Treasury Amends the Cuban Sanctions and Reauthorizes U-Turn Transactions

On May 29, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) implemented a final rule amending the Cuban Assets Control Regulations (CACR). OFAC stated that the amendments are intended to further implement the Biden administration’s policy to further the Cuban people’s internet freedom. Significantly, and among other changes, the amendments reinstate the authorization for “U-turn” transactions, which was previously revoked effective October 9, 2019.

U.S. Banks Now Authorized to Process “U-Turn” Transactions Involving Cuba

OFAC amended Section 515.584(d) of the CACR to reauthorize “U-turn” transactions. Banking institutions subject to U.S. jurisdiction may now process funds transfers in which Cuba or a Cuban national has an interest, where (1) the funds transfers originate and terminate outside the United States and (2) neither the originator nor the beneficiary is a person subject to U.S. jurisdiction. In addition, funds blocked prior to May 29, 2024 that would have been authorized under this final rule may now be unblocked and transferred, subject to a reporting requirement.

OFAC has provided examples of authorized transactions in which the involvement of the U.S. financial institution meets the conditions set forth above.

Expanded List of Internet-Based Services Authorized for Export to Cuba

OFAC also amended Section 515.578(a)(1) of the CACR, which authorizes the exportation or reexportation to Cuba, from the United States or by a person subject to U.S. jurisdiction, of certain internet-based services incident to the exchange of communications over the internet. Examples of authorized internet-based services added by the amendment include:

• Social media platforms
• Collaboration platforms
• Video conferencing
• E-gaming and e-learning platforms
• Automated translation
• Web maps
• User authentication services
• Services to support the exchange of communications over the internet, such as software design, business consulting, information technology management services, and cloud-based services, to support services described in Section 515.578(a)(1)(i) (i.e., services incident to the exchange of communications over the internet, including the examples described above)

In addition, OFAC expanded the scope of authorizations under Section 515.578(a)(2) for the exportation and reexportation of services to install, repair, or replace items related to communications, or items used to develop software that improves the free flow of information or that will support private sector activities in Cuba, by removing the requirement that the relevant items fall within specific export control classification parameters. As a result, effective May 29, 2024, items authorized under Section 515.578(a)(2) that are not subject to the U.S. Export Administration Regulations (EAR), no longer need to fall within specific control classification parameters to be authorized, subject to certain additional conditions set forth in Section 515.578. However, items subject to the EAR continue to be subject to applicable EAR licensing requirements.

Independent Private Sector Entrepreneurs

The final rule amends Section 515.340 of the CACR to substitute the term “self-employed individual” with the term “independent private sector entrepreneur.” The latter term continues to refer to non-prohibited Cuban nationals who are self-employed individuals, and additionally refers to small businesses that are wholly owned by or consist solely of these individuals. OFAC provides examples of such small businesses in FAQ 1179. This new term now expands certain existing general licenses, such as that found in Section 515.582, which authorizes persons subject to U.S. jurisdiction to engage in all transactions, including payments, necessary to import certain goods and services produced by independent private sector entrepreneurs in Cuba. In addition, the recent amendments include an authorization for independent private sector entrepreneurs in Cuba to maintain and use a U.S. bank account to conduct authorized or exempt transactions.

Conclusion

Companies and individuals that conduct or seek to conduct business involving Cuba should carefully review the amendments to the CACR and analyze the potential impact on their business. For example, the reauthorization of “U-turn” transactions would allow non-U.S. companies and individuals with business in Cuba to utilize the U.S. financial system to receive and send payments relating to Cuba. In addition, companies in the business of offering internet-based services may be able to take advantage of the expanded scope for the internet-based services authorization.

*Rossella Gabriele contributed to this Advisory. Ms. Gabriele is a summer associate in the firm’s Washington, D.C. office and will graduate in 2025 from Yale Law School. She is not admitted to the practice of law.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.