The U.S. Treasury Department Office of Foreign Assets Control (OFAC) announced yesterday that Carlson Wagonlit Travel or, CWT B.V. (“CWT”), of the Netherlands has:
agreed to pay $5,990,490 to settle potential civil liability for apparent violations of the Cuban Assets Control Regulations (the “CACR”), 31 C.F.R. part 515.
In plain English, it appears that CWT violated U.S. economic sanctions on Cuba during the course of the last six years and they stepped voluntarily reported it to OFAC. A wise move that saved them a whole lot of money and many a long-term legal headache. As is usually the case, there is not a whole lot of detail in these OFAC reports.
There has been a spike in people-to-people Cuba travel programs. Americans are not allowed to travel to Cuba for fun under the sun; however, there is a large loophole in the law called people-to-people travel. These trips are supposed to be highly structured visits to learn about Cuban culture and its people. The trips must also meet strict U.S. regulatory guidelines. In reality, most people-to-people travel is plain old-fashioned tourism, fun under the sun.
Many reputable travel companies such as CWT have taken advantage of the regulatory easing of travel restrictions by the Obama Administration; however, some companies and institutions have crossed the line into pure tourism travel that is not allowed. Tough to say what happened in the CWT case, but I expect more settlement or prosecution announcements in the future.
A cursory review of the advertised Cuba trips are people-to-people programs in name only. These trips fuel what I call, Castro Cuba Incorporated – a series of seemingly legal business enterprises operating in the United States and Europe that are designed to evade U.S. sanctions. The profits generated from these businesses of straight to the Communist Party and intelligentsia coffers in off-shore accounts in numerous nations away from prying U.S. eyes. It is an enterprise worthy of a RICO suit.
CWT was lucky. The penalty could have been much higher, or about $12 million; however, CWT voluntarily disclosed the violations. The lesson for attorneys, compliance specialists, and business owners: voluntarily disclosures make sense and it is never too late to scrub the books, policies, and procedures and implement a trade security compliance program.
You can read the complete, albeit sparse civil penalty report here.