Banks Are Right to Be Wary About Cuba Transactions

Monday, November 16, 2015
Last week, The Miami Herald ran a story entitled, "Banking woes ground some charter flights to Cuba."

In sum, it's about the Castro regime, travel providers and anti-sanctions lobbyists fretting how U.S. banks are being too cautious about any transactions involving Cuba.

Thus, they're prodding the banks to "have no fear" -- for Obama has purportedly said, with a wink-and-nod, that "it's OK."

So banks should have nothing to fear, right?

Wrong.

Banks are on the front-lines of sanctions implementation.

Banks are also on the front-lines of sanctions enforcement and liability. 

If you look back at some of the biggest enforcement actions against banks in recent years, the sanctions violations took place years before -- in some cases, over a decade before.

For example, the Lloyds TSP Bank PLC case was settled (for $350 million) in 2009, but the violations in question took place between 1995 and 2007.

The Credit Suisse AG case was settled (for $536 million) in 2009, but the violations in question took place between 1995 and 2006.

The Barclays Bank PLC case was settled (for $298 million) in 2010, but the violations in question took place from the mid-1990s through 2006.

The HSBC Holdings PLC case was settled (for $1.9 billion) in 2012, but the violations in question took place from the mid-1990s through 2006.

The BNP Paribas S.A. case was settled (for $9 billion) in 2014, but the violations in question took place between 2004 and 2012.

So on and so forth. 

The Obama Administration might irresponsibly be willing to skirt the law, create vagueness and give banks "winks and nods" now -- with anti-sanctions lobbyists cheering them on -- but these banks are correctly prudent to cross their t's, dot their i's and follow the letter of the law very carefully.

It's also what non-political bank regulators and compliance experts would advise them.

That's why, despite the State Department's begging and pleading, no major or regional U.S. bank with experience in international transactions was willing to conduct banking services for the Castro regime.

Instead -- after nearly a year of searching -- only a small, Florida-state chartered, real estate bank (Stonegate Bank), finally decided to do so -- mostly for the national media attention.

That should raise red-flags with Florida's bank regulators.

The fact remains that any liability for sanctions violations or missteps will not fly away with President Obama in a Marine helicopter on January 20, 2017.

It will only go away when Congress lifts its Cuba sanctions laws.

And, as history has shown, these violations and missteps can be much more costly than any business prospect with Castro's shadowy monopolies and banking system.