Cuba finds itself isolated from financial systems
HAVANA: Heightened scrutiny of banking transactions by the United States since the Sept. 11, 2001, terror attacks has led European and Canadian banks to curtail dealings with Cuba, according to bankers and businesses.
Cuba ceased exporting armed revolution to Latin America two decades ago, but Washington still lists the Communist country, along with Iran, Syria, Sudan and North Korea, as a “rogue” state that sponsors terrorism.
The U.S. Treasury denied that it was actively pressuring foreign banks to cut off business with Cuba but said that it had stepped up pressure on banks to cut ties with Iran in recent months.
Such efforts may be causing international banks to rethink their overall policies toward customer-relationship risk.
“Financial institutions and companies have to make their own decisions regarding what business they want to take on, and evaluating the risks posed by certain customers is certainly a key factor,” a Treasury official said.
The USA Patriot Act allows the U.S. authorities to confiscate assets and penalize institutions that fail to report money laundering and terrorist financing. The result - perhaps intended - is that Western businesspeople in Havana are having difficulty moving dollars to and from Cuba because banks are increasingly refusing their business.
HSBC, Barclays, Credit Suisse, Royal Bank of Canada and the Bank of Nova Scotia, also known as Scotiabank, have closed accounts of Cuban companies or reduced business tied to Cuba since last year to comply with U.S. regulations.
“Canadian banks have told clients to close their accounts and their credit cards because they have a business address in Cuba,” said Mario Simonato, a Canadian importer of vehicles and heavy equipment into Cuba from Canada.
ING Groep, the first big Western bank to set up business in Cuba, in 1994, said two weeks ago that it would close its Havana office. ING said it was purely a business decision, but it followed the blacklisting last year by the United States of INGs banking joint venture with Cuba.
Scotiabank last year ended dollar transactions by the Cuban Embassy in Jamaica and was criticized for bowing to U.S. rules.
“It is a risk-mitigation measure, a straight issue of our ability to settle transactions on U.S. dollar accounts,” said a Scotiabank spokesman, Frank Switzer. “It applies to anyone on a U.S. sanctions list.”
The move to comply with U.S. regulations came after the heaviest penalty in banking history. In 2004, the largest Swiss bank, UBS, was fined $100 million by the U.S. Federal Reserve for helping Cuba, Iran, Libya and the former Yugoslavia swap old dollar bank notes for newer currency.
UBS said it had “substantially completed” its exit from dealings with Cuba, Iran, North Korea, Myanmar, Sudan and Syria by the end of last year.
“UBS took this decision in 2005 after its own, careful evaluation of the costs and benefits of doing business with counterparties in these countries,” said Doug Morris, a UBS spokesman in New York.
Shunned by Swiss banks, Cuba has had trouble funding its United Nations mission in Geneva, a European diplomat in Havana said.
In June, Cuba complained that UBS and Banistmo, based in Panama and owned by HSBC, had refused to process the payment of its annual membership fee in the Latin American Parliament.
The bank squeeze is obstructing Cubas financial operations more than the U.S. trade embargo enforced since 1962, which has been since tightened but then amended in 2000 to allow U.S. companies to sell food to Cuba.
“The Patriot Act gave U.S. authorities a tool to do what they could not do before: chase foreign banks to comply with U.S. sanctions,” said a European businessman in Havana who asked not to be identified.