News / Americas

US Sanctions Make Cuba's Bank Account Too Toxic

FILE - Cuban pesos are seen at at vegetable stall at a market in Sagua La Grande, Villaclara  province in central Cuba.
FILE - Cuban pesos are seen at at vegetable stall at a market in Sagua La Grande, Villaclara province in central Cuba.
Reuters
The decision by a New York bank to close Cuba's checking account in the United States has presented an unusual diplomatic quandary that provides a test for new-found pragmatism in  relations between the two longtime foes.
 
Cuba announced on Tuesday that it is ceasing almost all consular services in the United States after M&T Bank  closed its account, sending shock waves through the booming Cuba-U.S. travel industry and threatening to undermine the Obama administration's goal of closer “people-to-people” ties.
 
Cuba blamed its unusual bank-less status on the longstanding U.S. economic embargo against the communist island, as well as sanctions resulting from it being included on the U.S. list of state sponsors of terrorism. These incur regulations - and potential fines - so onerous that banks are reluctant to accept such toxic accounts, experts say.
 
Cuba has so far not threatened any reciprocal action against the U.S. diplomatic mission in Havana, and observers were watching for signs of restraint, which diplomats would take as further indication that Cuba is pursuing improved relations.
 
The banking snafu was a problem not likely to go unresolved for too long because both Cuba and the United States have too much to lose from disrupting travel between the two countries, experts said.
 
But it exposed a conflict within U.S. policy towards Cuba which on the one hand wants closer travel ties with the island, and yet on the other brands it a supporter of terrorism.
 
“It begs the question how do we modernize these rules so they don't conflict with our policy goals. We want more people-to-people travel, and more family travel,” said U.S. Representative Joe Garcia, a Cuban-American Democrat from Miami.
 
He was referring to the Obama administration's support for educational and cultural exchanges, as well as unrestricted visits for Cuban families divided by the Florida Straits.
 
“We have a series of rules that are at best arcane and were cumbersome when they were created three decades ago. They are out of tone and time.”
 
Cuba needs tourism revenue
 
Cuba also cannot afford a drop in tourism to the island, which has become a mainstay of its cash-strapped economy.
 
The Obama administration says it is “actively working” to help Cuba find a bank willing to handle its U.S. accounts, but officials declined to go into details.
 
“We would like to see the Cuban missions return to full operations,” a State Department spokeswoman said.
 
The fastest way to do that would be by taking Cuba off the list of state sponsors of terrorism, a pariah status many Cuba analysts say the island no longer deserves.
 
The Obama administration may be contemplating such a move, but does not appear ready to go that far yet, analysts say.
 
“This banking issues is all about Cuba being on the list of state sponsors of terrorism,” said Richard Feinberg, a senior fellow of the Washington-based Brookings Institution.
 
A heightened sanctions compliance regime in recent years was more directed at Iran, North Korea and Syria, he noted, but Cuba suffered the consequences by being stuck in the same boat.
 
“The huge irony is that all this is happening just as we are about to relax sanctions on Iran,” he added.
 
Even so, the Obama administration ought to be able to come up with a way to reassure the banks that their exposure to regulation by the Treasury Department's Office of Foreign Assets Control (OFAC), which enforces sanctions, will be minimal, legal experts say.
 
“The Treasury Department needs to tell a Washington DC area bank that it has their blessing to handle Cuba's account through expediting the licensing,” said Antonio C. Martinez II, a New York attorney who deals with Cuba sanctions compliance and edits a blog critical of the embargo.
 
A Miami lawyer familiar with international banking and the Cuba embargo suggested that the White House or the State Department could simply resolve the matter with the Office of the Controller of the Currency, which regulates all national banks.
 
“Banks are very nervous about any type of misstep about money flowing to any country on the OFAC list because the fines, even if you only make a small mistake, are huge,” he said. “You have to scrutinize everything coming in and out. The problem is who wants to take that on? You just can't make money on these accounts.”
 
Regulatory hurdles make banks leery
 
M&T did not respond to calls for comment, but U.S. officials say over the past few years a number of banks have ceased providing banking services to diplomatic missions partly due to regulatory issues.
 
Some banks have paid hefty fines for bad Cuba transactions. In June Italy's second-largest bank, Turin-based Intesa San Paolo, paid OFAC $3 million over U.S. dollar transactions involving Cuba, Iran and Sudan.
 
Intesa processed 53 wire transfers for more than $1.6 million to Cuba between 2004-2008, according to OFAC.
 
Last year, the Dutch bank ING Bank NV agreed to pay $619 million to settle U.S. government allegations that it moved money illegally through banks in the United States in violation of sanctions against Cuba, Iran and other countries. It was the biggest fine against a bank for sanctions violations, officials said.
 
Swiss banks UBS AG and Credit Suisse AG  and Britain's Lloyds TSB Bank PLC and Barclays Bank PLC have also paid out hundreds of millions more in similar fines involving Cuba transactions.
 
U.S. officials say over the past few years a number of banks have ceased providing banking services to diplomatic missions linked to terrorism due to regulatory issues.
 
“Many banks and companies get caught in the sanctions web and they often can pay a costly price,” said Martinez.
 
