Cuba is not a regional financial center. Cuban financial practices and U.S. sanctions continue to prevent Cuba’s banking system from fully integrating into the international financial system.
The government-controlled banking sector, low internet and cell phone usage rates, and lack of government and legal transparency render Cuba an unattractive location for money laundering through financial institutions. The centrally-planned economy allows for little, and extremely regulated, private activity. A significant black market operates parallel to the heavily subsidized and rationed formal market dominated by the state.
The Government of Cuba does not identify money laundering as a major problem. Cuba should increase the transparency of its financial sector and continue to increase its engagement with the regional and international AML/CFT communities to expand its capacity to fight illegal activities. Cuba should increase the transparency of criminal investigations and prosecutions.
VULNERABILITIES AND MONEY LAUNDERING METHODOLOGIES
Cuba’s geographic location puts it between drug-supplying and drug-consuming countries. Cuba has little foreign investment, a small international business presence, and no offshore casinos or internet gaming sites. Cuba’s first special economic development zone at the port of Mariel in northwestern Cuba was established in November 2013 and is still under development. Brazilian construction giant Odebrecht has investments in Cuba, specifically at the Mariel Special Economic Development Zone. While the Cuban government’s direct participation in Odebrecht’s money laundering operation is not evident, the Cuban government’s economic practices are opaque and difficult to account for. Additionally, a high-level Brazilian official recently expressed concern the Cuban government laundered money through Odebrecht and stated his government’s intention to investigate possible wrongdoing. There are no known issues with or abuse of NPOs, ARS, offshore sectors, FTZs, bearer shares, or other specific sectors or situations.
KEY AML LAWS AND REGULATIONS
Cuba claims to take into account international AML/CFT standards. Legislation released in 2013 outlines regulations regarding enhanced CDD for foreign PEPs, although it continues to exempt domestic PEPs from the reach of the legislation.
The United States and Cuba have developed a mutual legal assistance relationship through the legal cooperation technical working group established by the Law Enforcement Dialogue. The DEA established direct communication with its Cuban counterpart to focus on counternarcotics cooperation. Cuba has bilateral agreements with a number of countries related to combating drug trafficking.
Cuba is a member of the GAFILAT, a FATF-style regional body. Its most recent MER is available at: http://www.fatf-gafi.org/countries/a-c/cuba/documents/mer-cuba-2015.html.
AML LEGAL, POLICY, AND REGULATORY DEFICIENCIES
Although the risk of money laundering is low, Cuba has a number of strategic deficiencies in its AML regime. These include a lack of SAR reporting to its FIU by financial institutions and DNFBPs, and weak supervision and enforcement of its DNFBP and NPO sectors.
These deficiencies stem from Cuba’s opaque national banking system, which hampers efforts to monitor the effectiveness and progress of Cuba’s AML efforts. Cuba should increase the transparency of its financial sector and increase its engagement with the regional and international AML communities. Cuba should ensure its CDD measures and STR requirements include domestic PEPs, all DNFBPs, and the NPO sector, and create appropriate laws and procedures to enhance international cooperation and mutual legal assistance. Cuba should increase the transparency of criminal investigations and prosecutions.
The U.S. government issued the Cuban Assets Control Regulations in 1963, under the Trading with the Enemy Act. The embargo remains in place and restricts tourist travel and most investment and prohibits the import of most products of Cuban origin. With some notable exceptions, including agricultural products, medicines and medical devices, telecommunications equipment, and consumer communications devices, most exports from the United States to Cuba require a license. Additionally, a number of U.S.-based assets of the Cuban government or Cuban nationals are frozen.
ENFORCEMENT/ IMPLEMENTATION ISSUES AND COMMENTS
Several years ago the government ran high-profile campaigns against corruption and investigated and prosecuted Cuban officials and foreign business people. Cuba released no reports of prosecutions or convictions for money laundering in 2018; the last reported case occurred in August 2011.
Cuba agreed to discuss with the United States the establishment of mechanisms to combat terrorism, drug-trafficking, trafficking in persons, money laundering, smuggling, cybercrime, and other transnational crimes. The United States and Cuba established the Law Enforcement Dialogue, with working groups on counternarcotics, money laundering, counterterrorism, human smuggling, trafficking in persons, trade security, and legal cooperation.