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OFAC Settlement with Airbnb Payments Highlights Risks for Corporations, Financial Institutions Doing Business in Cuba and Other U.S. Sanctioned Jurisdictions Finance & Banking

OFAC settlement with Airbnb Payments highlights risks for companies and financial institutions doing business in US-sanctioned jurisdictions

On January 3, 2022, the United States Department of Treasury’s Office of Foreign Assets Control (OFAC) announced a settlement with Airbnb Payments, Inc. (Airbnb Payments), a registered money services business and wholly owned subsidiary of ‘Airbnb, Inc. (Airbnb). According to the announcement,1 Airbnb Payments has processed several thousand travel-related payments from Airbnb customers in Cuba for reasons other than the limited travel-related transactions permitted by OFAC’s Cuban Asset Control Regulations (CACR). According to OFAC, Airbnb Payments also failed to keep required records documenting its customers’ travel experiences. As noted below, this settlement agreement underscores that U.S. businesses entering or operating in high-risk jurisdictions such as Cuba—and the financial institutions that process payments for those businesses—must remain diligent in ensuring that their programs of compliance adequately address the ever-changing complexities in OFAC’s Rules. The settlement agreement also underscores the importance of proactive compliance with sanctions. Despite the number of apparent violations, because Airbnb Payments voluntarily reported the activity to OFAC and implemented corrective actions, OFAC asked the company to pay only $91,172.29 , a small fraction of the legal maximum civil penalty ($600,601,408).

context

The United States imposed comprehensive economic sanctions on Cuba in the early 1960s, banning the majority of financial transactions involving the country.2 The CACR was amended several times over the following decades, with some administrations relaxing the restrictions and others tightening them. The most significant relaxation of the CACR occurred under the Obama administration. For example, in 2015 and 2016, the United States eased restrictions on travel, remittances, commerce, and the telecommunications and financial services sectors.3These changes made it easier for more US dollars to enter Cuba, with US citizens being allowed to send more money to loved ones, humanitarian projects or emerging businesses in Cuba. The amendments also allowed US financial institutions to open correspondent accounts with financial institutions in Cuba.4

During this period, many US-based companies began entering the Cuban market. Some of the companies did not sufficiently understand that, despite the relaxation of certain restrictions, the CACR still prohibited many financial transactions involving Cuba. For example, travel to Cuba was not as open as is generally believed. CACR allows travel-related transactions under only 12 travel categories5 and it requires U.S. companies providing travel services to Cuba to obtain and maintain a customer attestation that they are authorized to travel in one of the authorized categories.6

Since the Obama administration, authorized transactions with Cuba have been reduced. The Trump administration has largely ended the so-called “Cuban thaw,” backing away from any attempts to engage Cuba and instead tightening sanctions, including those that restrict travel and remittances.7So far, the Biden administration has done little to change the US approach to Cuba, and the sanctions imposed by the Trump administration are still largely in place.8, 9

Action Summary

According to OFAC, between September 28, 2015 and March 1, 2020, Airbnb Payments estimated that it violated the CACR by (1) processing payments for approximately 3,464 “stays” at Airbnb properties by customers who had no traveled to Cuba for one of the 12 reasons allowed by OFAC regulations; (2) failing to keep records, as required by OFAC regulations, of approximately 3,076 payments for Airbnb “experiences” hosted by locals in Cuba; and (3) processing approximately 44 payments for “travel transactions” involving non-US individuals on Airbnb’s website before OFAC had issued a specific license allowing Airbnb to do so.

OFAC asserted that the apparent violations occurred because (1) Airbnb entered the Cuban market without “fully addressing the complexities of managing a Cuba-related sanctions compliance program for travel services on Internet” for what would become a global customer base, and (2) “the scaling of
[Airbnb’s] in Cuba appears to have exceeded the company’s ability to manage the associated sanctions risks through its technology platforms. »ten

In explaining the relatively small civil monetary penalty that Airbnb Payments was required to pay, OFAC pointed out that the company had been recognized for proactively reviewing its own compliance program and voluntarily reporting apparent violations it had. found, implemented significant corrective action, having had no prior OFAC sanctions or findings of violation in the previous five years, and that the apparent violations were “not flagrant”. That said, it should be noted that OFAC concluded that an aggravating factor was the fact that “Airbnb Payments is a large, sophisticated technology company based in the United States.”11

Carry

The Airbnb Payments Policy offers two main lessons. First, companies are expanding their operations, and in particular their Internet operations, to any Sanctions high-risk area should do so with extreme caution, being careful not to expand the commercial side of their operations without also having a sufficiently robust sanctions compliance program in place. The compliance risk of any business expansion must first be assessed and addressed appropriately. Otherwise, companies run the risk of being penalized by OFAC, other regulatory agencies (for example, for financial institutions, federal and state banking agencies), and, in some cases, the Department of Justice.

Second, the relatively low civil monetary penalty in this case is a good reminder of the value of conducting internal self-assessments of sanctions compliance programs and, if necessary, voluntarily reporting any apparent violations.

Footnotes

1. Treasury Department, Enforcement Release, OFAC settles with Airbnb Payments, Inc. for $91,172.29 related to apparent violations of Cuba’s asset control regime (January 3, 2022).

2. Congressional Research Service, Cuba: Overview of US Policy (updated October 29, 2021).

3. Congressional Research Service, above footnote 2.

4. To see Press Release, President Barack Obama, President’s Statement on Policy Changes in Cuba (December 17, 2014).

5. 31 CFR § 515.560(a). Permitted purposes include: (1) family visits; (2) official government business; (3) journalistic activity; (4) professional research and professional meetings; (5) educational activities; (6) religious activities; (7) public performances, clinics, workshops, sports and other competitions and exhibitions; (8) support for the Cuban people; (9) humanitarian projects; (10) activities of private foundations or research or educational institutes; (11) the export, import or transmission of information or informational material; and (12) certain export transactions.

6. 31 CFR § 515.572(b)(1).

7. Congressional Research Service, above note 2. For example, the Administration eliminated person-to-person educational travel and cruise ship travel, and restricted air travel.

8. Congressional Research Service, above footnote 2.

9. To see 31 CFR pt. 515 for current regulations.

10. Treasury Department, Enforcement Release, above footnote 1.

11. Treasury Department, Enforcement Release, above footnote 1.

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