Archive for the ‘Cuba Sanctions’ Category



OFAC Fines Foreign Company for Following Applicable Foreign Law

Posted by at 8:41 am on December 1, 2017
Category: Cuba SanctionsForeign CountermeasuresGeneralOFAC

American Express Office in Rome, image by User Mattes [CC-BY-3.0] (], via Wikimedia Commons Office of Foreign Assets Control (“OFAC”) recently announced that it has extracted $204,277 from American Express as a result of 1,818 credit card transactions in the amount of $583,649.43 for purchases made in Cuba. At issue were Mastercard and Visa corporate credit cards issued by BCC Corporate SA to corporations for use by the employees of those corporations, which cards were then used by those employees to make the Cuban purchases that were at issue.. BCC is a wholly-owned Belgian subsidiary of Alpha Card Group, another Belgian company  and a 50/50 joint venture of BNP Paribas Fortis and American Express.

The immediate question here, which OFAC can’t be bothered to answer, is how OFAC has the authority to fine a Belgian company for its dealings with Cuba. The Cuban Assets Control Regulations prohibit Cuba transactions by persons “subject to the jurisdiction of the United States.” Section 515.329 of the CACR define persons subject to the jurisdiction of the United States to include companies “owned or controlled” by a corporation organized under the laws of the United States

The CACR does not define “owned or controlled.”  That’s probably because everyone — except apparently OFAC — understands what that means, namely that the U.S. company owns 100 percent of the company or some lesser amount coupled with de jure or de facto control. In the case of a 50/50 joint venture neither party owns or controls the venture.  (Owned in this context cannot mean any interest, no matter the size, since that would render the addition of “or controlled” unnecessary).

To make matters worse, OFAC is — yet again — punishing a company for complying with applicable foreign law.   Anyone who reads this blog knows that I have pointed out time and time again that it is illegal for companies doing business in the European Union. Council Regulation (EC) No 2271/96 of 22 November 1996 prohibits companies incorporated in the E.U., such as BCC Corporate SA, from complying with the U.S. embargo on Cuba. OFAC does not, of course, mention BCC’s obligation to comply with local law or even cite it as a mitigating factor here. This is particularly egregious where the company at issue is not even subject to U.S. jurisdiction.

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When You Might Not Be Libre To Drink a Cuba Libre in Cuba

Posted by at 6:02 pm on November 9, 2017
Category: Cuba SanctionsOFAC

Tropi Cola by Markus L [CC-BY-NC-2.0 (], via Flickr [cropped and processed]One of the things that pops out from the State Department’s Naughty List of Cuban businesses is all the beverage companies on it, which seems odd. I mean, honestly, how much can American tourists spend on TropiCola? How much of that will wind up in the pockets of Cuban spies and the Cuban military? Is the Cuban military going to crumble when it can’t sell TropiCola to American tourists?

On the list are Najita (orange soda), Cachito (sparkling lemonade), TropiCola, and rum producers Ron Caney and Ron Varadero. Havana Club Rum, the gold standard of Cuban rum, is, inexplicably, not on the Naughty List.

The relevant regulation here is the new section 515.209 of the Cuban Assets Control Regulations (“CACR”) which forbids “direct financial transactions” with any entity on the Naughty List. But don’t pin your hopes on the word “direct” because we’re talking OFAC here and we’re in the Upside Down where direct actually means indirect. When you buy TropiCola from a street vendor, that’s a direct transaction in the Upside Down where OFAC lives and an indirect transaction in the normal world.

For purposes of this prohibition, a person engages in a direct financial transaction by acting as the originator on a transfer of funds whose ultimate beneficiary is an entity or subentity on the State Department’s List of Restricted Entities and Subentities Associated with Cuba (“Cuba Restricted List”) … , including a transaction by wire transfer, credit card, check, or payment of cash.

So, when you give cash to bar in Havana to purchase a Cuba Libre made with Caney Rum and TropiCola, the ultimate beneficiaries are, arguably, TropiCola and Ron Caney. Perhaps an argument could be made that since both companies have already been paid, they aren’t the ultimate beneficiary of your payment to the bar. But, if section 515.209 of the CACR only applies when you buy Tropicola or Caney Rum directly from the bottler, why include them on the Naughty List? What U.S. tourist will ever deal directly with the bottler?

And since we made a trip to the Upside Down, I am compelled to add one thing: #JusticeForBob (spoiler alert!).

