CUBA
Summary
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Sanctions

U.S. general prohibitions on exports, imports, and certain other transactions

FAFT AML Deficient

No

Higher Risk Areas

 

US Dept of State Money Laundering Assessment

Not on EU White list equivalent jurisdictions

World Governance Indicators (Average Score)

Failed States Index (Political Issues)(Average Score)

Medium Risk Areas

Weakness in Government Legislation to combat Money Laundering

Corruption Index (Transparency International & W.G.I.))

 

 

ANTI-MONEY LAUNDERING

 

FATF Status

Cuba is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies

 

FATF Statement re AML Strategic Deficiencies: 24 October 2014

The FATF welcomes Cuba’s significant progress in improving its AML/CFT regime and notes that Cuba has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in February 2013. Cuba is therefore no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. Cuba will work with GAFISUD to further strengthen its AML/CFT regime.

 

Compliance with FATF Recommendations

The first Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Cuba was undertaken by the Financial Action Task Force (FATF) in 2015. According to that Evaluation, Cuba was deemed Compliant for 16 and Largely Compliant for 20 of the FATF 40 Recommendations.

Key Findings

As at the date of the on-site visit, it seems that Cuba is not an attractive place for ML/TF. Cuba's specific context and materiality reduce overall ML/TF risk.

Inter-agency coordination and cooperation at all levels of the Cuban government should be noted.

The ML/TF National Risk Assessment (NRA) and the development of a National AML/CFT Strategy are the first exercise carried out by Cuba in AML/CFT matters.

The DGIOF produces financial intelligence based on STRs, cash transaction reports, and additional information from reporting entities and from several Cuban agencies where necessary. As at the date of the on-site visit, no ML or TF STRs had been received from FIs or DNFBPs, and no intelligence reports had been created on these matters.

There are some shortcomings in the implementation of preventive and supervision measures for DNFBPs. In general, the country has adapted its AML/CFT national legislation in compliance with international standards. However, major efforts still need to be made for authorities and reporting entities to understand the new responsibilities assigned to them.

There are some shortcomings in the NPO sanctioning system.

With regard to ML investigations and prosecutions, as at the date of the on-site visit, the fight against money laundering itself did not seem to be efficient, as only two cases were prosecuted for ML since the criminalization of ML in 1999, whereas there were many trials for money laundering predicate offences.

In the case of measures for the confiscation and forfeiture of assets, confiscation is considered to have been an excellent tool to fight crime in general and to deprive criminals of their assets

The Cuban financial system is made up of a limited number of reporting entities and has a low level of internationalization. Additionally, AML/CFT measures have been implemented for years.

It is noted that the Republic of Cuba has a supervision system for banking and non-banking FIs that is based mainly on the suitability and the effective application of the supervision system developed by the Superintendence of the BCC, which comprises most of the relevant ML/TF risks in the Cuban economic context described below.

The current Cuban institutional and regulatory framework for the identification of terrorists, terrorist groups or terrorist support networks designated by the UNSC or by third countries and the ability to promote actions to deprive entities of their assets is complete and consistent.


Legal persons and arrangements with operations in Cuba are mostly state owned; therefore, the ML/TF risk is limited, since the abuse of legal arrangements and/or companies with illegal purposes is not attractive to criminal organizations.

Based on its context, Cuba can cooperate with other countries in relation to mutual legal assistance, including extradition. Informal cooperation is generally constructive and timely between all agencies and their foreign counterparts. In both cases, the figures for the volume of assistance requested by the country on ML/TF matters are consistent with the number of investigations, prosecutions or judicial proceedings carried out by the national authorities in this field; with regard to requests from foreign counterparts, inputs are consistent with the context of the country or the ML/TF risks and level of impact detected.

Risks and General Situation

In terms of threats, based on data provided by the authorities, Cuba does not have, in general, a high crime rate. It is necessary to mention that transnational organized crime seems to have an occasional impact in the country and is linked to international criminals who operate mainly from abroad, although criminal networks show a higher organizational level. Overall, the crimes that may be an ML threat are drug trafficking, embezzlement, bribery, and fraud. In addition, Cuba has updated and strengthened its legal AML/CFT/CFPWMD framework, largely in line with the FATF Standards, reducing potential vulnerabilities of the sectors.

In this update process, preventive measures for DNFBPs and NPOs will be implemented; however, according to the authorities, these sectors are currently not characterized by bearing a high risk in Cuba. Higher-risk activities and sectors are FIs and foreign investment, where a number of legal measures are widely and consistently implemented, reducing the chances of these sectors and activities being used for ML/TF/FPWMD.

