The Tampa Tribune Tampa, Florida 2 May 2016
Total Page：16
File Type：pdf, Size：1020Kb
U.S.-Cuba Trade and Economic Council, Inc. New York, New York Telephone (917) 453-6726 • E-mail: [email protected] Internet: http://www.cubatrade.org • Twitter: @CubaCouncil Facebook: www.facebook.com/uscubatradeandeconomiccouncil LinkedIn: www.linkedin.com/company/u-s--cuba-trade-and-economic-council-inc- The Tampa Tribune Tampa, Florida 2 May 2016 U.S. businesses' money can be frozen because of references to Cuba During the past year, financial transactions for Alexis Martin's Miami-based online business, MyCubanStore.com, have been frozen — sometimes for weeks — by PayPal. MYCUBANSTORE.COM By Paul Guzzo | Tribune Staff Alexis Martin sells fedoras and guayaberas and other Cuban fashions through his Miami-based online business MyCubanStore.com.com. Nothing from his inventory originates from the island nation nor does any of the business’s money come from or go to Cuba. Still, over the past year, financial transactions involving online payment giant PayPal have been frozen again and again, sometimes for weeks, until PayPal verifies they don’t violate U.S. policy on Cuba. The same thing happens at Island Travel and Tours, a company that does conduct business with Cuba. Financial transactions were delayed so long by banker J.P. Morgan Chase that the charter air company had to cancel eight flights to Cuba over the course of a week. The U.S. is moving to normalize relations with Cuba, but that isn’t always making it easier for Americans to do business there. One reason is fear linked to policies of isolation from the past, hard for financial intuitions to overcome, combined with complicated new policies plus an unprecedented surge of customers interested in Cuba. “This is a problem we’re having in a changing environment,” said Dan Zabludowski, an international business attorney in Miami with Hinshaw & Culbertson. “Some banks are still operating like it’s two years ago. They need to update how they operate.” The U.S. government is adding ways for its citizens and businesses to engage in commerce with the island nation after more than five decades of largely prohibiting it. U.S. credit cards can now be used in Cuba, for instance. And where only agriculture and medical supplies could be sold to Cuba two years ago, today, the list has expanded to telecommunications devices, restaurant equipment and construction supplies. Before the new engagement, the U.S. Office of Foreign Assets Control, OFAC, aggressively administered and enforced economic and trade sanctions on the island nation. With its enemy status, most transactions were illegal. Now, to promote U.S. commerce with Cuba, OFAC has been directed by the White House to let up. But for financial institutions, it turns out, that’s easier said than done. “It has been difficult to absorb,” said John Kavulich, president of the U.S.-Cuba Trade and Economic Council. “There has been a cautiousness that has provided an increasing amount of pain to small and medium sized businesses.” PayPal appears to be a case in point. ❖ ❖ ❖ In March 2015, OFAC fined PayPal $7.7 million for failing to screen properly for potential subjects of U.S. sanctions in transactions that it processed. The violations included 136 transactions involving Kursad Zafer Cire, a Turkish man on a U.S. list of weapons of mass destruction proliferators, and 98 transactions for more than $19,000 in goods from Cuba or in which Cuba had an interest. In response to the fine, PayPal instituted a new screening solution, according to OFAC documents, although the company did not elaborate. PayPal acknowledged it received a request for comment from the Tribune but never replied otherwise. The PayPal screening now includes an algorithm that freezes any transaction containing certain words associated with Cuba, said David Brown of New Jersey-based online store FolkCuba.com, which sells items needed to practice the religion known as Santeria. Santeria originated in Cuba, but the religious items sold by Brown did not. Still, like MyCubanStore.com, some of Brown’s transactions have been frozen — something that never happened before. Whenever it does, PayPal emails him a notice saying it will take up to 72 hours to vet a transaction. It can actually take weeks. He shared one of the emails with the Tribune. Martin of MyCubanStore.com said he receives the same notice. His funds have been held up for as long as a month. It did happen before, a few years ago, but the issue was resolved. It started again a year ago. On “any given day,” he said, he can have as many as three to five transactions held up, as much as $1,000 all told. Martin provided the Tribune with a copy of a statement from early April showing it took PayPal 15 days to