Cuba’s Financial Inclusion Challenges Fuel Money Laundering Concerns
The United States Department of State has highlighted Cuba’s lack of financial transparency and limited international integration as major hurdles to combating money laundering and financial crimes.
Limited International Integration and Opaque Banking Sector
Despite having bilateral agreements with countries to combat drug trafficking, Cuba’s opaque banking sector and limited internet access make it an unattractive location for money launderers. The country’s centrally-planned economy and cash-based black market operate parallel to the heavily subsidized formal market, making it difficult to monitor transactions and identify illegal activities.
Vulnerability to Money Laundering
Cuba’s geographic location between drug-supplying and consuming countries makes it vulnerable to money laundering, but its lack of foreign investment and small international business presence reduces the risk. The recent establishment of a special economic development zone at the port of Mariel has not raised concerns about financial crimes, according to experts.
Limited Anti-Money Laundering (AML) Laws and Regulations
Cuba’s AML laws and regulations are limited, with no known issues related to NPOs, alternative remittance systems, or offshore sectors. However, the country’s exemption of domestic PEPs from anti-money laundering legislation has been criticized as a weakness.
International Cooperation and Limited Progress
The Cuban government has agreed to cooperate with international efforts to combat money laundering and has established mechanisms for cyber-security and counter-terrorism cooperation with the United States. Despite this, Cuba still lacks a formal records-exchange mechanism and has not reported any official prosecutions or convictions for money laundering in recent years.
Recommendations for Improvement
Experts have called on Cuba to:
- Increase transparency in its financial sector
- Expand its capacity to fight illegal activities
- Ensure that anti-money laundering measures include domestic PEPs, DNFBPs, and the NPO sector
By addressing these challenges, Cuba can better combat money laundering and improve its overall financial inclusion.