Additionally, it should be noted that Cuba has contextual factors that are very specific and that have an impact on reducing the potential materiality of ML/TF/FPWMD offences being committed in the country. First, most reporting entities are state owned and therefore subject to a double supervision: ML/TF supervision and the supervision of the Office of the General Comptroller of the Republic. Second, Cuba has a limited participation in the international financial system.

As shown in the report in more detail, and considering the reduced levels of criminal impact, a strengthened legal framework, the extensive investigative and judicial capacities of all operators, the country's specific characteristics that reduce the potential materiality of crimes such as ML/TF being committed, it is concluded that Cuba is not an attractive place for ML/TF/FPWMD.

 

US Department of State Money Laundering assessment (INCSR)

Cuba is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.

OVERVIEW

 

Cuba is not a regional financial center. Cuban financial practices and U.S. sanctions continue to prevent Cuba’s banking system from fully integrating into the international financial system. The government-controlled banking sector, low internet and cell phone usage rates, and lack of government and legal transparency render Cuba an unattractive location for money laundering through financial institutions. The centrally-planned economy includes limited private activity. A significant cash-based black market operates parallel to the heavily subsidized and rationed formal market dominated by the state.

 

The Government of Cuba does not identify money laundering as a major problem. Cuba should increase the transparency of its financial sector and expand its capacity to fight illegal activities. Cuba also should increase the transparency of criminal investigations and prosecutions.

 

VULNERABILITIES AND EXPECTED TYPOLOGIES

 

Cuba’s geographic location puts it between drug-supplying and drug-consuming countries. Cuba has little foreign investment, a small international business presence, and no offshore casinos or internet gaming sites. Cuba’s first special economic development zone at the port of Mariel in northwestern Cuba was established in November 2013 and is still under development; it is not currently an area of concern. There are no known issues with or abuse of NPOs, alternative remittance systems, offshore sectors, FTZs, bearer shares, or other specific sectors or situations.

 

KEY AML LAWS AND REGULATIONS

 

Legislation released in 2013 outlines regulations regarding enhanced customer due diligence of foreign PEPs, although it continues to exempt domestic PEPs from the reach of the legislation.

 

Cuba has bilateral agreements with a number of countries, including the United States, related to combating drug trafficking. It is unknown if any of these agreements include mechanisms to share information related to financial crimes or money laundering.

 

The United States and Cuba do not have a formal records-exchange mechanism in place but, under the Law Enforcement Dialogue process, have developed a mutual legal assistance relationship as part of the legal cooperation technical exchange and have established direct communication between DEA and its Cuban counterpart to focus on counternarcotics cooperation.

 

Cuba is a member of the GAFILAT, a FATF-style regional body.

 

AML DEFICIENCIES

 

Although the risk of money laundering is low, Cuba has a number of strategic deficiencies in its AML regime. These include a lack of SAR reporting to its FIU from financial institutions and DNFBPs and weak supervision and enforcement in the DNFBP and NPO sectors.

 

These deficiencies stem from Cuba’s opaque national banking and financial sector, which hampers efforts to monitor the effectiveness and progress of Cuba’s AML efforts. Cuba should increase the transparency of its financial sector. Cuba should ensure its CDD measures and SAR requirements include domestic PEPs, all DNFBPs, and the NPO sector, and create appropriate laws and procedures to enhance international cooperation and mutual legal assistance. Cuba also should increase the transparency of criminal investigations and prosecutions.

The U.S. government issued the Cuban Assets Control Regulations in 1963, under the Trading with the Enemy Act. Between January 2015 and October 2016, the Departments of Commerce and the Treasury significantly modified sanctions regulations, with the easing of restrictions on authorized travel, commerce, and financial transactions. The embargo remains in place, however, and the sanctions regulations still restrict travel for “tourist activities,” as well as most investment and the import of most products of Cuban origin. With some notable exceptions, including agricultural products, medicines and medical devices, and certain non-sensitive telecommunications equipment and consumer communications devices, most exports from the United States to Cuba require a license. Additionally, U.S.-based assets in which Cuba or the Cuban government have an interest are blocked by operation of law, in the absence of a license.

 

ENFORCEMENT/IMPLEMENTATION ISSUES AND COMMENTS

 

The Cuban government has run high-profile campaigns against corruption in recent years, investigating and prosecuting Cuban officials and foreign businesspeople. Cuba also is continuing its efforts to investigate and prosecute cases of money laundering. There are press reports of Cuba prosecuting and convicting individuals for money laundering and related offenses as recently as December 2016, but Cuba released no official reports of prosecutions or convictions for money laundering in 2016.

 

Cuba has agreed to continued cooperation and to the establishment of mechanisms to promote cyber-security and to combat terrorism, drug-trafficking, trafficking and trade in persons, money laundering, smuggling, and other transnational crimes. The United States and Cuba have a Law Enforcement Dialogue with technical exchanges on counternarcotics, cybercrime and cybersecurity, money laundering and associated crimes, counterterrorism, and legal cooperation.

