba sanctions remain in place and the regulations continue to maintain restrictions on the Cuban Government and its military, intelligence, and security services. Today’s action is about support for greater freedom and expanded opportunities for the Cuban people. With that, I will turn it back over to the moderator for questions.
MODERATOR: Thanks so much. And as a quick reminder, as noted in the invitation to this call, this call is embargoed until its conclusion. Again, if you have a question, please use the “raise hand” function in Zoom. And with that, let’s please go to Kylie Atwood to ask the first question. Kylie, go ahead. You should be able to unmute yourself.
QUESTION: Hi. Thank you, guys, for doing this on this Tuesday morning. Just a quick question of clarification. If you guys could be a little bit more explicit with us, do these – what exactly do these online payment platforms include? Like which platforms are we talking about specifically? I assume it’s Zelle and Venmo, but are there other ones as well? And can you confirm that those two would be included? And then my second question is: Are there other countries that the United States has moved forward with this step in recent history that we can point to? And finally, you mentioned there are about 11,000 registered private businesses in Cuba, so is it safe to assume that all of those – so long as they don’t have those excluded officials on their leadership and team that you noted – they could all apply and try and access these online payment platforms now? Thank you.
MODERATOR: Thank you so much. Over to our speakers to take the question.
SENIOR ADMINISTRATION OFFICIAL THREE: This is . I can probably start and answer a couple of those questions. First, yes, online payment platforms are available to use for the authorized activity that is described in the regulations. As far as – of the 11,000 who have access to these new authorizations, they have to meet the definition of the independent, private sector entrepreneur. And we offer in the regulations a definition of that person, and that is also available in some of the guidance that we have issued. But specifically, this does in fact prohibit and exclude Cuban officials and Cuban Government, military, and intelligence and security services. So if they do have an interest in one of those private sectors, the definition would exclude them from this.
MODERATOR: Great. Thank you so much. Let’s go over to Karen DeYoung. Karen, you should be able to unmute yourself now.
QUESTION: Thank you. I was – I wanted to ask a question about state sponsor of terror definition and Cuba still being on that list. When the Secretary of State was asked last week in Congress about the previous decision to designate Cuba as cooperating with the U.S. anti-terrorism goals, he said that that was because Cuba had lifted – because Colombia had lifted its extradition orders on the ELN and other Colombian terrorist groups. That was the definition of why, in the most recent SST designation – that was the definition of why Cuba remained on the SST list. And so I’m wondering: Is the administration currently engaged in a review of the SST designation? And I have a secondary question about the restrictions that are under the SST designation, various sanctions – secondary sanctions and visa restrictions – that greatly affect the tourist industry, in which there are a lot of private – some entrepreneurs, and wondered to what extent you think those – that also undermines the goals that you’ve said are the goals of this current change that you’ve described.
MODERATOR: Thank you so much.
QUESTION: Sorry, that was kind of long.
SENIOR ADMINISTRATION OFFICIAL TWO: Great, thank you – no, thank you very much. Happy to take that. So on May 15th, the department determined that the circumstances for Cuba’s certification as a not fully cooperating country changed from 2022 to 2023. As you know, Cuba’s refusal to engage with Colombia on extradition requests for the – for ELN members, National Liberation Army members, supported Cuba’s NFCC certification for calendar year 2022. In August 2022, pursuant to an order from the Colombian president, from Gustavo Petro, Colombia’s attorney general announced that arrest warrants would be suspended against 17 ELN commanders, including those whose extradition Colombia had previously requested from Cuba. And moreover, the U.S. and Cuba resumed law enforcement cooperation in 2023, including on countering terrorism. So that’s why on May 15th the State Department determined that Cuba’s continued certification as a not fully cooperation country was no longer appropriated. So the designation of state sponsors of terrorism – terror is wholly separate from the NFCC – not fully cooperating country – certification process, and there have been countries certified as an NFCCs without being designated as state sponsors of terror. U.S. law establishes a specific statutory criteria for rescinding the SST designations, and any review of Cuba’s status on the SST list would be based on the law and the criteria established by Congress. Today’s step we feel is critical, in terms of meeting the President’s commitment in May 2022, to support the Cuban people and support the emerging entrepreneurial class, and we think will have a really big impact on the Cuban economy.
MODERATOR: Thank you so much. Let’s please go to Matt Spetalnick to ask the next question. Matt, you should be able to unmute yourself now.
QUESTION: Yes, thank you very much. I was going to kind of make another try at the state sponsor of terrorism question. I mean, can you confirm whether or not the administration, State Department, has begun an actual formal review of Cuba’s presence on that list? It’s been said since the beginning of the administration that – they’ve used the term “review.” It’s being – it’s been studied, and yet we don’t even know it’s truly under review. If so, if a review has not begun, could one begin in the near term and even be carried out before this administration – this term ends?
SENIOR ADMINISTRATION OFFICIAL TWO: Thanks for your question. So I have no updates on review. I would just say again that U.S. law establishes specific statutory criteria for sending an SST designation. And any review of Cuba’s status on the list would be based on the law and the criteria that Congress has established.
MODERATOR: Great. Thanks so much. Let’s please go to Rafael Bernal to ask the next question. Rafael, you should be able to unmute yourself now. Rafael, if you’re speaking, we can’t hear you.
