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INFO RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
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UNCLAS HAVANA 000753 
 
SIPDIS 
 
DEPT FOR WHA/CCA, INL, SCT, AND EEB 
DEPT OF JUSTICE FOR AFMLS, OIA, AND OPDAT 
DEPT OF TREASURY FOR FINCEN 
 
E.O. 12958: N/A 
TAGS: EFIN KCRM KTFN SNAR CU
SUBJECT: CUBA - MONEY LAUNDERING AND FINANCIAL CRIMES 
(INCSR PART II) 
 
REF: STATE 114958 ("2009-2010 INCSR INSTRUCTION CABLE") 
 
¶1.  GENERAL ASSESSMENT:  The Government of Cuba (GOC) made no 
significant changes to its anti-money laundering and 
counter-terrorist financing (AML/CTF) policy in 2009, nor did 
it publicly report any significant arrests, seizures or 
prosecutions.  One minor regulatory change gave the GOC even 
more control over foreign currency transactions in a move 
that could, as a side effect, deter potential 
money-laundering activity.  In addition, the GOC cooperated 
with the World Customs Organization in an anti-illicit bulk 
cash smuggling operation and is reportedly working with 
countries in the region to share counternarcotics 
information.  In July of this year, the GOC stated it would 
present a draft counternarcotics agreement to the United 
States, but as of December 2009 the GOC had yet to provide 
that proposal. 
 
¶2.  In general, the GOC claims to be in full compliance with 
international counter-terrorism conventions and to have taken 
into account the recommendations of the Basel Committee and 
the Financial Action Task Force when preparing banking 
regulations.  While Cuba has developed a number of 
regulations since 1997 relating to the detection and 
prevention of movements of illicit capital and the GOC 
tightly controls foreign currency movements both within and 
to/from the island, Cuba continues to have one of the most 
secretive and non-transparent national banking systems in the 
world. 
 
¶3.  This report follows the format provided in the 2009-2010 
INCSR Instruction Cable (Reftel). 
 
----------------- 
GENERAL QUESTIONS 
----------------- 
 
¶4.  Cuba is not considered an important regional financial 
center.  Cuban practices and U.S. sanctions prevent Cuba's 
banking system from fully operating in the international 
financial system.  The GOC released no information about any 
money laundering or terrorist financing activities within 
Cuba in 2009.  Cuba is not a member of the International 
Monetary Fund or the Financial Action Task Force (FATF), two 
of the top organizations active in fighting money laundering 
worldwide. 
 
¶5.  The Cuban economy operates in two currencies:  the Cuban 
peso (CUP) and the Cuban convertible peso (CUC).  The 
currencies are traded at 24:1 in government foreign exchange 
houses, but the official exchange rate of 1:1 is used in 
government statistics, making it nearly impossible to 
reconcile Cuban official monetary statistics. 
 
¶6.  There is a significant black market in Cuba that operates 
as a supply and demand market parallel to the heavily 
subsidized and rationed formal market controlled by the 
state.  The black market, including mostly goods obtained 
locally but also some smuggled goods, is primarily funded by 
the nearly $1 billion in remittances sent to Cuba every year. 
 These funds, mostly in U.S. dollars or euros, are traded for 
Cuban pesos at government foreign exchange houses.  The 
official CUC to U.S. dollar exchange rate is 1:1.08. 
 
¶7.  The U.S. Government does not have any direct evidence of 
money laundering or terrorist financing activities in Cuba in 
¶2009.  No mention of GOC complicity in money laundering or 
terrorism financing was made in the national or international 
media in 2009.  It should be noted, however, that the 
national media in Cuba is completely controlled by the state, 
which permits only laudatory press coverage of itself.  Crime 
is almost never reported.  The GOC does not routinely publish 
or publicize AML/CTF activities. 
 
-------------------------- 
OFFSHORE FINANCIAL CENTERS 
-------------------------- 
 
 
¶8.  Cuba is not considered an attractive offshore financial 
center for financial or corporate services.  Relatively few 
international businesses operate in Cuba.  Cuba has not 
licensed any offshore casinos or internet gaming sites. 
 
