Cuba’s Central Bank has granted a license to Servicios de Pago Red SA (REDSA) to enable it to facilitate the processing of remittances.
Although the decision in relation to REDSA comes shortly after Western Union withdrew from Cuba as a consequence of US sanctions on FINCIMEX (Cuba Briefing 2 November 2020), Cuban officials have indicated that FINCIMEX continues to process remittances from send markets other than the US.
The official media platform Cubadebate reported that REDESA’s licence has been modified to include among its activities the management and processing of family remittances from abroad to Cuba, with the intention of enabling the non-bank entity to develop a remittances operation in future.
The online publication quoted the Central Bank as saying, “the measure approved for REDSA is a provision for the future, which does not take effect immediately; it enables this institution to manage and process family remittances from abroad to Cuba”. It also wrote that the measure was not related to the suspension of remittances through Western Union as “FINCIMEX continues to process remittances from other destinations.”
Under the new regulation REDSA will be able to act as a processing centre for electronic paymentsin accordance Central Bank regulations; provide, manage and monitor electronic payment channels; administer, control, manage and further develop the country’s ATM network; and carry out interbank clearing processes for operations through Cuba’s Control and Monitoring Centre for Electronic Payments (CCMPE).
The new regulation also allows REDESA to issue bank cards, process and send data for the reconciliation purposes involving RED and non-RED cards; and process and settle claims for operations undertaken through the CCMPE.
Another resolution published in the same official gazette expands the remit of Financiera SA enabling it to process remittances received through REDSA. It makes clear that Compañía Financiera’s original licence has been cancelled and a new one granted to provide a range of services that includes the ability to undertake ‘any other operation and service of non-bank financial institutions’ in accordance with the law.
On 27 November, Western Union closed its 400 offices in Cuba following the revocation of its license by the Trump administration on the basis that FINCIMEX, its Cuban operating partner was a subsidiary of CIMEX which is a subsidiary of GAESA, the powerful military-run Cuban business conglomerate.
The effect has been to reduce the much-needed remittances from the US that provides the families and friends in Cuba with support that pays for food, rent, other expenses and supports many micro-businesses. There are early indications that once in office US President elect Joe Biden may sign an executive order reversing his predecessor’s remittances sanctions, perhaps explaining why, at this stage, the Central Bank is saying that the new REDESA service does not replace that provided by that of FINCIMEX.
A recently published analysis by the US based Havana Consulting Group indicated that cash remittances to Cuba have so far this year fallen by about US$3.3bn in cash. The Group reportedly forecast that overall cash remittances by the end of this year are expected to decline by 36.8% to an estimated US$2.3bn.