QUESTION: Oh, is that better?
MODERATOR: Yes. Go ahead.
QUESTION: Oh, sorry about that, and thanks for having the call. Following up on sort of the same line, there’s an apparent contradiction, at least publicly – it sounds strange and the Cubans have commented that it’s illogical – that a country can be fully collaborating against terrorism while sponsoring terrorism – on that side. And then on these sanctions and how they interact with the state sponsor of terrorism designation, a lot of these small and medium enterprises, they depend on tourism, and especially European tourists, and European tourists who right now choose not to go to Cuba because of the sanctions that fall on them because of the state sponsor of terrorism. Is there any relief on that end for these small companies?
SENIOR ADMINISTRATION OFFICIAL TWO: Great. Thanks for your question. So let me just sort of go through the differences between the NFCC certification and how it’s different from the state sponsor of terrorism authority. So basically, the State Department conducts an annual review of countries that are not cooperating fully with U.S. anti-terrorism efforts, which it is known commonly as the not fully cooperating country list. And that’s pursuant to section 40A of the Arms Export Control Act. Section 40A prohibits the sale or license for export of defense articles and services to a foreign country that’s certified as an NFCC. And the act requires that a report of the countries that fall into this category for the previous calendar year be sent to Congress every year by May 15. So the NFCC certification is made pursuant to a separate statutory authority and criteria from those under which state sponsor of terrorism designations are made. So there have been countries certified as NFCCs without being designated as SSTs, and there have been countries that have been designated SSTs without being certified as NFCCs, like Sudan. So they are separate authorities that have taken place. In terms of the tourism sector, I would just say that this is – these steps taken today by President Biden, by the administration are opening up a significant amount of space for private enterprises on the island. So that can be across all sectors in which you have these small and medium enterprises. That includes in the tourist sector, but also includes a diverse set of sectors, including auto repair, including food distribution. It’s really across the line. And we’ve been heartened by the fact that, in spite of Cuba’s dire economic situation, there’s this budding class of entrepreneurs, some 30 percent of the economy now, which are really taking extraordinary efforts to work against the failed communist experiment in the country and move forward in a positive direction. And what we’re looking to do today is support those individuals.
MODERATOR: Thanks. Let’s please go to Nora Gamez Torres to ask the next question. Nora, you should be able to unmute yourself. Go ahead.
QUESTION: Hi. Thank you so much for doing this. I wonder if you could go into more details about the use of online payment systems, if you can describe actually what are the ones that are authorized. And I guess you are authorizing this, but banks would have to actually decide if they want to provide these services or not. So I wonder if you can also comment on the sort of conversations you have been having with banks and these tech companies.
SENIOR ADMINISTRATION OFFICIAL THREE: Thanks, Nora, for that question. Yes, the regulatory amendment specifically authorized Cuban independent private sector entrepreneurs to establish and remotely access U.S. bank accounts, including through online payment platforms, to conduct authorized or exempt transactions. And the goal of this, of course, is to help facilitate independent private sector entrepreneurs in Cuba to import food, equipment, and other goods that that the Cuban people need. So yes, they do have access – if they meet the definition of private sector entrepreneurs and they are conducting authorized or exempt transactions, they have the ability to access U.S. bank accounts, establish and remotely access U.S. bank accounts, and that includes online payment platforms. In terms of your follow-on question, I think the types of – I’m sorry, Nora, what was the second half of your question?
MODERATOR: Her question was about conversations that we’ve been having with banks and tech companies. Yeah.
SENIOR ADMINISTRATION OFFICIAL THREE: Oh, yes. Yes. So look, you are absolutely right, the financial institutions will make a risk-based decision, but the State Department and the Treasury Department will engage regularly with financial institutions. And we will – if they have questions, they will come in to OFAC and ask those questions. But we do regularly engage with banks related to questions on Cuba regulations, and we anticipate that they will be coming in and OFAC will be prepared to field those.
MODERATOR: Great, thank you. And our final question will go to Rebecca Santana. Rebecca, you should be able to unmute yourself.
QUESTION: Hi, thank you so much. Just full disclosure, I do not usually cover Cuba, so this is a little bit elementary. I just kind of want to make sure that I am understanding this correctly. So before this, if you were an entrepreneur in Cuba, you couldn’t access the U.S. banking system, whether that was have it in a bank account or whether using, like, your Chase Bank app to make transactions. And now you will be able to presumably as long as you meet this definition of what it is to be a private sector entrepreneur, an independent one, and you don’t have these government ties to your company – you would be able to access that – you’d be able to set up a U.S. bank and be able to use – do online banking.
SENIOR ADMINISTRATION OFFICIAL THREE: Thank you, Rebecca. That’s right. This new authorization allows private sector – independent private sector entrepreneurs, as per the definition, to establish and remotely access U.S. bank accounts, including through our online payment platforms. But it —
MODERATOR: Great —
SENIOR ADMINISTRATION OFFICIAL THREE: Again, it has to be linked to authorized or exempt transactions.
MODERATOR: Thank you so much. That does exhaust our questions and conclude this morning’s call. As a reminder, this morning’s call was on background, attributable to senior administration officials. And the embargo has now lifted on the call. Thank you all so much for joining us, and thank you to our speakers. Have a great day. Bye-Bye.
