The U.S. government put new regulations into effect March 15 aimed at making it easier for U.S. banks to process financial transactions involving Cuban entities or Cuban nationals, as well as allowing Cubans to open U.S. bank accounts. How important are the rule changes for financial services companies that want to do business in Cuba? Will the relaxation of restrictions have a significant effect on the amount of remittances that goes to Cuba? What will be the effects on the island nation’s economy?

Fernando X. Donayre, chief investment officer and founder of INCA Investments in Miami: "For some time now, U.S. banks have been hesitant to conduct financial transactions that were permitted by U.S. regulations. Much of their fear has been as a result of record U.S. fines which were imposed on certain financial institutions that had been seen to conduct U.S. dollar transactions with Cuban institutions. In addition, the U.S. regulations that were issued were not always clear as to what was permitted or not. As such, U.S. institutions made a business decision that the relatively low amount of fees that would be generated by directly or indirectly conducting financial transactions with Cuba would be more than offset by the potential of incurring extraordinarily large fines. The new regulations will not have much of an effect on the number of U.S. financial service companies that will be doing business in Cuba. The amount of financial transaction between the two countries at this time is fairly limited. Most U.S. banks will take a wait-and-see-attitude. However, the new financial transactions are important for those few pioneering companies that are attempting to do business with Cuba within the more liberal regulations, but have found it difficult to do so due to their inability to find a U.S. bank willing to conduct even the most basic financial transactions that doing business with Cuba entails. We have already found willingness by a bank we deal with to make a direct payment to a Cuban entity, something the bank was not doing before the new regulations went into effect. As the ability of U.S. companies to conduct business with Cuba continues to increase, largely as a result of all of the new regulations passed since Dec. 17, 2014, we expect that U.S. financial institutions will follow suit and expand their operations to conduct business with Cuba."

Manuel Orozco, director of the Migration, Remittances and Development Program at the Inter-American Dialogue and fellow at the Center for International Development at Harvard University: "The easing of regulations is certainly a great step to strengthen the U.S.-Cuba corridor for cross-border transfers (family remittances, trade related payments and other kinds of authorized payments). In order for Cuba to benefit from greater financial payment penetration, its financial value chain has to be modernized. Two key tools include regulatory reforms and technology penetration. In the first case, the Cuban government has to introduce or liberalize regulations on the type of businesses (banking and non-banking institutions) allowed to pay, including public and private entities as a means to enhance payment penetration and competition in the market and reduce state monopoly. It also needs to modernize its anti-money laundering practices and guidance in a global context where de-risking is the norm. Cuba has not been exempt from threats to financial crimes related to narcotrafficking or other illicit activities, and in a more integrated world, its exposure requires and demands strict risk management mechanisms. The central bank authorities also are to consider how to liberalize financial access in a way that dollar accounts can be opened and allowed to receive payments from abroad in the form of account deposits. Technologically, Cuba suffers terribly from major payment technology gaps, from poor automated payment networks (such as ATMs and POSTs) to a lack of broadband Internet access for small and micro enterprises capable of originating or paying transactions. Along those lines, hardware and software technology should be accompanied by a competitive environment where Internet costs are lower so that businesses can afford to operate payments and reduce transaction costs. The next wave of reforms and business development in Cuba is precisely in its infrastructural and institutional framework, which once functional, will create a substantive space for greater integration to the U.S. market."

Matthew Aho, special advisor on Cuba at the corporate practice group of Akerman LLP in New York: "In mid-March, the White House directed the Treasury Department’s Office of Foreign Assets Control (OFAC) to publish the fifth major round of regulatory revisions since President Obama’s historic December 2014 decision to normalize relations with Cuba. Each successive round has been designed to build a new regulatory framework to allow U.S. citizens and businesses to implement White House policies by engaging in newly authorized activities. In fact, the implementation of President Obama’s normalization policies requires private businesses and individuals to act under the new rules. While some clearly are—U.S. travel to the island has boomed, airlines are scrambling for new routes and mobile carriers have signed roaming agreements—banks and other financial institutions have been far more hesitant. As a result, blocked wire transfers and other banking difficulties continue to plague companies that are engaged in perfectly legal activities under the new rules. The essence of this challenge is that banks assign high degrees of risk to OFAC-licensed activities (including legal, operational, reputational, political and other forms of risk). And, while every financial institution evaluates these and other risks differently, according to their own subjective process, all banks do weigh such risks, or potential ‘costs,’ against the potential profit, or ‘benefits,’ of banking a particular account holder. In the case of Cuba, it is clear that banks continue to judge potential costs of facilitating licensed activity to far outweigh potential benefits. As such, their hesitancy to facilitate licensed activities is based on rational business decision-making. Identifying a remedy to address banks’ concerns may ultimately prove elusive—particularly given the complexity of banking regulations in this area and the ongoing possibility of major enforcement action. I suspect that the present situation will continue to undercut White House policies until an adequate solution is found, which could take months—or even years—to accomplish."

The Latin America Advisor features Q&A from leaders in politics, economics, and finance every business day. It is available to members of the Dialogue's Corporate Program and others by subscription.