Photo Credit: Tropi Cola by Markus L [CC-BY-NC-2.0 (], via Flickr [cropped and processed]. Copyright 2010 Markus L

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To Have and Have Not People-to-People Trips to Cuba

Posted by at 11:02 pm on November 8, 2017
Category: Cuba SanctionsOFAC

El Floridita by Miss Bono [CC-BY-SA-3.0 (], via [cropped]The Office of Foreign Assets Control (“OFAC”) today announced the long-awaited (or, perhaps more accurately, long-feared) amendments to the Cuban Assets Control Regulations designed to limit travel by U.S. persons to Cuba. (U.S. persons remain free to travel without restriction to the China, Russia, the Philippines, Saudi Arabia, Burma, Zimbabwe and other countries run by dictators that systematically and egregiously violate human rights, but that’s another story.)

The changes are pretty much what had been anticipated. Financial transactions with listed companies in the Cuban military, intelligence, or security services sector are forbidden, meaning that many hotels and shops in Cuba will be off-limits to U.S. travelers. The full State Department list can be found here.  The rules leave the non-travel liberalizations that occurred during the last administration pretty much in place.

Interestingly, it appears that El Floridita, the legendary daiquiri factory and Hemingway haunt in Old Havana, was spared, even though it is almost certainly owned by GAESA, the military conglomerate with tentacles throughout the Cuban economy and the target of the new restrictions. So, for the moment at least, any American who makes it to Cuba won’t go to jail for stepping inside El Floridita.

And, of course, the biggest loophole that allowed U.S. travel to Cuba – self-guided “people-to-people” tours – was closed up. Or maybe not.

The general license for people-to-people tours is still available but the travel must be conducted under the auspices of an organization. Section 515.565(b) now states that people-to-people travel is authorized provided that it occurs “under the auspices of an organization that is a person subject to U.S. jurisdiction and that sponsors such exchanges to promote people-to-people contact.” Additionally, the rule now requires that an “employee, paid consultant, agent, or other representative of the sponsoring organization accompanies each group traveling to Cuba.” This employee must “ensure that each traveler has a full-time schedule of educational exchange activities.”

Do you see where I’m going on here? I mean let’s say that you and several other U.S. friends want to go to Cuba. What would prevent you from, say, forming a non-profit in your home state with a charter saying that the non-profit’s purpose is to promote people-to-people travel to Cuba? And then draft an employment agreement between one of the friends and the new non-profit? Then, off you go, to sip daiquiris at El Floridita as long as you don’t stay in Hotel Ambos Mundos (where Hemingway finished Death in the Afternoon and started To Have and Have Not).

Certainly, you must be thinking, there must be something to prohibit this. But no, there is not. The new FAQ 16 addresses the question “[w]hat is an “organization” in the people–to-people context?” It simply repeats the definition that such an organization is subject to U.S. jurisdiction and sponsors exchanges promoting people-to-people contact. FAQ 16 also makes clear that you can’t even have your home-brew non-profit apply for an OFAC license just to make sure you’re okay.

To the extent proposed travel falls within the scope of an existing general license, including group people-to-people educational travel, organizations subject to U.S. jurisdiction may proceed with sponsoring such travel without applying to OFAC for a specific license. It is OFAC’s policy not to grant applications for a specific license authorizing transactions where a general license is available

Because the rules say that this organization sponsors “exchanges,” you’re going to have to make two trips, I suppose, but beyond that it certainly seems to me that enterprising travelers can still do people-to-people tours without having to pay a million dollars to the Smithsonian to go on one of their tours and get trapped on a tour bus with Bob and Ethel Plimsdale.

¡Buen viaje!

Photo Credit: El Floridita by Miss Bono [CC-BY-SA-3.0 (], via [cropped]. Copyright 2013 Miss Bono

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Florida Imposes Its Own Embargo on Cuba

Posted by at 5:34 pm on September 11, 2017
Category: BISCuba SanctionsOFAC

Rick Scott Head Shot by Rick Scott [CC-BY-SA-2.0 (], via Flickr 2007 [cropped]Last week, before other things got in the way, Florida governor Rick Scott looked in the mirror and suddenly realized that he had been elected by the American voters to run the foreign policy of the United States. So, without further delay, Scott announced that Florida would cut off all state funding for any port that permitted traffic to Cuba. As a result, the ports in Everglades and Palm Beach cancelled memoranda of understanding that they were planning to sign with Cuban officials visiting the state.

