Last week, the Office of Foreign Assets Control (OFAC) issued updates to the Cuban Assets Control Regulations (CACR). The updates are intended to continue the Biden administration’s policy of providing the Cuban people with “tools to pursue a life free from Cuban government oppression and to seek greater economic opportunities.”
Internet-Based Services
OFAC updated the General License (GL) at Section 515.578 of the CACR that authorizes the export, reexport, and import of certain internet-based services to Cuba in order to expand the scope of services that qualify under the GL. Section 515.578 now authorizes services related to social media platforms, collaboration platforms, video conferencing, e-gaming and e-learning platforms, automated translation, web maps, and user authentication services. Services incident to the exchange of communications over the internet continue to include instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, blogging, domain name registration services, and web hosting (provided that it is not for the promotion of tourism), as provided in the prior scope of the rule. This change more closely aligns the CACR internet-based services GL with the related internet communication GL under the Iranian Transactions and Sanctions Regulations (ITSR).
The updated GL also clarifies the types of cloud-based services that persons subject to U.S. jurisdiction can provide to facilitate communications over the internet involving Cuba.
Independent Private Sector Entrepreneur
OFAC has replaced the defined term “self-employed individual” with the new term, “independent private sector entrepreneur.” The new definition continues to include self-employed individuals, and now extends to private cooperatives or small private businesses, with up to 100 employees, owned by or consisting of self-employed individuals.
“U-turn” Transactions and Bank Accounts
Previously, 515.584(d) authorized banking institutions (including money services business and other financial institutions) to “reject funds transfers originating and terminating outside the United States, provided that neither the originator nor the beneficiary is a person subject to U.S. jurisdiction.” The new rule updated 515.584(d) to authorize banking institutions to process, rather than reject such “u-turn” transactions.
OFAC also updated the related FAQ 757, which now says that:
Effective May 29, 2024, banking institutions subject to U.S. jurisdiction are authorized to process “U-turn” transactions, i.e., funds transfers originating and terminating outside the United States, where neither the originator nor the beneficiary nor their respective banking institution is a person subject to U.S. jurisdiction.
The requirement that the respective banking institution of the originator and beneficiary cannot be a person subject to U.S. jurisdiction is new. It is not found in either the regulatory text or the prior version of this FAQ, but reflects the intent of this rule to process u-turn transactions in which U.S. financial institutions provide an intermediary role.
Additionally, the rule added a new paragraph (h) which authorizes banking institutions to open and maintain bank accounts in the U.S. for independent private sector entrepreneurs in Cuba. Such accounts can be used to conduct authorized or exempt transactions under the CACR.
For more information on these updates to the Cuba sanctions, see OFAC’s Recent Actions announcement here.
