With the corpses of banks skewered by OFAC strewn around everywhere you look, it is not altogether surprising that banks are terrified of the agency and are scared to death that the slightest misstep might bring the wrath of the agency down upon them. The latest instance of acute ofacaphobia, reported here in an excellent Miami Herald article, involves banks in a panic that travelers to Cuba on one of the general licenses might be fibbing and might really be going to Cuba to drink mojitos in Old Havana and hang out on the beach.

Before travelers can arrive in Cuba, the airline or charter company needs to pay $194 per passenger for landing fees and mandatory health insurance. According to the article, now that passengers self-certify their eligibility under the twelve categories covered by the general license for travel, banks are trying to verify that these self-certifications are accurate, asking for itineraries and other information to assure themselves that they won’t be the next cow in the OFAC abbatoir.

Meanwhile, analysts said perhaps the biggest reason banks are wary of Cuba business are the huge — and recent — fines aimed at banks that have done business with sanctioned countries. Just last month, France’s Crédit Agricole bank paid nearly $800,000 [sic – $800,000,000] to U.S. state and federal agencies to settle allegations it tried to hide or obscure references to transactions involving U.S.-sanctioned nations, including Cuba.

The result has been that travelers arrive at the airport only to learn that they aren’t going to Cuba, that the flight has been cancelled, and that they have to go home because necessary fees had not been transferred by the U.S. banks. Apparently they are so irritated that charter companies have gone to the airport with “police escorts” to deliver the bad news.

This should come as no surprise to OFAC. And there is a simple solution: issue guidance to the banks that they can rely on the traveler’s self-certification of their eligibility under the general license. If Justin Whiteshoes says he’s going to Cuba on a people-to-people tour and is, in fact, going on a bar-to-bar tour, it is going to be Justin Whiteshoes who gets whacked and not the bank that wired his $194 fee to Cuba.

The NBC affiliate in Miami on September 29 issued an “investigative report” with the title “Millions of Dollars Sent to Cubans Abroad Being Blocked by U.S. Government.”  It starts as follows:

As the U.S. continues to ease sanctions against Cuba, more money is being allowed to flow from the states to the island. While the changes have benefited those living in Cuba, the NBC6 Investigators found that millions of dollars being sent to Cubans abroad are being blocked by the U.S. government.

The report says that it heard that money being sent to Cuban nationals outside of Florida was disappearing and that “after months of investigation,” it finally determined what should have been obvious. The money had been blocked because of OFAC rules. This led to the money quote in the story from one of the victims who sent money and had it blocked:

“That’s people’s money and they can’t keep it just because,” Cruz said.

Oh, yes they can. (Of course, I sympathize with Mr. Cruz’s point and certainly believe that OFAC shouldn’t keep money “just because,” but that’s what they do.)

So what’s going on here? The “investigative report” doesn’t really help much, probably because the reporters probably have no clue as to how OFAC’s regulations work here. The starting point in figuring this out, as regular readers know, is that section 515.201 prohibits transfers of funds to Cuban nationals, wherever located, whether they are in Cuba or Mexico. Blocking transfers to Cuban’s outside Cuba is pretty much an example of blocking “just because,” if the purpose of the sanctions is to deprive the Castro regime of money.

Of course, there are two exceptions that come into play here that may permit transfers to funds to Cubans wherever located. The first is the provision for personal remittances in section 515.570. There is no dollar cap on those now, but we can speculate that prior wires to Cuban nationals would have been blocked because they exceeded the limits (in terms of amounts and permissible transferees) that were in place prior to these restrictions being (mostly) lifted.

The second, of course, is the general license (beloved to Major League Baseball) in section 515.505. That general license unblocks Cuban nationals that have taken up permanent residence outside Cuba. You have to suspect this would have applied to many, if not most, of the transfers at issue. Since permanent residence can be documented under section 515.505 by a sworn statement that the individual does not intend to return to Cuba, it shouldn’t be that hard to transfer money, particularly now, to Cubans outside Cuba.

So, when the “investigative report” left the misleading impression that money couldn’t be sent to Cubans outside Cuba, that was simply because the reporters had not figured out that the dollar amount and permissible transferee restrictions have been, largely, lifted and that no restrictions are imposed on Cubans that have decided to move permanently to countries other than Cuba.  The moral of the story is this: don’t believe everything you see on TV news.