7 January 2022
Airbnb Payments Pays $91k Settlement for Cuba Sanctions Violations
Airbnb Payments, a subsidiary of rental company Airbnb, will pay $91,172 for alleged violations of sanctions against Cuba, the US Office of Foreign Assets Control (OFAC) has announced.
OFAC, which implements and enforces US sanctions, says the company processed payments associated with customers traveling to Cuba for unauthorized reasons, and failed to keep adequate records of transactions.
Broad sanctions on Cuba have been a key area of foreign policy continuity between the Trump and Biden administrations. The Trump administration increased the economic pressure on Cuba, reversing President Obama’s shift to a more open stance that had led to an increase in travel between the two countries. Under President Biden, the broader sanctions continue.
Airbnb launched its Cuba business in April 2015, following regulatory changes announced by the US three months earlier. However, OFAC says the company “failed to fully address the complexities of operating a Cuba-related sanctions program for internet-based travel services.”
It says the rapid growth of Airbnb’s services in Cuba soon outstripped Airbnb Payments’ ability to manage the sanctions-related risks through its technology systems and reliance on manual checks.
Additionally, the record-keeping violations were “primarily due to technical defects involving an older version of the Airbnb mobile application that remained operational for Cuba-related travel,” OFAC said. “The older version of the application did not maintain complete functionality for guests to make an attestation regarding their reason for travel to Cuba.”
Airbnb discovered the issue itself after realizing it had processed payments for persons traveling outside of OFAC’s 12 authorized categories. These include family visits, US government business, educational and religious activities. It then carried out a forensic review “based on an approved and statistically significant sampling” of traveler stays and experiences related to Cuba.
In a statement, OFAC said Airbnb Payments proactively initiated a comprehensive review of its sanctions compliance program and implemented remedial measures while fully cooperating with officials. This proactivity has significantly reduced the scale of the fine from a base of $364,689, OFAC said.
Compliance improvements made by Airbnb
Airbnb Payments has agreed to implement additional sanctions compliance control improvements as part of its remediation. These include:
- IP blocking to permit individuals located in Cuba to act as hosts on Airbnb while simultaneously preventing them from transacting as guests
- The collection of country of residence and payment instrument information, to determine if users are nationals or residents of Cuba
- Screening to ensure no hosts are Cuban government officials or Communist party members and manual checks to ensure no listings are associated with the Cuba restricted list
- Requiring guests that book a stay or experience to complete an attestation prior to completing a reservation
- Requiring users listing a property in Cuba as a host on Airbnb to certify they are an independent entrepreneur
“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 warned.
“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 that process transactions for companies that operate worldwide, including transactions involving individuals and entities located in sanctioned countries, should understand the risks associated with those services and take necessary steps to mitigate them.
Before launching complex online payments programs in high-risk markets like Cuba, firms need to ensure they’ve conducted a comprehensive, risk-based assessment and fully understand their potential exposure.
This case also highlights the importance of proactively identifying sanctions compliance deficiencies and implementing appropriate remedial measures, as well as the benefits of voluntary self-disclosure and cooperation with OFAC.
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