It is one of these odd stories that make me wonder if there is someone in the U.S. government that is, finally, utilizing our laws and regulations to exact concessions from the regime in Cuba. I’ve even managed to work in some Seinfeld. Read on.
Under U.S. law, Americans can travel to Cuba by what is known as “people to people” travel. These are supposed to be cultural exchange like trips, not tourism, where you visit the island pursuant to a full-time schedule of structured travel to learn more about the people of Cuba, the culture, history, etc.
Travel service providers in the United States need access to U.S. banks to process the money part of these trips. As this involves paying fees to the Castro regime, TSPs need a license from the Treasury Department Office of Foreign Assets Control (OFAC). Without an OFAC license good luck trying to send any money to Cuba, legally, via a U.S. banking institution.
Just because OFAC grants a TSP an OFAC license, U.S. banks are not legally required to transfer any money to Cuba. I’ve heard for several months, from clients and others, that many U.S. financial institutions are simply refusing to send any funds Cuba for any TSPs. Not sure why this happening. It just is and, frankly, I’m glad it is. Why? Because the regime needs that money to process the visas. It is a money-making venture for the Cubans. And less money to the regime is consistent with U.S. law and policy.
U.S. banks must comply with a series of federal laws and regulations when engaging in transactions with high risk transactions. It is becoming increasingly expensive to process these payments. There have also been many high-profile enforcement cases and it appears many U.S. banks have decided to step sending money to Cuba.
Cuban officials have huffed and puffed for several months about all this. In December 2013, right at the peak of holiday family travel, regime officials in Washington, DC threatened they would shut down visa processing if the banking issue was not sorted out. According to various sources I’ve talked to about this, the Cubans even asked the State Department for help. The Cubans temporarily suspended visa processing and later started it up again. However, according to a story in this week’s Miami Herald, it seems as if the problem is only getting more complicated:
Cuba’s diplomatic mission in Washington said Friday that it had once again suspended consular services and will no longer be granting visas, except in humanitarian cases, because it can’t find a U.S. bank to handle its accounts.
If a solution to the impasse isn’t reached soon, family visits to the island, as well as academic, educational, sports, cultural, scientific and other exchanges between Cuba and the United States, could be impacted.
No one has said so, and I doubt they will say publicly even if true, that this is a concerted and coordinated effort by the Obama Administration to secure concessions from Cuba.
If they are not doing so, they should seize on this moment and make it so. It could serve as a small reminder to the regime, as well as opponents of U.S. policy, to be careful in threatening the U.S. with, say, holding hostage an American citizen for ransom. That is what they are doing with Alan Gross.
This story reminds me of a scene from the Seinfeld episode, the Robbery:
Whatever is really going on, the entire process can serve as a learning moment for the regime, opponents of U.S. policy, as well as certain pockets of the Obama Administration. Sanctions — a foreign policy tool (not a policy) — can and do work. The only trick is you need to, use them, just like the Clapco D-29.
Cuba cannot access most of the U.S. financial system for many a good reason. We should keep it that way and, when we need to do so, make it even more onerous for the Cubans to get passed the locks. The United States has been way to generous with the access for way too long.
If I were representing the Alan Gross family this, and a few related action items, is what I’d be urging the Obama Administration to do. Cuba wants to play politics with the lives of an American. The Obama Administration should stop playing politics and use the tools it has to exact his release, and more.
For fellow lawyers in my neck of the woods who advise on these matters, recall that Alan Gross traveled to Cuba a few times too many. He did so to work on matters needing done pursuant to a U.S. government contract. There are many compliance lessons from this case including: know your market. Folks in this town think Cuba is one big joke. In many ways, it is. Rooted in the Cold War mindset, Cuban leaders are rudderless but that makes them very dangerous and unpredictable.
Allowing Gross to travel to Cuba so many times to distribute electronic equipment for use for internet connectivity was, at least in my book, malpractice. Putting at risk American citizens, as contractors did with Mr. Gross, need not happen. You can do a great deal more working, legally, with third-country nationals.