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Enforcement of Travel Rules - Cuba - Will History Repeat?


#1

We don’t read much about US travellers being penalised via enforcement of OFAC, so should we be worried?
Possibly, because despite what we think we know there is some interesting historical background that Trump could easily draw upon.
It’s found in this link: https://www.treasury.gov/resource-center/sanctions/Programs/Documents/testimonycubatravel.pdf
Specifically, at page 18:
"I have appended a chart that depicts our Cuba travel enforcement case openings and referrals for civil penalty review, as well as the number of Cuba travel Prepenalty Notices issued, for the period of January 1996 through June 2001. (Tab 10) As shown, 4,535 travel cases were opened for investigation; 1,690 cases were referred for civil penalty review; and Prepenalty Notices were issued in 947 cases. Again, many individuals request informal settlements with OFAC without the issuance of prepenalty notices."
What is moot is that traveller numbers back then were very low by comparison, so OFAC were reasonably active in past and could easily be activated to do it again, bigger and better.
I certainly hope note, but history has a tendency of repeating itself.


#2

Thanks for that, Rob. Reinforces the line that there hadn’t been any fines in close to 15 years.


#3

The Obama administration effectively dried up OFAC actions against individual travellers as seen here:
"Fewer than 100 individuals have been penalized since 2006, with 21 in 2006; 17 in 2007; 32 in 2008; 3 in 2009; 1 in 2010; and, most recently, 1 in January 2017."
ref: https://fas.org/sgp/crs/row/RL31139.pdf
The 2017 case was somewhat unusual as it tied an individual penalty with group travel for business purposes and was effectively unrelated to “tourism” via an OFAC licence.
I suppose the point of this post is to show what a difference a change of administration can make.


#4

The group that was recently fined for their 2010-2011 trips is quite active. Here is their website:
http://50.87.249.118/~respooc0/

The CRS paper quoted is also available here:


#5

To me, two things kind of stood out in DJT’s announcement in June. One was the removal of individual travel under the people-to-people sub-category (which has no effect on any of the other categories), and the other was the threat of increased enforcement (which could affect all categories).
We can only speculate on the probability of increased enforcement, but I believe DJT was only being political, and that there will be no real change to the extent of enforcement. (I think it is all bluster and bluff.)
That is only my personal opinion, and I may yet be proven wrong.
Unfortunately, a lot of Americans are focussing on the ban of individual people-to-people travel, and may end up getting sucked into paying for expensive group tours. Although, if there is stepped up enforcement, I suppose it would be the tour operators that would be held accountable, rather than the individuals who buy these group tours, so you could think of it as some sort of expensive insurance.


#6

Jack
Trump is a case study in popularism, so you may well be right.
There is no doubt that US-based Cuba group tour specialists got a leg up in bookings after Trump’s June announcement, and maybe that will be a continuing trend until the new regulations are promulgated, and perhaps after.
Strict enforcement will be the real killer, as I see it.
As to accountability, my suspicion is that you are right in that ultimately the tour operators doing dodgy deals would be hardest hit, but by a double whammy. As I read it, an individual makes a declaration and it is the individual’s responsibility to therefore be compliant. I am not sure if anything prevents OFAC attempting to penalise an individuals, based on their declaration, should it be proven false. The individual would then claim against the tour operator in a civil claim to recover losses. AND, the tour operator would separately be penalised by OFAC.
The other point is that penalties have not been harshly applied in the past. Should the US government want to send a strong message, it needs only drop its discretionary power and impose the highest penalty on all offenders.
The saddest thing here is that for many decades US “tourism” (yes, licensed travel) has never been a big factor in Cuban economic growth, and Trump’s actions will be but a blip in that regard. The real losers are those in the US who could have a wonderful travel experience but for backward political thinking.


#7

Indeed, the real losers may be the Cuban Americans in Miami who bought and paid for all of those new shiny Cuban Paladars and fancier Casa upgrades in anticipation of the crush of American visitors.
Maybe the same Cuban Americans who voted for Trump because he represented himself as business positive.
Following up on the self-declared reason for travel may catch a few but I think that Jack hit the nail on the head with the real chill being the possibility of increased Customs and Border Patrol scrutiny of returnees.


#8

cubajack
Here was an interesting announcement last week:
"Office of the Spokesperson
Washington, DC
July 14, 2017
Under Secretary of State for Political Affairs Thomas Shannon reported on July 14, 2017, to the appropriate congressional committees, consistent with Section 306©(2) of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 (Public Law 104-114; 22 U.S.C. 6021-6091) and pursuant to the authority delegated to the Secretary by the President on January 31, 2013, and as authorized under Delegation of Authority 284-1, dated February 13, 2009, that he had made the statutorily required determination in order to suspend for six months beyond August 1, 2017, the right to bring an action under Title III of the Act."
It was interesting because the President or Secretary for State usually make the announcement, and may suggest that Trump does not consider Cuba a big deal, despite Rubio’s chest beating.
The announcement itself means that about 6000 Cubans who had their property expropriated as a result of the Revolution cannot lodge filing in the US in US Federal Courts to recover their losses of almost US$2billion (about $8 billion with interest).
Until this issue is settled - if ever - it is likely to remain a festering sore affecting trade and travel to Cuba.


#9

Thanks, Rob. Do you have a link for the item you quoted?
I am quite sure you are right that DJT doesn’t consider Cuba to be a big deal. Rubio, of course, does. But DJT seems to be busy with other things.

I agree, that last item is a sore point. Not just for the Cuban ex-pats, but also the US companies that had their property expropriated. Another sore point is the damage Cuba sees as having been done to their economy by the embargo.

