More than a year and a half after official remittance channels to Cuba shut down, a new digital payment system allows Cuban Americans to send money to their families in Cuba without the involvement of financial entities run by the Cuban military.
The Canadian RevoluGROUP, with a subsidiary in Miami, said last week that it added Cuba to its list of more than 100 countries where its mobile payment app RevoluPAY can be used to receive remittances. The company said the money transfer service fully complies with the embargo regulations and followed advice obtained from the Treasury Department.
Developing the app and getting all the banking licenses to operate have taken years, but the result is a system that “the Cuban military can’t touch,” Emilio Morales, vice president of the Miami subsidiary RevoluGROUP USA Inc., told the Miami Herald in an interview.
Hundreds of money transfers to Cubans from the United States and other countries have already happened successfully, he said at a press conference in Miami on Tuesday.
Official remittance channels abruptly ended in late October 2020, when Western Union was forced to close its offices in Cuba because of new U.S. sanctions to the military conglomerate GAESA and its subsidiary Fincimex, which handled remittances to Cuba. The Cuban government, in turn, refused to authorize a non-military bank to take over the business.
Thousands of Cuban Americans were then left with little recourse to help their families on the island. Many pay very high fees through Miami-based agencies that use individual travelers, known as “mulas,” to carry the money to the island. That informal channel was severely reduced due to the closure of airports during the pandemic.
Morales, who has been tracking remittances to Cuba for several years as the president of the Havana Consulting Group, estimates that Cuba received around $3 billion in remittances in 2019. Most of that money was captured by a web of military banks, giving devalued Cuban pesos instead of dollars to the receiver. RevoluPAY puts an end to that, he said, and also offers Cubans “financial freedom” because the app provides access to a prepaid debit card issued by a foreign bank.
The military’s tight grip on the banking system is a major obstacle for resuming remittances to Cuba after President Joe Biden instructed his administration to study ways to minimize the money flowing to the Cuban armed forces.
A working group on remittance sent its recommendations to the White House in August. Last month, a State Department spokesperson said the administration was exploring “innovative solutions, and that also includes digital payments.”
The State Department did not reply to a request for comment.
While RevoluGROUP did not receive a special authorization to operate with remittances to Cuba, known as a specific license, Morales said it received guidance from the U.S. Treasury Department in December detailing the requirements for such services under exceptions in the embargo regulations. Such exceptions are known as general licenses.
The Treasury Department usually ignores or delays its response to inquiries about transactions the administration does not support. But the written response to RevoluGROUP came relatively quickly, in just one month, according to a company statement.
How does the system work?
Cuban Americans wanting to send money to their families have two choices: they can use RevoluSEND, a web-based payment system, or the app RevoluPAY. With RevoluSEND, you can send money to the receiver’s account in MLC, a Cuban digital currency, in one of three Cuban banks: Banco Popular de Ahorro, Banco de Credito y Comercio and Banco Metropolitano S.A. These banks are not under U.S. sanctions.
The MLC accounts are connected to Cuban-issued bank cards that can be exclusively used in government stores selling food and other necessities. According to the RevoluSEND website, clients wanting to send $100 to a relative or friend in Cuba will have to pay about $7 to deposit 90 euros.
This service could be helpful to more vulnerable Cubans, such as senior citizens who do not own a cellphone or are not familiar with this sort of financial technology, known as fintech.
“Fintech technology has closed a gap and provided services that are currently available online to a mass of millions of people who were disadvantaged because they did not have a bank account,” Morales said in the interview.
The app RevoluPAY offers more choices because the sender can transfer money either to an MLC account or directly to the receiver in what are known as wallet-to-wallet payments. The latter comes with no associated fees, Morales said.
The wallet is also linked to a Visa or Mastercard prepaid bank card offered by the app and issued by a European bank. Morales declined to say which bank would be issuing the cards but said the company is working to figure out ways to send the physical bank cards to their customers in Cuba.
While cards from U.S. banks do not generally work in Cuba because of the embargo regulations, cards issued in Europe and elsewhere can be used in government stores, restaurants and other businesses.
Cuban card users would not be able to extract cash because the government has frozen the sale of foreign currency. But they could abroad.
The new service would allow Cubans, largely disconnected from the international financial system, to have a foreign bank card, which Morales said was “a true revolution.”
Clients can do “whatever they want with that money and that card,” he said. “That money does not go to a GAESA or a Cuban bank in a third country. The only way the Cuban government touches the money is when the user uses his card in a store.”
Owning a card issued by an international bank opens up many possibilities for Cubans, from paying for a Netflix subscription to booking a hotel abroad or buying a flight ticket, he said during a press conference on Tuesday in Miami.
The payment system complies with U.S. and international banking regulations, he explained, and users have to upload their identification details to the system so the company can meet anti-money-laundering and other compliance requirements.
Will the Cuban government allow it?
The Cuban government has already pushed back against RevoluPAY, claiming it will impose higher fees than Western Union. Morales said Western Union charged more than RevoluPAY, around $12 to send $100.
Cuba’s central bank also said it had no contract or formal agreement with RevoluGROUP and could not guarantee the security of the transactions.
“The United States government maintains the prohibitions and coercive measures applied in 2020 and 2021 against Cuban financial entities,” the bank said.
Morales confirmed that the company has no contract with Cuban banks.
“There are no contractual ties; we are not interested,” he said, adding that the transfer can happen regardless due to “correspondent banking relations,” a system that allows banks to provide financial services to institutions in other countries.
If the Cuban government decides to block the bank transfers or debit card transactions, he said, it risks being penalized by Visa, Mastercard and Swift, the communication system used by most banks around the world.
“It will work,” he told the Herald, and “there’s nothing they can do about it.”
This story was originally published March 08, 2022 2:52 PM.