“The question is does Cuba belong on the terror list.”

You May Like

Photogallery US to Send 3,000 Troops to Liberia in Expanded Ebola Effort

At US Centers for Disease Control and Prevention in Atlanta, Obama is to announce troop deployment, other details of US plans to fight Ebola outbreak More

China Muslims Work to Change Perceptions After Knife Attacks

Muslims in Kunming say that they condemn the violence, it is not a reflection of the true beliefs of their faith More

Humanitarian Aid, Equipment Blocked in Cameroon

Move is seen as a developing supply crisis in West Africa More

This forum has been closed.
Comment Sorting
Comments
     
by: John Schluter
November 29, 2013 3:24 PM
This is too Funny!
I have the same problem;
Tons of income
800 credit score
But the bank can't loan to me even though they have a record amount of funds available. They told me the US government is making it impossible for them to loan.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Enviropreneur Seeks to Save the Environment, Empower the Communityi
X
September 16, 2014 2:06 PM
Lorna Rutto, a former banker, is now an ‘enviropreneur’ - turning plastic waste into furniture and fences discusses the challenges she faces in Africa with raw materials and the environment.
Video

Video Enviropreneur Seeks to Save the Environment, Empower the Community

Lorna Rutto, a former banker, is now an ‘enviropreneur’ - turning plastic waste into furniture and fences discusses the challenges she faces in Africa with raw materials and the environment.
Video

Video West Trades Accusations Over Ransoms

As world leaders try to forge a common response to the threat posed by Islamic State militants in Iraq and Syria, there is simmering tension over differing policies on paying ransoms. In the past month, the jihadist group has beheaded two Americans and one Briton. Both countries refuse to pay ransom money. As Henry Ridgwell reports for VOA from London, there is uncertainty in the approach of some other European nations.
Video

Video Scotland Independence Bid Stokes Global Interest

The people of Scotland are preparing to vote on whether to become independent and break away from the rest of Britain, in a referendum being watched carefully in many other countries. Some see it as a risky experiment; while others hope a successful vote for independence might energize their own separatist demands. Foreign immigrants to Scotland have a front row seat for the vote. VOA’s Henry Ridgwell spoke to some of them in Edinburgh.
Video

Video Washington DC Mural Artists Help Beautify City

Like many cities, Washington has a graffiti problem. Buildings and homes, especially in low-income neighborhoods, are often targets of illegal artwork. But as we hear from VOA’s Julie Taboh, officials in the nation's capital have come up with an innovative program that uses the talents of local artists to beautify the city.
Video

Video US Muslim Leaders Condemn Islamic State

Leaders of America's Muslim community are condemning the violent extremism of the Islamic State group in Iraq and Syria. The U.S. Muslim leaders say militants are exploiting their faith in a failed effort to justify violent extremism. VOA correspondent Meredith Buel reports.
Video

Video Americans' Reaction Mixed on Obama Strategy for Islamic State Militants

President Barack Obama’s televised speech on how the United States plans to “degrade and destroy” the group known as the Islamic State reached a prime-time audience of millions. And it came as Americans appear more willing to embrace a bolder, tougher approach to foreign policy. VOA producer Katherine Gypson and reporter Jeff Seldin have this report from Washington.
Video

Video Authorities Allege LA Fashion Industry-Cartel Ties

U.S. officials say they have broken up crime rings that funneled tens of millions of dollars from Mexican drug cartels through fashion businesses in Los Angeles. Mike O'Sullivan reports that authorities announced nine arrests, as 1,000 law enforcement agents fanned out through the city on Wednesday.
Video

Video Bedouin Woman Runs Successful Business in Palestinian City

A Bedouin woman is breaking social taboos by running a successful vacation resort in the Palestinian town of Jericho. Bedouins are a sub-group of Arabs known for their semi-nomadic lifestyle. Zlatica Hoke says the resort in the West Bank's Jordan Valley is a model of success for women in the region.


Carnage and mayhem are part of daily life in northern Nigeria, the result of a terror campaign by the Islamist group Boko Haram. Fears are growing that Nigeria’s government may not know how to counter it, and may be making things worse. More

AppleAndroid

More Americas News

Chronically Hungry Numbers Decline

Three U.N. agencies have released the State of Food Security in the World report
More

UN: Enforced Disappearances Continue Unabated Globally

UN Working Group on Enforced Disappearances says more than 43,000 cases from 88 countries still remain to be clarified
More

Hurricane Odile Weakens, Still a Threat to Mexico

Odile could drench Baja California with as much as 46 centimeters of rain by Friday
More

Powerful Hurricane Threatens Mexico's Baja California

US forecasters have downgraded Odile to strong Category 3 storm, with top sustained winds of 205 kilometers per hour
More

Hard-hitting Films Tackle Homelessness at Toronto Festival

'Time Out of Mind,' 'Shelter,' and 'Heaven Knows What' all focus on characters struggling with homelessness, addiction on the streets of New York
More

After Tax Reform Triumph, Chile's President Faces Rockier Road

'Honeymoon' may be over for Michelle Bachelet as protests rise and economy, security outlook worsen
More