Treasury Amends the Cuban Assets Control Regulations to Support Cuban Citizens and Independent Private Sector Entrepreneurs

On May 28, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) amended the Cuban Assets Control Regulations (CACR) to better implement the Biden-Harris Administration’s policy aimed at increasing support for the Cuban people. These amendments enhanced authorizations for internet-based services to promote internet freedom in Cuba, support independent Cuban private sector entrepreneurs, and expand access to financial services. In conjunction with these amendments, OFAC issued six new, Cuba-related Frequently Asked Questions (FAQ) and amended eight Cuba-related FAQs. These FAQs are available here.

Background

On May 16, 2024, the Biden-Harris Administration issued a statement emphasizing its commitment to prioritizing the human rights and economic well-being of the Cuban people. In doing so, the Administration announced initiatives to bolster Cuba’s private sector, including enhanced access to U.S. internet services, e-commerce platforms, electronic payments, and increased support for microfinance and training for Cuban entrepreneurs. The May 28, 2024, amendments by OFAC codify these policy objectives within the Cuban Assets Control Regulations (CACR), 31 CFR Part 515.

Authorized Internet-Based Services and Software

OFAC updated the CACR to clarify and expand the scope of authorized internet-based services. This includes specifying authorized services such as social media, collaboration platforms, video conferencing, e-gaming, e-learning, automated translation, web maps, and user authentication services similar to current Iran General License D-2. OFAC clarified that U.S. persons and those subject to U.S. jurisdiction are authorized to provide cloud-based services to support internet communications. These cloud-based services include remote data storage, data transport service, content distribution networks, virtual machines, software-as-a-service, and infrastructure-as-a-service.

The amendments to the CACR also broadened the authorization for services related to communication, including training, installation, repair or replacement of relevant items used to develop software. OFAC also removed previous export control classification requirements for referenced items, for example, items exported or reexported to Cuba pursuant to License Exception Consumer Communication Devices (CCD) or License Exception Support for the Cuban People (SCP). Furthermore, OFAC authorized the export or reexport of Cuban-origin software and mobile applications from the U.S. to third countries, aiding Cuban entrepreneurs in offering their products globally.

Independent Private Sector Entrepreneurs

OFAC further clarified its position relating to the support of private business. It replaced the term “self-employed individual” with “independent private sector entrepreneur” in 31 CFR § 515.340 to capture self-employed individuals, private business owners, and employees, as well as private cooperatives and small private businesses owned by such individuals.

OFAC explained that this definition will apply to private cooperatives, small private businesses, and sole proprietorships in Cuba with up to 100 employees, aligning with Cuba’s authorization of small-and-medium sized private enterprises. OFAC underscored that the term “independent private sector entrepreneur” specifically excludes prohibited Cuban officials and Cuban Communist Party members to prevent them from benefitting from U.S. actions intended to support independent private sector entrepreneurs.

Notably, OFAC authorized Cuban independent private sector entrepreneurs to open, maintain, and use U.S. bank accounts remotely. This includes using online payment platforms for authorized or exempt transactions, regardless of whether the entrepreneur is in the U.S., Cuba, or elsewhere.

U-Turn Transactions

OFAC reinstated the authorization for “U-turn” transactions that had previously been revoked by the Trump Administration.  This general license authorizes funds transfers originating and terminating outside the U.S. where neither the originator nor beneficiary is subject to U.S. jurisdiction.  Pursuant to the amended 31 CFR § 515.584, U.S. banks can now process “U-turn” funds transfers involving Cuban interests, as long as neither the originator nor beneficiary is under U.S. jurisdiction. Additionally, OFAC amended the CACR to permit the unblocking and return of any previously blocked “U-turn” funds transfers.

Impact

The May 28, 2024, amendments to the CACR may expand business opportunities for independent Cuban nationals, ease certain financial transactions between Cuba and the U.S., and offer potential avenues for expansion into the Cuban market for certain U.S. companies. Companies operating internationally should act proactively to ensure compliance with new requirements under the CACR and evaluate the impact of broaden authorizations to the companies’ dealings.