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 increase support for the Cuban people and Cuban private sector in furtherance of the Biden administration's policy towards Cuba announced in 2022. The CACR amendments primarily clarify and expand authorizations relating to internet-based services, authorize the export of Cuban-origin software, expand the definition of those engaged in the Cuban private sector that are covered under certain authorizations (e.g., remittances, imports from Cuba, U.S. bank accounts), and re-authorize so-called "U-turn" transactions under the CACR. OFAC also released new FAQs and updated certain existing FAQs related to these changes to the CACR.

Background 

Internet-Based Services

The authorization for the export, reexport, and import of certain internet-based services under the CACR is amended to provide updated examples of services authorized and broaden the scope of authorized install, repair, and replacement services by removing a significant limitation on items covered. 

• The examples of services "incident to the exchange of communications over the internet" now include "domain name registration services, social media platforms, collaborations platforms, video conferences, e-gaming and e-learning platforms, automated translation, web maps, and user authentication services."
• The examples of services "to support" such exchange now include the more general "cloud-based services" (as compared to only "cloud storage" previously).
• Authorized services "to install, repair, or replace" certain telecommunications or software development items are no longer limited to items of only certain export classifications (although the item itself must still be authorized for export). 

Cuban Software Exports

• OFAC added an authorization relating to Cuban-origin software and mobile applications, allowing not only their import into the U.S. but also their export or reexport from the U.S. and third countries. 

Cuban Private Sector

• The terms "self-employed individual" and "independent Cuban entrepreneur" in the CACR have been replaced with "independent private sector entrepreneur" throughout, with a revised definition broadening the scope of those that are covered to also include, inter alia, private businesses and sole proprietorships of up to 100 employees. Relevant provisions throughout the CACR are updated accordingly, effectively broadening the scope of various authorizations including for remittances, the importation of goods and services produced in Cuba, and for certain financial transactions as described below.

Financial Transactions

OFAC has added and reinstated authorizations for certain financial transactions under the CACR: 

• U.S. Bank Accounts: Authorization has been added to allow banking institutions to open and maintain U.S. bank accounts in the name of Cuban nationals who are "independent private sector entrepreneurs." 
• U-Turn Transactions: Authorization for U-turn transactions has been reinstated, allowing the processing of funds transfers in which Cuba or a Cuban national has an interest through the U.S. financial system if such funds transfers originate and terminate outside the U.S., where neither the originator nor the beneficiary nor their respective banking institutions is a U.S. person. A related amended provision clarifies that the authorization allows U-turn transactions that involve entities on the Cuba Restricted List (CRL) as long as such transactions would be "indirect" not "direct" with entities on the CRL. Funds that have been previously blocked that would now be authorized as a U-turn transaction are also authorized to be unblocked and returned to the remitter. 

OFAC FAQs

• New FAQs include guidance on what kind of small businesses are considered an "independent private sector entrepreneur;" what goods may be considered "produced by independent private sector entrepreneurs" and thus may be imported into the U.S.; what internet-based services may be provided to otherwise prohibited parties; and OFAC's due diligence expectations for internet-service providers and web-hosting providers.
• Existing FAQs have been updated, including FAQs concerning U-turn transactions and U.S. bank accounts.

Key Takeaways

• These amendments open up new business opportunities for U.S. persons with respect to the Cuban private sector and also facilitate some existing U.S. business with Cuba, particularly due to the increase in internet services authorized and the new authorization for private sector entrepreneurs to hold U.S. bank accounts. However, businesses should still carefully consider the compliance implications in pursuing opportunities under these new or expanded authorizations, as they still entail a number of complex criteria and other restrictions and regulations may still apply to such activities, particularly export controls relating to goods or travel to Cuba and U.S. customs regulations. 
• The implications for non-U.S. businesses are also significant, as transactions in Cuba or with Cuban nationals may once again be conducted in U.S. dollars, subject to certain requirements under the reinstated U-turn transaction authorization. In addition, parties that had funds involving Cuba blocked in recent years could seek to unblock and recover those funds if the underlying transactions would be permissible under the U-turn transaction authorization.
• This marks the second time that OFAC has amended the CACR to relax the Cuba sanctions under the Biden administration's Cuba policy (the first was in 2022 and focused on certain travel and remittance authorizations). The reinstatement of the authorization for U-turn transactions is a particularly noteworthy reversal as the authorization was eliminated by OFAC during the Trump administration in 2017 as a part of the its policy to strengthen Cuba sanctions. The outlook for Cuba sanctions is unclear with upcoming U.S. elections, which could possibly result in the U.S. reverting to a policy of increasing pressure on Cuba. 

For more information, please contact:

Timothy P. O'Toole, totoole@milchev.com, 202-626-5552

Laura Deegan, ldeegan@milchev.com, 202-626-5942

Caroline J. Watson, cwatson@milchev.com, 202-626-6083

Melissa Burgess, mburgess@milchev.com, 202-626-5914

Manuel Levitt, mlevitt@milchev.com, 202-626-5921

Annie Cho, acho@milchev.com, 202-626-1570

Rebecca Tweedie, rtweedie@milchev.com, 202-626-1487

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