The discussion was on some other slightly different topics, but somewhere else, I had made some comments that included some impressions on that point. I will repeat it here as previously posted:

Normalization of Relations Cuba and USA

Here’s what needs to be done:

The USA agrees to keep their nose out of Cuba’s internal affairs, and not interfere with Cuba’s foreign policy, and Cuba will extend the same courtesy to the USA. If Cuba extradites any fugitives from US justice, the USA needs to extradite any fugitives from Cuban justice that they are harboring.

Then Cuba and the USA negotiate a settlement of compensation for US businesses nationalized by the revolution, also taking into account reparations that may be owed to Cuba due to US actions against Cuba, and considering Cuba’s ability to pay, if the balance of the debt works out that way. DJT understands the concept of bankruptcy quite well, I understand, so that latter part should make sense to him.


#10

cubajack
Here’s the link to the announcement:
https://www.state.gov/r/pa/prs/ps/2017/07/272620.htm
I was trying to find some evidence that the US administration was going to adopt a hard line on Cuba, and the low key treatment of this announcement suggested the opposite.
The Donald could have used Cuba as a welcome diversion, but there’s just as much a chance he never thought to, if he thinks much at all about politics.
If I were Rubio I would be disappointed that an opportunity to keep Cuba in the spotlight was instead significantly downgraded.
We will all be the wiser in 53 days, but my tea leaf reading suggests your earlier take of bluster from the Donald will be morte likely than something punitive.


#11

I have made predictions in the past that have proven wrong, but I hope this is not one of them.

And, also, thanks for that link.


#12

In fact, the soft touch approach started in the last part of GWB’s era - not Obama’s.

Remember that when OFAC were active, the advice was to request a hearing. GWB had not provided a budget for the judges and so no hearings could be scheduled. I don’t know what happened to those cases.

I know that John Kavulich’s cubatrade blog talks of a countdown to the new regs in September - but I have seen nothing definitive about that, The OFAC blogs certainly do not say that. I expect that date will come and go with nothing new published.


#13

beardo
Here’s an example of the data on penalties, when they were being enforced against individuals during the GWB era: https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Documents/12052003.pdf
From the perspective of individual travel, Obama pretty much dried up all enforcement action.


#14

justRobme,

I’m in agreement with you that if the Administration is serious (and I’m not convinced that they are) the way to go about it is through increased enforcement. They made their intentions clear in this Fact Sheet https://www.whitehouse.gov/blog/2017/06/16/fact-sheet-cuba-policy last month when the announcement was made. The question is whether or not this is still their intent. These lines stood out to me:

Enhance compliance with United States law—in particular the provisions that govern the embargo of Cuba and the ban on tourism;

President Trump’s policy changes will encourage American commerce with free Cuban businesses and pressure the Cuban government to allow the Cuban people to expand the private sector. Easy to control and enforce if individual travel is eliminated.

The policy enhances travel restrictions to better enforce the statutory ban on United States tourism to Cuba. Among other changes, travel for non-academic educational purposes will be limited to group travel. The self-directed, individual travel permitted by the Obama administration will be prohibited.

It wouldn’t take much to up the fear factor to put a chill on individual tourist travel and push people to approved group travel. Those businesses have lobbyists and money whereas individuals do not.

As you said, we’ll find out soon.


#15

jRm - neither of the Cuba related penalties listed there appear to be travel related.

griz - of course what the White House says are its intentions and what are actually its intentions are not necessarily the same.


#16

beardo
The link I provided shows that 15 individuals were penalised for licensing breaches due to Travel-related transactions. It does not itemise the specific nature of the breach of license. One person settled “informally” and 14 went to hearings.

And I agree with your reply to griz, adding that whatever they intend might not be achieved if is not enforced - as we have all come to know.


#17

Sorry - I missed that third page.

But one paid the Penalty Assessed (A),
14 reached an Informal Settlement (S),
and none had gone to a Hearing (H)

As mentioned, I wonder what happened to those who requested hearings.

The enforcement action stopped before Obama. If you look at https://www.treasury.gov/resource-center/sanctions/CivPen/Pages/2008.aspx in the second half of the year there are lots of fines for buying Cuban cigars on the internet but almost nothing for travel.


#18

beardo
As I understand it, the reports relate to penalties which would be “enforced”, so if it went to hearing, they were required to pay up. All the instances I looked at for “assessed” settlement were very much greater than those “informally settled”.
You are right in that only penny numbers of individuals were being prosecuted by 2006/7, and thereafter all but disappeared.
My suspicion is that Bush diverted resources to prosecuting international banks where penalties reached in the hundreds of millions. Why land minnows when there were whales:wink:


#19

You’ve lost me Rob.
The process was:
OFAC assessed a penalty - those who paid that are marked (A) - the amount would vary from case to case depending on the circumstances
some asked OFAC to accept a lesser amount than was assessed on them - those are marked (S)
the third category would be those who requested a hearing and still had to pay - there are none of those.

Bush seems to have diverted resources to concentrate on those buying Cuban cigars over the internet. I don’t know if they were just easiest or what.


#20

Thanks beardo
I misread the column heading and have amended my previous post - my bad:flushed:
I scrolled through a few years of enforcement actions and saw only one “request” for a travel related hearing (those which I saw go to hearings involved currency transactions).
Hearings are costly and cumbersome to manage for big numbers of enforcement actions, so if the US is going to look at an “enforcement” regime in the brave new world then maybe they will have to streamline their procedures.
I did notice that under Obama the penalties grew huge for corporates, pulling in over a billion dollars in some years. That rendered the annual amounts generated from individual penalties somewhat insignificant and may in part explain the numbers drying up.