On May 28, 2024, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) amended the Cuban Assets Control Regulations (“CACR”) and issued new and updated frequently asked questions (“FAQs”) to further implement a policy originally announced by the Biden Administration on May 16, 2022 to increase support for the Cuban people and private sector entrepreneurs.
The CACR has been revised as follows:
- Clarification and Expansion of Authorized Internet-Based Services and Software: The authorization for the export, reexport, and import of certain internet services set out at 31 CFR § 515.578(a)(1) has been revised to provide additional examples of authorized services incident to the exchange of communications over the internet and to include and expand certain services to support the exchange of such communications. In particular:
- Social media platforms, collaboration platforms, video conferencing, e-gaming and e-learning platforms, automated translation, web maps, and user authentication services have been added to the list of representative services incident to the exchange of communications over the internet.
- Cloud-based services (clarified to include, per the new FAQ 1175, e.g. remote data storage, data transport services, content distribution networks, virtual machines, software-as-a-service, and infrastructure-as-a-service) to support the exchange of communications over the internet have been added to the list of authorized services incident to the exchange of communications over the internet. (Previously, this prong referred only to “cloud storage” services.)
- The authorization to provide installation, repair, and replacement services related to (i) communications, (ii) items used to develop software that improves the free flow of information, or (iii) items used to develop software that will support private sector activities has been expanded by removing the authorization’s limitation to items with certain export control classifications.
- Cuban-origin software and mobile applications are now authorized for export or reexport from the United States to third countries.
- Independent Private Sector Entrepreneurs: OFAC is replacing the defined terms “self-employed individual” and “independent Cuban entrepreneur” with the term “independent private sector entrepreneur.”The updated term still includes self-employed individual owners or employees of small private businesses or sole proprietorships (cuentapropistas), but has been expanded to include also private cooperatives and other private businesses owned by or consisting solely of such individuals up to 100 employees(i.e. the entities themselves, and not just their owners or individual employees). Prohibited Cuban government officials captured under 31 CFR 515.337 and members of the Politburo of the Cuban Communist Party are excluded from the scope of the term “independent private sector entrepreneur.”
By expanding this definition, OFAC has effectively broadened the scope of a wide range of CACR authorizations (e.g., remittances, US imports of certain goods and services, and certain banking-related transactions discussed below).
- US Bank Account: OFAC is authorizing Cuban national independent private sector entrepreneurs to open, maintain, and remotely use US bank accounts, including through online payment platforms, to conduct authorized or exempt transactions, regardless of their location (e.g., regardless of whether they are in the United States, Cuba, or other countries), but only to conduct authorized or exempt transactions.
- U-Turn Transactions: OFAC is reinstating its authorization (previously revoked in 2019) for US banks to process “U-turn” transactions (i.e., funds transfers in which Cuba or Cuban national have an interest when such transfers originate and terminate outside the United States, provided that neither the originator nor beneficiary is subject to US jurisdiction). According to OFAC, this reinstated authorization is intended to benefit Cuban nationals (including independent private sector entrepreneurs) by facilitating remittances and payments for transactions for authorized transactions in the Cuban private sector.
OFAC is also authorizing the unblocking and return of any “U-turn” funds transfer that were blocked prior to the reinstatement of this “U-turn” authorization.
- Telecommunications-related Transaction Reporting Procedures: The CACR reporting requirements have also been amended to replace the fax or mailing requirement with an email reporting requirement for certain telecommunications-related authorizations under 31 CFR § 515.542. OFAC has also clarified that the reporting requirement applies only to the telecommunications service provider acting under the telecommunications authorization, and not banking institutions processing payments on behalf of such providers.
OFAC has also issued six new CACR FAQs (1174–1179) and amended eight other CACR FAQs (732, 736, 745, 748, 757, 769, 770, and 785) to account for the CACR amendments relating to independent private sector entrepreneurs, “U-turn” transactions, and the expanded internet-based services authorization. The new FAQs are briefly summarized below:
- FAQ 1174 clarifies that persons providing web hosting services may reasonably rely on information provided to them by their customers in the ordinary course of business in performing due diligence to assess whether a hosted website is not for the promotion of (Cuban) tourism (which would be outside of the scope of the relevant authorization)—unless they know or have reason to know otherwise.
- FAQ 1175 confirms that services related to application programming interfaces (“APIs”) that are incident to the exchange of communications over the internet fall within the authorization for exportation/reexportation to Cuba under 31 CFR § 515.578(a)(1)(i). API services falling within the authorization may include those incident to web maps, social media platforms, collaboration platforms, video conferencing, etc.
- FAQ 1176 indicates that internet-based service providers subject to US jurisdiction may reasonably rely on information provided to them by their customers in the ordinary course of business—unless such providers know or have reason to know that a transaction is not authorized—in performing due diligence to determine whether intended recipients of an export or reexport are prohibited officials of the Government of Cuba, prohibited members of the Cuban Communist Party, or organizations administered or controlled by the aforementioned.
- FAQ 1177 indicates that only services that are widely available to the public and are at no cost to the user are authorized to be provided to a prohibited official of the Government of Cuba, a prohibited member of the Cuban Communist Party, or an organization administered or controlled by the aforementioned under the internet-based services general license.
- FAQ 1178 clarifies that whether or not a good would be considered “produced by independent private sector entrepreneurs” depends on the extent of Cuban state-owned entities’ involvement in the production and exportation of the subject goods. The FAQ indicates that goods may not be considered “produced by independent private sector entrepreneurs” if a Cuban state-owned entity has processed the good into a product with a new name, character, or use.
- FAQ 1179 provides a wide variety of examples of private business entities and private cooperatives that may qualify as an “independent private sector entrepreneur” (e.g., agricultural businesses and farming cooperatives, mobile app developers, medical supply businesses, bed and breakfasts).