Now, of course, we all understand that Governor Scott’s 8th grade civics class may not have covered some of the finer points of the U.S. Constitution, and we also understand that Cuba-bashing is a favorite sport for Florida politicians, but even a quick review of the Supreme’s Court’s decision in Crosby v. National Foreign Trade Council reveals the problems with the governor’s actions here. In Crosby, Massachusetts prohibited state agencies from buying goods from companies that did business with Burma. The Supreme Court held that the law was preempted by the Supremacy Clause of the United States Constitution. In doing so, the Court noted that the Massachusetts law interfered with the ability of the federal government to conduct foreign policy with respect to Burma. Central to that holding was the court’s finding that the Massachusetts law penalized companies for engaging in trade with Burma that was expressly permitted by the federal sanctions against Burma

Here, Governor Scott’s threat extends to all trade with Cuba, even if that trade is permitted by a specific or general license. So, to take a timely example, it is legal, under section 515.591 of the Cuban Assets Control Regulations and License Exception SCP of the Export Administration Regulations to export goods and services to Cuba to assist with rebuilding infrastructure damaged by Hurricane Irma. Yet, under the threatened action, if that relief is shipped through a Florida port, that port will be penalized by Florida. This does seem, shall we say, pretty ungrateful under the circumstances: Irma’s strength, and impact on Florida, was lessened by the time she spent wreaking havoc on the northern coast of Cuba. Florida ought to think of that before blocking aid to Cuba in rebuilding destroyed infrastructure.

Photo Credit: Rick Scott Head Shot by Rick Scott [CC-BY-SA-2.0 (], via Flickr 2007 [cropped]. Copyright 2007 Rick Scott

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Copyright © 2017 Clif Burns. All Rights Reserved.
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OFAC Fines AIG for Drafting Error in Global Insurance Policies

Posted by at 10:40 am on June 28, 2017
Category: Cuba SanctionsEconomic SanctionsIran SanctionsSudan

IG Employees via [Fair Use]On Monday, the Office of Foreign Assets Control (“OFAC”) announced that insurance giant AIG had agreed to pay $148,698 to settle charges that it had insured 555 shipments involving Sudan, Iran and Cuba. Although some of the apparent violations involved single shipment policies to the sanctioned destinations or paying claims under global policies on shipments to those destinations, others involved simply accepting premiums under global insurance policies that were later used to cover shipments on which no claims were made to sanctioned destinations.

In November of last year, OFAC provided guidance on how global insurance policies should deal with U.S. economic sanctions

The best and most reliable approach for insuring global risks without violating U.S. sanctions law is to insert in global insurance policies an explicit exclusion for risks that would violate U.S. sanctions law. For example, the following standard exclusion clause is often used in open marine cargo policies to avoid OFAC compliance problems: “whenever coverage provided by this policy would be in violation of any U.S. economic or trade sanctions, such coverage shall be null and void.” The legal effect of this exclusion is to prevent the extension of a prohibited service (insurance or risk assumption) to sanctioned countries, entities or individuals. It essentially shifts the risk of loss for the underlying transaction back to the insured – the person more likely to have direct control over the economic activity giving rise to the contact with a sanctioned country, entity or individual. [11-16-07]

This is a sensible and reasonable policy with respect to global insurance policies. So, you must be assuming, AIG must have left the language cited above out of its global policies and that led to the fines. But you would be wrong. OFAC said this about the AIG global policies:

While a majority of the policies were issued with exclusionary clauses, most were too narrow in their scope and application to be effective.

And how were they “too narrow in their scope and application”? OFAC is not saying. Apparently, OFAC thinks it will be easier to fine other insurance companies later if it keeps secret the drafting errors in the global policies that made the exclusionary clauses in the AIG global policies “too narrow in their scope and application.” And what about those clauses other than most clauses that were too narrow?  Why was AIG being fined for shipments under policies where the exclusionary clauses were acceptable?

Worse yet, after staying mum on what was wrong with “most” of AIG’s exclusionary clauses beyond being “too narrow,” OFAC has the nerve to say this in its announcement:

This enforcement action highlights the important role that properly executed exclusionary clauses play in the global insurance industry’s efforts to comply with U.S. economic sanctions programs.

If “properly executed exclusionary clauses” are so gosh-darned important, then why on earth does OFAC refuse to give the insurance industry a single clue as to what exactly are  “properly executed exclusionary clauses” and what was wrong with “most” of the clauses in the AIG global policies? Did they leave out the word “void” from the recommended language? Did they just say “U.S. economic sanctions” instead of “U.S.economic or trade sanctions”?  How hard would it have been for the agency to say precisely and specifically what was wrong with AIG’s exclusionary clauses?  This just underscores the perception that OFAC is more interested in terrifying than regulating U.S. businesses.

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Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)