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US Government Eliminates “U-Turn” Financial Transactions and Restricts Remittances to Cuba

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On September 6, 2019, the US Treasury Department Office of Foreign Assets Control (“OFAC”) announced that it is amending the Cuban Assets Control Regulations (“CACR”) to further financially isolate the Cuban government and implement President Trump’s June 2017 National Security Presidential Memorandum (“NSPM”) Strengthening the Policy of the United States Towards Cuba (the “CACR Amendment”). The CACR Amendment (1) removes the authorization for banks subject to US jurisdiction to process pass-through or “U-turn” transactions, and (2) eliminates or restricts certain types of remittances to Cuba. The CACR Amendment was published in the Federal Register on September 9, 2019, and will take effect on October 9, 2019.

OFAC also published Frequently Asked Questions and a Fact Sheet on the CACR Amendment.

“U-Turn” Transactions

OFAC revised the “U-turn” general license provided in 31 CFR § 515.584(d). Since March 2016, the general license has authorized banking institutions subject to US jurisdiction to process “U-turn” transactions, i.e., Cuba-related funds transfers (typically in US dollars) from one non-US bank to another non-US bank where neither the originator nor beneficiary is a person subject to US jurisdiction. Under the CACR Amendment, banks subject to US jurisdiction may no longer process “U-turn” transactions. However, they are authorized to reject such transactions and are not required to block them.

Remittances

Further, OFAC restricted certain remittances to Cuba as summarized below:

  1. Family remittances (31 CFR §515.570(a)): OFAC amended this general license by putting a cap of $1,000 per consecutive three-month period as the maximum amount one remitter can send to one Cuban national as a family remittance. Further, OFAC excluded as authorized recipients of family remittances the close relatives of (1) prohibited officials of the Government of Cuba and (2) prohibited members of the Cuban Communist Party.
  2. Remittances to certain individuals and independent non-governmental organizations in Cuba (31 CFR §515.570(g)): OFAC amended this general license by adding authorization for unlimited remittances to certain additional self-employed individuals. OFAC added a definition of a qualifying “self-employed individual” in 31 CFR §515.340.
  3. Donative remittances (31 CFR §515.570(b)): OFAC removed the general license authorizing persons subject to US jurisdiction to make certain donative remittances to Cuban nationals.
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Mr. McMillan's practice involves compliance counseling; compliance programs; licensing; compliance reviews; internal investigations; voluntary disclosures; administrative enforcement actions; criminal investigations; customs inquiries, audits, detentions, and seizures; and trade-compliance due diligence and post-acquisition integration in mergers and acquisitions. His practice includes matters that implicate the US International Traffic in Arms Regulations (ITAR), US Export Administration Regulations (EAR), US National Industrial Security Program (NISP), the US Committee on Foreign Investment in the United States (CFIUS), and equivalent non-US laws. Mr. McMillan regularly advises on and represents clients in matters involving technology, including its control, protection, accidental disclosure, diversion, or unauthorized collection. Mr. McMillan has extensive experience working with companies in the aerospace and defense industry, as well as companies in the Middle East and other parts of Asia.

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Eunkyung advices clients on various regulatory compliance and trade issues, concentrating on the US export controls such as the Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR), economic and trade sanctions, US customs and import laws, the US Foreign Corrupt Practices Act (FCPA), and foreign anti-bribery laws.

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Callie C. Lefevre is an associate in the Washington, DC office where she is a member of the International Practice Group. Her practice is focused on all aspects of International Trade law, particularly compliance with US export controls, trade and economic sanctions, and US foreign investment restrictions. *Admitted in New York only. Practice limited to matters and proceedings before US courts and federal agencies.

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