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Jan 12, 2022

Airbnb unit settles Cuba sanctions enforcement

OFAC warns of risks associated with entering new markets

A money services business subsidiary of Airbnb has agreed to pay $91,172.29 to settle its potential civil liability for ‘apparent violations’ of US sanctions against Cuba.

According to the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), which administers and enforces economic and trade sanctions, Airbnb Payments processed payments related to guests traveling for reasons outside of OFAC’s authorized categories and did not keep certain required records associated with Cuba-related transactions.

‘This action highlights the risks associated with entering new commercial markets, particularly one that has elevated sanctions risks such as Cuba, without fully anticipating the complexities of legally operating in a US-sanctioned jurisdiction and fully implementing appropriate sanctions compliance controls,’ OFAC says in a statement. It adds that the size of the penalty reflects that Airbnb Payments’ apparent violations were self-disclosed and non-egregious.

A request for comment from Airbnb was not returned immediately.

OFAC says in a filing that, pursuant to communications with the agency, Airbnb Payments carried out a forensic review based on a sample of ‘stay’ transactions (traveler lodging provided by Airbnb hosts) and ‘experience’ transactions (traveler activities provided by Airbnb hosts) involving Cuba. 

Having looked at the results of that sample and the total transactions processed by Airbnb Payments between September 28, 2015 and March 1, 2020, it was determined that the company processed payments related to 3,464 stay transactions in Cuba by Airbnb ‘guests’ traveling for reasons outside of OFAC’s 12 authorized categories, OFAC says. According to the agency, Airbnb Payments also processed payments related to 3,076 experience transactions where it failed to keep records in accordance with OFAC regulations.

In addition, the agency says Airbnb Payments processed payments related to 44 confirmed transactions involving non-US individuals engaging in Cuba travel transactions on Airbnb’s platform before OFAC issued a specific license to Airbnb for it to engage in such conduct. As a result, OFAC states, Airbnb Payments processed payments on behalf of customers on Airbnb’s platform in apparent violation of the Cuban Assets Control Regulations.

According to OFAC, these apparent violations occurred primarily because Airbnb launched its Cuba business in April 2015 without fully addressing the complexities of operating a Cuba-related sanctions-compliance program for internet-based travel services.

‘As Airbnb launched its services in Cuba following regulatory changes announced by the US government in January 2015, the scaling up of its services in Cuba appears to have outpaced the company’s ability to manage the associated sanctions risks via its technology platforms, leading to some of the apparent violations,’ the agency says.

For example, when Airbnb first launched in Cuba, Airbnb Payments used a manual process to screen hosts and guests for potential sanctions issues before the unit was able to implement a customized internet protocol blocking system, according to OFAC.

The Treasury unit says mitigating factors in reaching the settlement include that Airbnb Payments:

  • Initiated the comprehensive review of its sanctions compliance program and voluntarily reported its findings to OFAC
  • Fully co-operated with OFAC, such as by responding to requests for information
  • Undertook significant remedial measures to enhance its sanctions compliance program and has agreed to implement additional sanctions compliance commitments designed to minimize the risk of recurrence of similar conduct in the future.

OFAC outlines compliance considerations arising from the matter:

  • ‘A failure to fully implement appropriate risk-based sanctions-compliance measures into a company’s infrastructure at the time of a new product launch or entry into a new business line – particularly one involving internet-based services – could lead to apparent violations of OFAC regulations’
  • Financial institutions processing transactions for companies that operate globally should understand the sanctions risks associated with those services and take the necessary actions to mitigate those risks
  • The importance of proactively identifying sanctions-compliance deficiencies and taking remedial actions
  • The benefits of voluntary self-disclosure and co-operation with OFAC.

Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...