OFAC Further Amends the Cuban Assets Control Regulations Regarding Travel and Financial Transactions

[author: Rachel Coyne – Intern]

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has amended the Cuban Assets Control Regulations to further implement elements of the policy announced by the President on December 17, 2014 to engage and empower the Cuban people. These additional changes were published in the Federal Register on March 16, 2016.

OFAC has made amendments to the Regulations with respect to travel and related transactions, financial transactions, and business and physical presence. Among other things, these amendments further facilitate travel to Cuba for authorized purposes, expand the range of authorized financial transactions, and authorize additional business and physical presence in Cuba. The amendments also implement certain technical and conforming changes.

Travel and Related Transactions:

OFAC has amended section 515.565(b) to remove the requirement that people-to-people educational travel be conducted under the auspices of an organization that sponsors such exchanges. This section now authorizes individuals to travel to Cuba provided that, among other things, the traveler engages while in Cuba in a full-time schedule of educational exchange activities that are intended to enhance contact with the Cuban people, support civil society in Cuba, or promote the Cuban people’s independence from Cuban authorities, and that will result in meaningful interaction between the traveler and individuals in Cuba. The predominant portion of the activities engaged in by the traveler must NOT be with certain Government of Cuba or Cuban Communist Party officials. Persons relying upon this authorization must retain records related to the authorized travel transactions, including records demonstrating a full-time schedule of authorized activities.

OFAC has amended section 515.571 to remove the limitation on the receipt of compensation in excess of amounts covering living expenses and the acquisition of goods for personal consumption by a Cuban national present in the United States in a nonimmigrant status or pursuant to other non-immigrant travel authorization issued by the U.S. government. New section (a)(5)(i) explicitly authorizes the receipt of any salary or other compensation consistent with the individual’s non-immigrant status or other non-immigrant travel authorization, provided that the recipient is not subject to any special tax assessment by the Cuban government in connection with the receipt of the salary or other compensation. New section 515.571(e) authorizes all transactions related to the sponsorship or hiring of a Cuban national to work in the United States and provides that an employer may not make additional payments to the Cuban government in connection with the sponsorship or hiring of a Cuban national. This section also authorizes transactions in connection with the filing of an application for non-immigrant travel authorization. OFAC has added section 515.585(c) to authorize individuals who are persons subject to U.S. jurisdiction and who are located in a third country to engage in the purchase or acquisition of merchandise subject to the prohibitions in section 515.204, including Cuban-origin goods, for personal consumption while in a third country, and to receive or obtain services from Cuba or a Cuban national that are ordinarily incident to travel and maintenance within a third country. This provision does not authorize the importation of such merchandise into the United States, including as accompanied baggage.

Financial Transactions:

OFAC has authorized U-turn transactions, in which Cuba or a Cuban national has an interest to be conducted through the U.S. financial system. This provision authorizes funds transfers from a bank outside the United States that pass through one or more U.S. financial institutions before being transferred to a bank outside the United States where neither the originator nor the beneficiary is a person subject to U.S. jurisdiction

OFAC has added a new section to authorize U.S. banking institutions to process U.S. dollar monetary instruments presented indirectly by Cuban financial institutions. Correspondent accounts used for transactions authorized pursuant to this section may be denominated in U.S. dollars. This section does not authorize banking institutions subject to U.S. jurisdiction to open correspondent accounts for banking institutions that are nationals of Cuba.

OFAC has added another new section to authorize banking institutions to open and maintain accounts solely in the name of a Cuban national located in Cuba for the purposes only of receiving payments in the United States in connection with transactions authorized pursuant to or exempt from the prohibitions of this part and remitting such payments to Cuba. This provision would allow, for example, a Cuban national author located in Cuba to open an account with a bank or online payment platform in the United States to receive payments for sales of her book.

Business and Physical Presence:

In September 2015, OFAC amended sections 515.542 and 515.578 to authorize persons subject to U.S. jurisdiction to establish and maintain a business presence in Cuba, including through subsidiaries, branches, offices, joint ventures, franchises, and agency or other business relationships with any Cuban individual or entity, to facilitate the provision of authorized telecommunications and internet-based services. OFAC has now expanded this authorization to establish a business presence to include the following additional categories of persons subject to U.S. jurisdiction (all of whom were previously authorized to establish a physical presence): exporters of goods authorized for export or reexport to Cuba by section 515.533 or section 515.559 or that are otherwise exempt; entities providing mail or parcel transmission services authorized by section 515.542(a) or providing cargo transportation services in connection with trade involving Cuba authorized by or exempt from the prohibitions of this part; and providers of travel and carrier services authorized by section 515.572. OFAC has clarified that the business and physical presence authorization for providers of internet-based services extends to persons engaged in transactions authorized by section 515.578(e). OFAC has removed the prior provisions authorizing business presence that were located in sections 515.542 and 515.578 and consolidated these authorizations in section 515.573.

In September 2015, OFAC amended section 515.573 to authorize certain persons subject to U.S. jurisdiction to establish a physical presence, such as an office or other facility, in Cuba, to facilitate authorized transactions. OFAC has now expanded this authorization to include the following additional categories of persons subject to U.S. jurisdiction: entities engaging in non-commercial activities authorized by section 515.574 (Support for the Cuban People); entities engaging in humanitarian projects set forth in section 515.575(b) (Humanitarian projects); and private foundations or research or educational institutes engaging in transactions authorized by section 515.576. OFAC has also added a note to clarify that the activities that may be carried out by exporters of items exported or reexported pursuant to authorization by the Department of Commerce or OFAC, or that are otherwise exempt, at a physical presence authorized by this section include the assembly of such items.

Other Transactions:

OFAC has added a new provision to authorize the provision of educational grants, scholarships, or awards to a Cuban national or in which Cuba or a Cuban national otherwise has an interest. This could include, for example, the provision of educational scholarships for Cuban students to pursue academic studies for a degree. OFAC has amended section 515.578 to allow the importation of Cuban-origin software. OFAC has also made several technical and conforming edits.

The above information is taken from OFAC’s final rule regarding these amendments. To read more about these regulations, read the full rule here.