---------------- 
FREE TRADE ZONES 
---------------- 
 
¶9.  Cuba does not operate any free trade zones. Cuba had 
created three export zones for manufacturing, but shut all of 
them down due to lack of interest and as part of its 
recentralization policy between 2004 and 2005. 
 
------------------------------ 
LEGAL FOUNDATION OF AML REGIME 
------------------------------ 
 
¶10.  Cuba has the following laws and regulations in place in 
relation to AML/CTF: 
 
-Resolution 91 of March 9, 1997:  This resolution provides 
for the application of "Guidelines for members of the 
national banking system relating to the detection and 
prevention of movements of illicit capital". 
 
-Resolution 27 of December 7, 1997:  This resolution provides 
for the creation of the Central Risk Information Office 
(CIR), which compiles and processes information on suspected 
or actual instances of money laundering.  The resolution 
requires all banks and non-bank financial institutions to 
report such information on a monthly basis. 
 
-Instruction 1 of February 20, 1998:  Established 19 steps to 
implement the general guidelines in Resolution 91, including 
"know the client", monitoring large cash deposits and 
withdrawals, identifying company accounts as the most likely 
vehicle for money laundering, and designating a prevention 
compliance official responsible for identifying and taking 
such steps as may be necessary in connection with suspected 
money laundering activities. 
 
-Law 87 of February 26, 1999:  Added money laundering to the 
penal code. Article 346 of Chapter II of Law 87 states, "Any 
person who acquires, converts, or transfers resources, 
property or rights thereto, or attempts to carry out such 
transactions, in full awareness, or having the obligation to 
know or rationally assume, from the occasion or circumstances 
of the transaction, that such resources, property or rights 
are the direct or indirect proceeds of acts connected with 
illicit trafficking in drugs, arms or persons, or with 
organized crime, shall be liable to a penalty of imprisonment 
from five to twelve years.  Any person who conceals, or 
obstructs measures to ascertain, the nature, origin, 
whereabouts, destination, movement or true ownership of 
resources, property or rights thereto...shall be liable to 
the same penalty."  Those who commit these acts out of 
inexcusable ignorance shall be imprisoned for two to five 
years. 
 
-Instruction 2 of April 26, 2000:  Further clarified the 
guidelines from Resolution 91. 
 
-Law 93 of December 20, 2001: Law against acts of terrorism. 
In regards to the financing of terrorism, Chapter IX reads, 
"Any person who by any means, directly or indirectly, 
collects, transports, provides or has in his power financial 
or material funds or resources with the intention that they 
should be used or in the knowledge that they are to be used 
in order to carry out any of the offences envisaged in the 
Law, shall be subject to imprisonment of ten to thirty years. 
 The same penalty shall apply to any person who, directly or 
indirectly, makes funds, financial or material resources or 
financial or related services of any other kind available to 
any person or entity who uses them to carry out any of the 
offences envisaged in this Law." 
 
-Instruction 19 of May 7, 2002:  "Guidelines for the struggle 
 
against financing terrorism" for the purpose of enforcing the 
provisions in Cuban Law 93 of 2001, UN's International 
Covenant to Suppress Financing of Terrorism of 1999, UN 
Security Council Resolution 1373, FATF recommendations of 
2001, Cuban Resolution 91 of 1997, and Cuban Instruction 1 of 
¶1998. 
 
-Resolution 17 of March 19, 2004:  Established the Bank 
Supervision Office in the Central Bank to process information 
provided by the Central Risk Information Office and others 
about delicate and illegal activities, corruption, and 
possible operations for laundering money linked with the 
Cuban banking system. 
 
-Instruction 26 of July 30, 2004:  Provides new guidelines 
for the preventing, detecting, facing, and deterring 
operations of illicit capital movements (money laundering), 
and illicit operations in the collections of payments. 
 
