Cuba’s removal from terrorism list may prove more symbolic than business-friendly

Cuba's removal from terrorism list may prove more symbolic than
business-friendly
BY MIMI WHITEFIELD MWHITEFIELD@MIAMIHERALD.COM
04/26/2015 11:12 AM 04/26/2015 11:12 AM

Regulations governing the United States' new commercial opening toward
Cuba were announced in January, but so far there have been few takers.

Most businesses are still kicking the tires when it comes to Cuba and
trekking to the island, often with lawyers in tow, to assess the
opportunities and risks. A trade delegation led by New York Gov. Andrew
Cuomo last week, however, reported progress had been made on deals in
the telecom and healthcare fields — two areas where U.S. businesses are
allowed to engage with the Cuban government under the new U.S. Cuba policy.

But even when Cuba is removed from the list of state sponsors of
terrorism, a designation that carries some financial sanctions, analysts
say they don't expect it will set off a business stampede either.

"I think people are reevaluating but they are waiting until the 45-day
waiting period is up before taking the next step," said Fernando
Capablanca, managing director of White Cap Consulting Group and
president of the Cuban Banking Study Group. "I think everyone wants to
pay it very safe — what's 45 days after 55 years?"

In December President Barack Obama announced a new policy of engaging
Cuba after more than half a century of trying to bring about change
through isolating the island, and on April 14, he informed Congress that
he intended to remove Cuba from the terrorism list, starting the clock
ticking on the waiting period.

With the Cuban-American delegation saying last week that it wouldn't be
mounting a challenge to the de-listing, Cuba is set to come off the list
in late May. The United States put Cuba on the list in 1982 at a time
when Havana was promoting armed revolution in Latin America and Africa.

Stephen F. Propst, a Washington attorney, said the de-listing will be an
important step in the U.S.-Cuba normalization process, but he expects it
will have limited immediate impact on economic activity between the
United States and the island.

However, he said, "It's a very important step to move forward on
diplomatic relations between the two countries." Keeping Cuba on the
list, Propst said, is a "label, largely a version of diplomatic
name-calling."

Still, Andy Fernandez, leader of Holland & Knight's Cuba Action Team,
said removing Cuba from the terrorism list removes a "barricade, a
roadblock" that has made U.S. companies hesitant to even engage in legal
business dealings with Cuba.

Under Obama's new Cuba policy, Americans can trade selected goods with
private Cuban entrepreneurs, supply private farmers in Cuba, sell
building supplies to private individuals and participate in Internet and
telecom projects that will improve the connectivity of the Cuban people.

But the impact of the de-listing will be muted because there's still a
thicket of sanctions imposed under the embargo, the Helms Burton Act and
other U.S. laws that remain in effect, including provisions that require
U.S. banks to block transactions with Cuba or Cuban nationals that
aren't in the permitted category.

New regulations allow a bank to reject such transactions. "That makes a
lot of difference if you're the person whose money is blocked and you
can't get it back," said lawyer Patricia Hernandez during a Cuba seminar
organized by the Florida International Bankers Association and the Cuban
Banking Study Group last week.

"The overall risk with Cuba will remain as long as the embargo is in
place," Andy Fernandez said.

Lifting the embargo "will be the new elephant in the room in future
talks," said Peter Schechter, director of the Adrienne Arsht Latin
American Center at the Atlantic Council.

The United States and Cuba are currently negotiating to renew diplomatic
ties and open embassies. So far there have been three rounds of talks.

"Cuomo's trip illustrates not only the eagerness but also the
frustration that U.S. governors feel — the 1996 Helms-Burton Act
handicaps their states' trade opportunities." he said.

The embargo, which was phased in gradually starting in 1960, was
codified through Helms-Burton and cannot be totally lifted without an
act of Congress.

Companies such as Netflix, IDT, which has begun offering direct
telephone service to Cuba rather than making the final connection
through a third party, and lodging company Airbnb, which is working with
private Cuban casas particulares or bed and breakfasts, have staked out
territory in Cuba. MasterCard and American Express also say they want to
allow U.S. customers to use their cards in Cuba.

But not one bank has announced its intention to support the cards —
meaning authorized American travelers still can't use plastic issued by
a U.S. bank to pay for their hotel and other expenses in Cuba.

However, MasterCard Vice Chairman Walt Macnee, who took part in the
Cuomo trip, told USA Today that he had two meetings with Cuba's central
bank to pave the way for use of U.S. cards in Cuba. "Now we're going to
work with each of the banks individually and make some progress there,"
he said.

But just because U.S. banks are now allowed to have correspondent
accounts in Cuban financial institutions to support authorized business
and to handle credit and debit transactions for authorized American
travelers doesn't mean they're required to do so, said Propst.

"Many banks are still hesitant," he said, because of uncertainty over
whether they'll be held responsible if an American traveler doesn't fall
within 12 categories of Cuba travel the United States allows or if the
traveler uses the card to pay for unauthorized transactions.

"It can't be someone who goes to Cuba to invest in vintage 1950s Chevys,
for example. That's not permitted," Fernandez said.

The Office of Foreign Assets Control has said the banks should rely on
the word of travelers that their trips are authorized "provided that
such persons do not know or have reason to know that a transaction is
not authorized."

That last phrase makes bankers nervous, said Fernandez, who has a number
of financial clients, because they are unclear how bank regulators and
auditors will interpret it.

Lawyers say there needs to be further clarifications from OFAC before
U.S. banks will feel comfortable handling Cuban debit and credit card
transactions. They anticipate further clarifications of the regulations
that came out in January.

"Banking with Cuba I think is still down the road," said Peter Quinter,
a Customs and trade attorney with GrayRobinson. "The physical and legal
infrastructure doesn't exist yet."

Financial institutions have been notoriously cautious about doing
business with the island because of fears they might run afoul of U.S.
sanctions against Cuba, and they have reason for pause. The United
States has aggressively pursued banks around the world that have had any
dealings with Cuba that use U.S. dollars and has imposed very hefty fines.

Some analysts say Cuba's removal from the list may encourage a bank to
begin handling the accounts of the Cuban Interests Section in
Washington, which processes fees for visas and passports, and Cuba's
U.N. diplomatic mission in New York. For more than a year after their
previous banker withdrew, the missions and their employees have been
operating on a cash basis.

The State Department has tried to help Cuba in its quest to find a new
banker and a senior administration official says that the banking
situation is close to being resolved. But so far there has been no
announcement and a spokesman for the Cuban Interests Section did not
respond to phone calls from the Miami Herald.

"I don't think it's as easy as has been portrayed," Hernandez said.
"What banks wants to take on the expense of monitoring all the
transactions that go through those accounts?"

Source: Cuba's removal from terrorism list may prove more symbolic than
business-friendly | Miami Herald Miami Herald -
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