Financial Crime World

Financial Crime Prevention Strategies in Cuba: A Review of the Nation’s Efforts to Combat Money Laundering and Illicit Activities

Cuba has a unique economic landscape, characterized by a centrally-planned economy and limited private activity. Despite these challenges, the island nation has made efforts to prevent financial crimes and combat money laundering. However, significant vulnerabilities remain, and Cuba’s financial sector continues to be plagued by opacity and lack of transparency.

Challenges in Combating Money Laundering

  • Cuba is not a regional financial center, and its banking system remains largely isolated from the international financial system.
  • The government-controlled banking sector, low internet and cell phone usage rates, and limited private activity all contribute to an environment that makes it difficult to launder money through financial institutions.

Regulatory Efforts

  • In 2013, Cuba released legislation outlining regulations for enhanced customer due diligence of foreign politically exposed persons (PEPs).
  • However, this law continues to exempt domestic PEPs from regulation, leaving significant gaps in its anti-money laundering (AML) regime.

Lack of Transparency

  • Cuba’s lack of transparency hampers efforts to monitor the effectiveness and progress of its AML efforts.
  • The country’s opaque national banking and financial sector makes it difficult to track the flow of money and identify suspicious transactions.

Strategic Deficiencies in Cuba’s AML Regime

  • Lack of SAR reporting from financial institutions and DNFBPs.
  • Weak supervision and enforcement in these sectors.

Recommendations for Improvement

  • Increase transparency in its financial sector.
  • Expand its capacity to fight illegal activities.
  • Ensure that customer due diligence measures and suspicious activity reporting requirements include domestic PEPs, all DNFBPs, and the non-profit organization (NPO) sector.

U.S. Sanctions on Cuba

  • The U.S. government has imposed sanctions on Cuba since 1963, under the Trading with the Enemy Act.
  • While some restrictions have been eased in recent years, the embargo remains in place, and most exports from the United States to Cuba require a license.

Cuba’s Efforts to Investigate and Prosecute Money Laundering

  • In recent years, Cuba has run high-profile campaigns against corruption, investigating and prosecuting Cuban officials and foreign businesspeople.
  • However, there is a lack of transparency in Cuba’s criminal investigations and prosecutions, making it difficult to track the progress of these efforts.

Conclusion

While Cuba has taken some steps to prevent financial crimes and combat money laundering, significant vulnerabilities remain in its AML regime. To address these weaknesses, the country should increase transparency in its financial sector, expand its capacity to fight illegal activities, and ensure that its customer due diligence measures and suspicious activity reporting requirements are comprehensive and effective. Only through a concerted effort can Cuba effectively prevent financial crimes and protect its economy from illicit activities.