¶11.  In addition, the Central Bank of Cuba issued Order 66 of 
June 1, 1998 on bank secrecy, which requires financial 
institutions to provide any information or documents 
requested of them by the empowered authorities (courts, tax 
authorities, inspectors of the Bank Supervisory Authority) 
relating to financial transactions or banking operations in 
cases of presumed or suspected movement of illicit funds. 
Cuban Instruction 19 of 2002 states that the legal provision 
concerning Bank Secrecy in Cuban Laws shall not be an 
impediment to collaborating with the authorities when the 
empowered authority under statutory right applies for 
information. 
 
¶12.  In 2009, the international press reported that the Cuban 
Central Bank issued Instruction 1 of March 27, 2009 with new 
rules governing foreign currency transactions and the use of 
foreign currency accounts.  The instruction restricts who can 
open and use bank accounts in foreign currency to foreigners 
and authorized representatives, and it appears to target 
Cuban free-lance agents operating unofficially on behalf of 
foreign companies.  In addition, cash transactions are now 
only authorized for salary payments.  All other cash 
transactions require authorization from the bank president or 
his representative.  One press story attributed this 
restriction to Cuba's liquidity crunch.  As a side effect, 
the tighter government control could serve as a deterrent for 
potential money-laundering activities.  The GOC has not made 
any public announcements or statements about these new rules, 
which as of December 2009 were still not published on the 
Central Bank's website or in the Official Gazette. 
 
---------------- 
FINANCIAL SECTOR 
---------------- 
 
¶13.  Every financial institution has a designated official 
who reports to the top executive of the institution and is 
responsible for identifying and taking such steps as may be 
necessary in connection with suspected money laundering 
activities.  According to Cuban Instruction 19 of 2002, banks 
are required to report immediately to competent entities of 
the Ministry of Interior and the Central Bank's Central Risk 
Information Office about any "complex transaction of an 
unusual amount" and also about those transactions that do not 
show any legal economic purpose, that demonstrates 
unquestionably that a money laundering operation is in 
progress, or when, on reasonable grounds, a suspicion arises 
that any fund is related or is going to be used in terrorist 
actions.  According to press reports, the Central Bank 
through Instruction 1 of 2009 now requires banks also to 
determine if a given financial transaction corresponds to a 
(state or foreign) company's approved corporate or social 
purpose.  Furthermore, Resolution 91 of 1997 indicates a 
statutory threshold of CUP 10,000 (equivalent to $10,000 at 
the time) to trigger a report.  The National Banking System 
should keep records for five years from the conclusion of the 
transactions.  We have no information regarding the capacity 
(staffing or otherwise) of the Central Risk Information 
Office to supervise or examine financial institutions for 
 
compliance with AML/CTF laws and regulations. 
 
¶14.  In Cuba's fifth and most recent report to the UNSC 
Counter-Terrorism Committee from June 8, 2006, the GOC said 
that the Cuban banking system does not have the authority to 
analyze financial transactions conducted outside the Cuban 
banking system.  In response to a question about whether 
there had been any studies of informal and illegal financial 
transactions conducted in Cuba, the GOC downplayed the 
informal sector's significance and even questioned its 
existence.  The GOC stated, "the Committee refers to informal 
and illegal transactions; if such transactions exist, they 
must be inconsequential compared to the millions of 
transactions, worth billions of Cuban pesos conducted by 
natural and juridical persons and handled by bank offices 
every year, or the money flows in the thousands of current 
accounts or millions of savings accounts kept by people in 
bank branches." 
 
¶15.  We are not aware of any reporting of any suspicious 
activities by any bank or financial institution.  We are also 
not aware of any legal protection for individuals (bankers or 
otherwise) with respect to their cooperation with law 
enforcement in regards to AML/CTF investigations. 
 
------------------ 
FIU INVESTIGATIONS 
------------------ 
 
¶16.  Cuba does not have a financial intelligence unit. 
 