clear transactions totaling around $150. He said he fears customers will grow weary of doing business with him because money is immediately deducted from their account but the product arrives days or weeks late. Confounding him more is that the suspensions are random. Some go through without trouble. As a small businessman, said Brown of FolkCuba.com, he needs the suspended funds to pay bills. During the last holiday season, he had trouble replenishing his stock because PayPal took weeks to release transactions worth around $1,500. Antonio C. Martinez II, a New York attorney, has a client who provides consultation on licensed travel to Cuba. That client has been waiting for PayPal to unfreeze a transaction of about $5,000 for six months. “The business took place between a U.S. citizen and a U.S. entity yet they still haven’t released the money,” said Martinez, who did not share more information on the matter. ❖ ❖ ❖ PayPal is just one of the institutions suspending transactions with Cuba in the name. The founder of mobile app company Fueled.com, Ryan Matzner of New York, uses online payment system Venmo. In February, Venmo flagged his payment for a meal at New York restaurant Cafe Habana because of the word “Habana.” Matzner provided the Tribune copies of two notices emailed to him by Venmo that read, “We were hoping you could provide us details for your reference to ‘Habana’ as well as give us some insight on what this payment was specifically for.” A second read, “We are required to follow-up on potential items that may be related to policies pertaining to OFAC sanctions.” When the Tribune asked Venmo how it screens transactions with a mention of Cuba, even in product or company name only, a spokesperson replied via email with a link to OFAC’s online resource page for Cuba sanctions. Attorney Zabludowski has a client who also sells goods marked Cuban that have no direct relationship with the nation. Yet the client’s former bank was regularly freezing the funds. He said he could not share further details on the matter. Attorney Peter Quinter of Miami, head of the international trade-law group for Orlando-based GrayRobinson, said he still frequently represents clients with money wires to Cuba that have been frozen by a U.S. bank even though the transaction meets all legal requirements. In order to land in Cuban airports, Island Travel must first pay fees to the island nation’s government by wiring money through a bank in a third nation. Still, in November, J.P. Morgan Chase & Co. suspended more than $250,000 in payments sent to Cuba, resulting in the cancellation of flights, said Island Travel President Bill Hauf. Asked how J.P. Morgan Chase flags transactions containing the word Cuba, a bank spokesperson responded via email, “As a matter of policy, we screen all payments for violations of U.S. sanctions, applying to all sanctions programs.” Ultimately, said Hauf, it was OFAC that resolved the issue, nearly three weeks after the transactions were suspended. ❖ ❖ ❖ Island Travel has experienced random suspensions since then but the money has been released faster, so no flights were affected. Still, it makes conducting business difficult. Hauf said other charter companies have had the same problem. “This all started six to nine months ago,” he said. “I’ve been doing this without a problem for five years. Why is this an issue now when business in Cuba is supposed to be getting easier?” For starters, attorney Zabludowski said, financial institutions might be overwhelmed. Two years ago, a limited number of Americans were doing business with Cuba. Today, U.S. citizens are lining up for commerce opportunities there. Then add confusion over new regulations. Doing business in Cuba still is influenced by the travel and trade embargo. Some forms of commerce are legal. Some are not. For instance, Cuba can only buy U.S. agriculture products with cash but can buy items like construction supplies on credit. Also, before the U.S. engaged with Cuba again, OFAC licenses to a specific company or individual were required for any financial transaction in Cuba and for the sale of any goods and services to the island nation. Today, some of these deals are covered by easier-to-obtain general licenses. Charter flights are one such enterprise, Hauf said, yet his bank keeps asking him for a specific license before it will transfer his funds. Regulations are also vaguely written and open to interpretation. A U.S. company may think a venture is covered under a general license but is not. The enterprise, unknown to the company, might not be legal at all. “Now a banker has to make an interpretation on a general license as to whether it is legal or not,” said David Seleski, CEO of Pompano Beach-based Stonegate Bank, the first U.S.