WILL CUBA'S MONETARY UNIFICATION AND FREE TRADE ZONE FACILITATE MONEY LAUNDERING ?

The Cuban Convertible Peso (CUC)

The Government of Cuba has announced that it intends to integrate its two-tier monetary system. The Cuban Peso (CUP), which is the national currency, is currently worth four American cents ($ .04); the Convertible Peso (CUC) which is used by tourists and foreign nationals, and others with access to US currency, is valued at par with the US Dollar. It is the only currency accepted in stores that sell imported goods, and is used in the tourist industry; the CUC replaced the US Dollar in 1994.

There are a number of inequities that a unified Peso is intended to remedy, including the present inability of most Cuban nationals to afford to shop in the imported goods stores, unless they are receiving remittances from relatives abroad;The CUP has no value abroad; it is used to buy domesticv goods, and to pay salaries. Will a new Peso present opportunities for money launderers to wash drug profits earned in North America ? Read on, please.

The Cuban Peso (CUP)

Add to the currency consolidation news the fact that Cuba has announced that it will open a "Special Economic Zone" (free trade zone) at the port of Mariel, where foreign businesses can repatriate profits abroad for many years in the future, free of Cuban taxes, and you have a potential perfect storm for money launderers.

It does not take a vivid imagination to create a scenario : US-earned drug profits, that are easily bulk cash smuggled, by sea, into Cuba, could be washed through the Euro-businesses operating in the Mariel Special Economic Zone, and sent to the EU, as profits earned tax-free in Cuba. The dollars could be exchanged for the new strong Peso in the underground economy, or through confederates posing as tourists, or by street-level foreign exchange brokers. After being declared as profits, the money could be changed into Euros, and repatriated abroad.

Mariel Special Economic Zone

Given that Cuba's state-owned banks have been involved in knowingly laundering illicit Medicare profits that have been smuggled into Cuba, one doubts that the launderers will have any problems, once they move their clients' narco-profits to Havana. Foreign banks with branches inside Cuba could also be utilized to send what are declared to be business profits to Europe.

Target dates for the new Peso, and for the opening of the Special Economic Zone, have not been set, but we will be watching for indications that dirty money is being directed through this method, when the opportunity presents itself.