How Companies and Banks Should Approach the Evolving U.S. Sanctions on Cuba

Jeremy Paner authored an article for Law360 on how companies and banks operating in or trading with Cuba should approach the most fundamental change ever to the U.S. embargo.

On May 1, President Donald Trump issued an executive order authorizing OFAC and the State Department to impose sanctions against non-U.S. individuals, companies, and banks for their dealings with Cuba.

“In sum, the executive order shifts the focus to foreign companies whose Cuban dealings have no connections to the United States and are entirely lawful under the laws of their home jurisdictions,” Paner wrote.

While OFAC has modified certain aspects of the Cuban embargo over the years, according to Paner this is the most significant development to the Cold War-era embargo.

“Financial institutions and companies that have carefully segregated their Cuba operations from the United States to mitigate their sanctions risk exposure are no longer protected by those ring-fence protocols,” he wrote.

In the article, Paner explained how the order transforms the Cuban embargo into a comprehensive sanctions program akin to Iran, including by authorizing true “secondary sanctions” as OFAC uses that term.

“OFAC may impose blocking or less-than-blocking sanctions on any non-U.S. financial institution determined to have conducted or facilitated any ‘significant transaction or transactions’ for any person blocked under the new authority,” Paner wrote.

Paner also discussed how the executive order represents the beginning of a “maximum pressure” campaign by the Trump administration against Cuba to increase the island’s economic isolation.

“OFAC will likely consistently focus on the banking sector to accomplish that goal,” he wrote. “The non-U.S. financial institutions that continue unauthorized or non-exempt banking activities face the highest risk exposure.”

Lastly, Paner broke down how companies and banks can effectively mitigate their risk exposure, including through comprehensive due diligence reviews.

“Banks should not delay their Cuba reviews or potential outreach to OFAC. Notably, the existing designation criteria does not require OFAC to demonstrate that banks “knowingly” provided services,” Paner wrote. “It is also worth considering that as a matter of law, OFAC is not required to provide pre-notification of any designation.”

Read the article.