---------------------------------------- 
ASSET FORFEITURE AND SEIZURE LEGISLATION 
---------------------------------------- 
 
¶17.  The GOC has not made public any information regarding 
arrests, prosecutions or convictions for money laundering or 
terrorist financing since January 1, 2009.  Banks are 
authorized by Instruction 19 to take preventive action by 
blocking or freezing the funds of other financial assets of 
Cuban or foreign individuals or legal persons under suspicion 
for money-laundering (including as the result of drug 
trafficking) transactions.  The penal code provides that 
anyone convicted of money laundering or terrorism financing 
will forfeit any proceeds.  The penal code further provides 
that authorities may seize not only financial assets but any 
property "instrumental to or resulting from the offence, to 
keep it and have it examined by experts where necessary." 
The GOC has not made public any information regarding 
narcotics-related, terrorism-related, or other 
criminal-related financial assets frozen or seized in 2009. 
 
------------------- 
TERRORIST FINANCING 
------------------- 
 
¶18.  Cuba criminalized the financing of terrorism as required 
by the UN International Convention for the Suppression of the 
Financing of Terrorism, UNSC Resolution 1373, and FATF 
Special Recommendation 9 through Instruction 19, "Guidelines 
for the Struggle against Financing of Terrorism" on May 7, 
¶2002.  We are unaware as to whether the GOC has circulated to 
its financial institutions the list of individuals and 
entities that have been included on the UN 1267 sanctions 
committee's consolidated list, or any other UN, U.S., or 
third party list. 
 
¶19.  We are unaware of any steps the GOC has taken to 
regulate informal remittance carriers.  Cuba does not report 
estimates of funds received through remittances, but 
estimates from the U.S. General Accounting Office, 
Congressional Research Service, The Commission for Assistance 
to a Free Cuba, Cuban economists, and international 
economists range between $500 million and $1 billion.  Most 
of these remittances come from Cuban-Americans and are 
delivered to family members.  Historically, only 10-20 
percent are carried by formal remittance carriers (i.e. 
Western Union) due to previous U.S. restrictions on the 
 
dollar amount and frequency of remittances.  However, changes 
to U.S. regulations announced in April 2009 and implemented 
in September 2009 removed most of those restrictions and made 
it easier to send funds through licensed remittance 
forwarders and financial institutions.  It remains unclear 
how these regulatory changes will affect the use of 
individual cash couriers or other informal money transfer 
systems.  The circulation of the U.S. dollar has been 
prohibited since 2004.  The Cuban government tightly controls 
all currency exchange and charges a 10 percent commission on 
U.S. dollar exchanges. 
 
¶20.  There are very few independent charitable or non-profit 
entities, mostly operating through the Catholic Church. 
Instruction 19 of 2002 states that special attention should 
be paid to operations made by the "so-called non-profit 
organizations", which can:  be used by terrorist 
organizations simulating to be legally established; use 
legitimate entities as channels to finance terrorism, with 
the purpose of preventing their assets from being frozen; or 
hide the undercover deviation of funds designed to illegal 
purposes towards terrorist organizations.  The GOC heavily 
regulates the small non-profit sector, but we have no insight 
into how the guidelines in Instruction 19 are enforced. 
 
¶21.  Travelers to Cuba must fill out a Customs Declaration if 
they are carrying cash in excess of $5,000 or the equivalent 
in other currencies.  Travelers departing Cuba are only 
permitted to export convertible currency and other valuables 
exceeding an amount of $5,000 if:  the amount had been 
previously imported and declared; or the amount was lawfully 
acquired in Cuba, which shall be proven through presentation 
of the relevant bank documents. 
 
--------------------------------------- 
BILATERAL AND INTERNATIONAL COOPERATION 
--------------------------------------- 
 
¶22.  The United States has no bilateral counternarcotics, 
anti-money laundering, or counter-terrorism agreements with 
Cuba and does not fund any GOC counternarcotics or 
counter-terrorism law enforcement initiatives.  In July of 
this year, the GOC stated it would present a draft 
counternarcotics agreement, but as of December 2009 the GOC 
had yet to provide that proposal.  Cuba's drug czar has 
publicly raised the idea of greater counternarcotics 
cooperation with the United States, and President Raul Castro 
has called for a bilateral agreement on narcotics, migration, 
and terrorism.  However, these calls have not been 
accompanied by actionable proposals on which to base future 
Cuban cooperation. 
 
