American Express has agreed to a settlement with the U.S. Treasury Department over more than 14,000 tickets that were issued by its foreign subsidiaries for travel between Cuba and countries outside the U.S. between December 2005 and November 2011.
The company’s American Express Travel Related Services will pay $5.2 million to settle potential civil liability for its apparent federal violations.
In a statement, American Express said the company “identified certain travel transactions made on behalf of our clients for tickets booked outside of the U.S. for travel between non-U.S. countries and Cuba. We voluntarily self-disclosed these bookings to OFAC [the U.S. Treasury Department’s Office of Foreign Assets Control, which is charged with enforcing the U.S. embargo against Cuba], and put in place robust controls to ensure it would not recur.”
In its July 22 Enforcement Information statement, the Treasury Department stated that American Express Travel Related Services “had issued 14,487 tickets between Dec. 15, 2005, and Nov. 1, 2011, for travel between Cuba and countries other than the U.S. without authorization from OFAC.”
The bookings violated the Cuban Assets & Control Regulations, which were issued in 1963 and which prohibit financial transactions by banking institutions under U.S. jurisdiction in which Cuba or its citizens have an interest.
Treasury pointed out the American Express had voluntarily disclosed this matter to OFAC and that the apparent violations had occurred “subsequent to agency notice” in 2005.
American Express Travel Related Services was investigated by OFAC in 1995 and 1996 for similar violations committed by a recently acquired subsidiary.
American Express is a licensed Travel Service Provider (TSP), which means that it can provide Cuba-related travel arrangements for licensed individuals or entities for authorized trips to Cuba. A TSP license does not grant American Express the right to grant licenses to individuals to travel to Cuba.
In this case, the bookings in question were never approved by OFAC, which said that American Express showed “reckless disregard” of U.S. embargo rules and had never implemented the measures it said it would after the 1995-1996 investigations.
A lawyer who specializes in these types of cases put it this way: “Under OFAC regulations, U.S. corporations’ foreign branches and subsidiaries are subject to the restraints and restrictions of the U.S. embargo on Cuba, even though those subsidiary companies are incorporated under the laws of countries in which they are located (Mexico, for example).”
The result is that the U.S. parent company is held liable for the actions of its foreign affiliates, according to the lawyer.
OFAC’s penalty of $5.2 million is $1.2 million higher than the base penalty and “is warranted to clearly communicate the seriousness with which OFAC takes compliance,” according to the Treasury statement.
U.S. citizens are prohibited from traveling to Cuba as tourists, although they can travel for religious, educational or cultural visits if granted a specific license by Treasury’s OFAC.
More than a dozen companies currently are licensed to offer the people-to-people programs, which were reinstated in 2011.
Government restrictions on travel to Cuba remain very strict even as the logjam regarding licenses for companies operating people-to-people programs appears to have loosened.
OFAC evaluates each license application to confirm that each operator and each itinerary meet the guidelines and regulations for approved cultural people-to-people programs from the U.S. to Cuba.
Even then, it is a long, arduous process from application to authorization, and each license is subject to full reapplication and review when it is up for renewal every year or two years.
Follow Gay Nagle Myers on Twitter @gnmtravelweekly.