Retrenchment On Cuban Sanctions; The Search For A Middle Ground

The Trump Administration has made good on its promise to cut back on the liberalized Cuban policy implemented by the Obama Administration with a new regime that introduces new travel restrictions as well as broad prohibitions on "direct financial transactions" between persons subject to the jurisdiction of the United States and parties on a new Cuban Restricted List (CRL) that has been published by the State Department.

The New Cuba Restricted List

The new regulations add a new section 515.209 to the Cuban Assets Control Regulations (CACR) prohibiting "direct financial transactions" with parties on the new CRL, which names approximately 180 Cuban entities including 80 hotels all across the island. New section 515.209 is unusual in that it expressly prohibits only "direct" financial transactions, which are further specified as limited to situations where the person on the CRL is either the ultimate beneficiary or originator on a wire, credit card charge, check or payment of cash. This seems clearly to permit indirect transactions, i.e., payments to third parties in Canada, Mexico or Europe that one is aware will later be followed by a separate wire, charge, check or cash payment by that party to a CRL party. Section 515.201(c), however, remains in the CACR and continues to prohibit actions that have the purpose or effect of evading or avoiding the basic prohibitions on dealing with Cuba in 515.210(a) and (b). It remains to be seen, therefore, whether OFAC will view "indirect" transactions with CRL entities as permitted by the expressly limited wording of 515.209 or prohibited by the longstanding evasion and avoidance provision in 515.201(c).

Effect of the CRL on General Licenses

The new regulations also add a new section 515.421 providing that "transactions ordinarily incident to" transactions authorized by general or specific license do not include transactions with those on the CRL if the general or specific license expressly excludes such direct financial transactions. Such an express exclusion has been added to 18 of the General Licenses in subpart 500 of the CACR, which means that whenever a CRL person could be involved it will be necessary to sort through the General Licenses to see whether one is available that does not have the CRL exclusion. This will have an impact on many sectors. It applies, for example, to powers of attorney (515.530), negotiation of contracts (515.534), informational materials (515.545), family visits...