¶23.  In the absence of normal bilateral relations, the U.S. 
Coast Guard Drug Interdiction Specialist (DIS) assigned to 
the U.S. Interests Section (USINT) acts as the main conduit 
for anti-narcotics issues with the host country on a 
case-by-case basis.  Cuban authorities provided DIS exposure 
to Cuban counternarcotics efforts, including providing 
investigative criminal information, such as names of suspects 
and vessels; debriefings on drug trafficking cases; and 
access to meet with the Chiefs of Havana's International 
Criminal Police Organization (INTERPOL) and Customs offices. 
No AML/CTF cases were presented through DIS channels in 2009. 
 Similar cooperation on counter-terrorism activities does 
not/not exist. 
 
¶24.  On August 25, 2009, the GOC granted USINT's Regional 
Security Officer permission to serve subpoenas from the U.S. 
District Court, Southern District of Florida, on three 
Cuban-American brothers suspected of defrauding the United 
States out of more than $100 million in illegal Medicare 
claims.  The complaints specify that the warrants for arrest 
are directed against personal property (assets), although 
none of the property identified is in Cuba.  The suspects 
were being held in a Cuban prison on unspecified charges. 
There have been no further requests for assistance or 
exchanges of information between USINT and Cuban authorities 
concerning this case. 
 
 
¶25.  Cuba has ratified the UN International Convention 
against Illicit Traffic in Narcotic Drugs and Psychotropic 
Substances (Vienna Convention), the UN Convention against 
Corruption, and the UN International Convention for the 
Suppression of the Financing of Terrorism.  Cuba signed but 
has not ratified the UN Convention against Transnational 
Organized Crime (Palermo Convention).  Cuba is not a member 
of any FATF-style regional body, but it claims to have taken 
FATF recommendation into consideration when drafting AML/CTF 
regulations. 
 
¶26.  The GOC maintains that it has close ties to regional 
counternarcotics initiatives.  The GOC reported that in 2009 
it was a party to two memorandums of understanding and 56 
judicial assistance agreements.  Further, Cuba participates 
in international efforts such as the United Nations' Heads of 
Drug Law Enforcement Agencies (HONLEA) meetings.  In May 
2009, Havana hosted a working group meeting of the exchange 
of intelligence information among the European Union, Latin 
America and the Caribbean that included 44 delegates from 34 
nations.  In June, a regional seminar was held regarding 
Mutual Judicial Assistance between Latin American and 
Caribbean nations, organized by experts from the United 
Nations Office on Drugs and Crime (UNODC) and the Cuban 
Ministry of Justice, and attended by 10 regional nations. 
UNODC Director Antonio Maria Costa visited Cuba in 2009 to 
review Cuban efforts pertaining to drug addiction and 
prevention. 
 
¶27.  GOC personnel attended two training courses offered by 
international partners that focused on maritime drug 
interdiction and money laundering.  The GOC also reported it 
continued to strengthen its relationship with the INTERPOL, 
primarily regarding persons who move internationally and are 
believed to be involved in drug-related crimes. 
 
¶28.  The Mexican press reported Cuba's participation in an 
October ministerial including 16 countries from Latin America 
and the Caribbean concerning the "world problem of drugs, 
security and cooperation."  One of the measures reportedly 
agreed to was the sharing of intelligence through each 
country's gradual participation in the Mexico Platform, 
including a database to track drug related crimes. 
 
¶29.  Also in October, Cuba participated through the World 
Customs Organization (WCO) in Operation ATLAS (Assess, 
Target, Link, Analyze and Share), the largest multilateral 
operation in history targeting cash smugglers.  U.S. 
Immigration and Customs Enforcement (ICE) led Operation ATLAS 
with more than 80 countries (including Cuba) participating in 
the seizure of $3.5 million in cash and the identification of 
$24 million in undeclared currency that may have otherwise 
gone undetected at ports of entry around the world during the 
five-day period.  We understand the Cuban Customs Agency was 
an active participant in the operation. 
FARRAR