By Pete Kasperowicz - 02/15/14 01:23 PM EST
The government of Cuba announced late Friday that it will no longer process visas for U.S. travel to Cuba.
Cuba said travel will end until a new U.S. bank can be found to process visa fees that are collected and routed to Cuba.
The decision is a blow to the goals of the Obama administration, which sought to expand travel opportunities to the island. It will also have an immediate impact on Cuba's access to hard currency, on which many of its citizens rely.
M&T Bank of Buffalo, New York, had long handled these transactions, but decided last year to terminate all of its embassy accounts. M&T had said it would continue processing visa deposits for Cuba until next Monday.
Last summer, M&T's decision set off a mad scramble at the State Department to find a new bank. But while State had reached out to dozens of banks — including some in Miami — no bank has yet stepped up to handle the processing duties.
As a result, Cuba pulled the plug on travel Friday night.
"In spite of the huge efforts made, as a result of the restrictions in force, derived from the policy of economic, commercial and financial blockade by the U.S. government against Cuba, it has been impossible for the Interests Section to find a U.S.-based bank that could operate the bank accounts of the Cuban diplomatic missions," the Cuban Interests Section announced.
"As a result thereof, the Cuban Interests Section finds itself forced to suspend consular services as of the date of publication of this press release, until banking services are re-established. As informed last November, consular services will only be provided for humanitarian cases."
Shutting down travel to Cuba from the United States will likely force an immediate discussion on how the U.S. will try to effectuate its goals of expanded travel to Cuba.
Many groups that support expanded U.S.-Cuba relations argue the problem would be solved if Cuba were taken off the State Department's list of state-sponsors of terrorism. But several informed observers say this is incorrect, and that this argument is complicating the problem by making it appear that Obama must take a major step to restore travel — a move that is unlikely and politically difficult.
Instead, legal experts note that the problem is related to the decades-old embargo the U.S. has imposed against Cuba. That embargo requires any U.S. bank that will process transactions for Cuba to be licensed, as M&T was.
However, some say U.S. banks appear to be growing more worried about the regulatory burden that comes with processing money destined for Cuba.
If that's the case, Cuba's decision could prompt discussion within the U.S. government over whether and how the regulatory burden against these banks should be eased.
The State Department's efforts over the last eight months indicate this could be the problem, as no bank has stepped up to take M&T's place. High-level officials at State have reached out to several banks and banking organizations in an effort to find a new financial institution to handle the transactions.
Sources familiar with this process note that State's Office of Threat Finance Countermeasures is trying to help. That office is tasked with keeping money away from terrorist entities, and its effort to find a new bank is being seen as a sign that State is not looking to punish any bank that steps forward.
State declined to confirm this office's involvement, but did acknowledge that officials have been searching for a new bank Cuba can use.
"Since last summer, the Department of State has been actively working with the Cuban Interests Section to identify a new bank to provide services to the Cuban missions," said a State spokesman. We have reached out to more than 50 banks and understand that several are currently exploring whether to provide the Cuban missions with banking services."
The U.S. and Cuba have suffered many diplomatic setbacks over the years, and Cuba's reaction to its lack of access to a new U.S. bank indicates this could be the latest major problem.
Specifically, the announcement makes no mention of any way to work around the problem, which Cuba may have the option of doing. For example, Cuba has been known to issue tourist visas without the need for consular processing, and such visas could be used to facilitate travel.
But Cuba seems to have shunned these efforts, which will create immediate problems for the various groups that have already booked travel to Cuba.
"I think we're about to see disruption of serious, long-promoted travel programs involving Cuba," said Robert Muse, a lawyer with experience on this issue.
"This has the potential of upending programs like National Geographic's," he said. "A lot of people are hoping Cuba will work around this problem to ensure minimal disruption to some very worthwhile programs."
State responded today by saying it is disappointed in Cuba's decision, "given that we had helped the Mission identify a workable solution to its consular fee-processing needs with ample time for its implementation."
"That the Cuban Interests Section has not effectively pursued this option will result in hardship to Cuban and U.S. citizen travelers alike," said Spokesman Noel Clay.