 

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SANCTIONS

The Cuban Assets Control Regulations, 31 CFR Part 515 (the “Regulations”), were issued by the U.S. Government on July 8, 1963, under the Trading With the Enemy Act in response to certain hostile actions by the Cuban Government. They apply to all persons (individuals and entities) subject to U.S. jurisdiction. There are general prohibitions on exports, imports, and certain other transactions.

15 March 2016 - The U.S. Department Of The Treasury announced significant amendments to the Cuba sanctions regulations. These include the following: -

Banking and financial services –

- U-turn payments through the U.S. financial system. U.S. banking institutions will be authorized to process U-turn transactions in which Cuba or a Cuban national has an interest. This provision will authorize funds transfers from a bank outside the United States that pass through one or more U.S. financial institutions before being transferred to a bank outside the United States, where neither the originator nor the beneficiary is a person subject to U.S. jurisdiction.

- Processing of U.S. dollar monetary instruments. U.S. banking institutions will be authorized to process U.S. dollar monetary instruments, including cash and travelers’ checks, presented indirectly by Cuban financial institutions. Correspondent accounts at third-country financial institutions used for such transactions may be denominated in U.S. dollars.

- U.S. bank accounts for Cuban nationals. U.S. banking institutions will be authorized to open and maintain bank accounts in the United States for Cuban nationals in Cuba to receive payments in the United States for authorized or exempt transactions and to remit such payments back to Cuba.

Trade and commerce –

- Physical and business presence. OFAC will expand the existing authorization for “physical presence” (such as an office, retail outlet, or warehouse) to include entities that engage in authorized humanitarian projects, entities that engage in authorized non-commercial activities intended to provide support for the Cuban people, and private foundations or research or educational institutes engaging in certain authorized activities pursuant to sections 515.575, 515.574, and 515.576 of the CACR, respectively. OFAC will also expand the existing authorization for “business presence” (such as a joint venture) to include exporters of goods that are authorized for export or re-export to Cuba or that are exempt, entities providing mail or parcel transmission services or cargo transportation services, and providers of carrier and travel services to facilitate authorized transactions. The revised regulations will also clarify that the physical and business presence authorizations permit exporters and re-exporters of authorized or exempt goods to assemble such goods in Cuba. BIS will make conforming changes to the EAR to generally authorize exports and re-exports of eligible items to establish and maintain a physical or business presence that is authorized by OFAC.

- Importation of software. The CACR currently authorizes the importation of Cuban-origin mobile applications. OFAC will expand this authorization to allow the importation of Cuban-origin software.

- Shipping. BIS will generally authorize vessels to transport authorized cargo from the United States to Cuba and then sail to other countries with any remaining cargo that was onloaded in the United States.

- Cuban private sector. BIS will adopt a licensing policy of case-by-case review for exports and re-exports of items that would enable or facilitate exports from Cuba of items produced by the Cuban private sector.

 

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BRIBERY & CORRUPTION

 

Index

Rating (100-Good / 0-Bad)

Transparency International Corruption Index

47

World Governance Indicator – Control of Corruption

61

 

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INVESTMENT CLIMATE - Executive Summary (US State Department)

The government continues to balance the need for loosening its socialist economic system against a desire for firm political control. The government in April 2011 held the first Cuban Communist Party Congress in almost 13 years, during which leaders approved a plan for wide-ranging economic changes. Since then, the Cuban government has slowly and incrementally implemented limited economic reforms, including allowing Cubans to buy electronic appliances and cell phones, stay in hotels, and buy and sell used cars. The Cuban government also opened up some retail services to "self-employment," leading to the rise of so-called "cuentapropistas" or entrepreneurs. Recent moves include permitting the private ownership and sale of real estate and new vehicles, allowing private farmers to sell agricultural goods directly to hotels, and expanding categories of self-employment. Despite these reforms, the average Cuban's standard of living remains at a lower level than before the collapse of the Soviet Union and the resulting downturn of the 1990s. Since late 2000, Venezuela has been providing oil on preferential terms, and it currently supplies over 100,000 barrels per day of petroleum products. Cuba has been paying for the oil, in part, with the services of Cuban personnel in Venezuela, including some 30,000 medical professionals.

 

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FURTHER NEWS / REPORTS

15 April 2015 - Reuters: President Barack Obama told Congress on Tuesday he intends to remove Cuba from a U.S. list of state sponsors of terrorism, clearing the main obstacle to restoring diplomatic relations and reopening embassies shut for more than half a century.

Congress has 45 days to consider Obama's decision before it takes effect, but lawmakers cannot stop it unless both chambers approve a joint resolution, a move that is highly unlikely.

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