New Executive Order Threatens Sanctions Against Non-US Persons Doing Business with Cuba

The White House’s new executive order substantially expands the scope of an already comprehensive sanctions framework on Cuba, authorizing sanctions on non-US persons doing business with Cuba, as well as non-US persons—including foreign financial institutions—doing business with non-Cubans who become sanctioned under the executive order.

THE NEW EXECUTIVE ORDER

On May 1, 2026, President Donald Trump issued Executive Order (EO) 14404 “Imposing Sanctions on Those Responsible for Repression in Cuba and for Threats to United States National Security and Foreign Policy.” This action builds upon the US embargo to which Cuba has been subject for over six decades that is administered through the Cuban Assets Control Regulations (CACR), 31 CFR Part 515, by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC).

On the same day, the White House published a fact sheet regarding the EO. According to the fact sheet, the EO is in line with the administration's efforts to hold the Cuban government, and those who support it, “accountable for its support of hostile actors, terrorism, and regional instability that endanger American security and foreign policy.” The fact sheet states that Cuba's actions pose an "unusual and extraordinary threat" to the United States, which requires an immediate response to protect American citizens and interests.

Under the EO, the treasury secretary, in consultation with the secretary of state, is authorized to designate non-US persons determined to “operate” in the energy, defense, metals and mining, financial services, or security sectors of the Cuban economy. The term “operate” has not been defined, nor has it been defined in the past where OFAC has used this term in other sanctions programs. Therefore, the drafting allows the government to retain substantial discretion in how it uses this provision to target Cuban and non-Cuban actors.

Under the EO, blocking sanctions can be imposed on any non-US person determined to

• be owned, controlled, or directed by, or to have acted or purported to act for or on behalf of, directly or indirectly, the Government of Cuba or any person whose property or interests in property are blocked pursuant to the EO;
• own or control, directly or indirectly, any person whose property or interests in property are blocked pursuant to the EO;
• have been a leader, official, senior executive officer, or member of the board of directors of the Government of Cuba or an entity whose property or interests in property are blocked pursuant to the EO;
• be a political subdivision, agency, or instrumentality of the Government of Cuba;
• be responsible for or complicit in, or to have directly or indirectly engaged in or attempted to engage in, serious human rights abuse in Cuba;
• be responsible for or complicit in, or to have directly or indirectly engaged or attempted to engage in, corruption related to Cuba, including corruption by, on behalf of, or otherwise related to the Government of Cuba, or a current or former official at any level of the Government of Cuba, such as the misappropriation of public assets, expropriation of private assets for personal gain or political purposes, or bribery; or
• to be an adult family member of a person designated pursuant to the EO.

Unlike the other legal authorities that make up the US sanctions program on Cuba, the EO creates sanctions exposure for non-US persons engaging in certain transactions with blocked persons. Blocking sanctions can be imposed on non-US persons determined to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, the Government of Cuba or any person whose property or interests in property are blocked pursuant to the EO.

Foreign financial institutions (FFIs) that conduct or facilitate significant transactions on behalf of any person blocked pursuant to the EO can be sanctioned. The EO does not define “significant transaction,” but this phrase is used commonly across OFAC’s sanctions programs. An assessment as to whether a transaction is “significant” typically involves a consideration of a number of factors, including, but not limited to size, number, and frequency; type, complexity, and commercial purpose; the level of awareness or involvement by the financial institution’s management; whether the activity or payment illustrates a pattern of practice or is an isolated event; the ultimate economic benefit conferred upon the designated person(s); and whether the transactions involved the use of deceptive financial practices to obscure the identities of the parties involved. [1]

In a press release issued on May 7, 2026, Secretary of State Marco Rubio announced the first three parties to be designated pursuant to the EO:

• Grupo de Administración Empresarial S.A. (GAESA), for operating or having operated in the financial services sector of the Cuban economy
• Ania Guillermina Lastres Morera, for being or having been a leader, official, senior executive officer, or member of the board of directors of GAESA
• Moa Nickel S.A., for operating or having operated in the metals and mining sector of the Cuban economy

CUBA GENERAL LICENSE 1

On May 7, 2026, OFAC issued Cuba General License 1 (GL 1), which authorizes transactions prohibited by the EO to the extent that those transactions are already authorized or exempt under the CACR, including transactions conducted pursuant to general or specific licenses under the CACR. However, GL 1 does not authorize any transactions that are otherwise prohibited by 31 CFR Chapter V. GL 1 limits the immediate disruption for US persons currently relying on general or specific licenses, or other exemptions, to the CACR.

NEWLY ISSUED CUBA-RELATED FAQS

On May 7, 2026, OFAC also issued six new Frequently Asked Questions (FAQs) providing guidance related to the EO and the activities authorized by GL 1.

FAQs 1251 and 1252

FAQ 1251 explains that the EO establishes a new Cuba-related sanctions program, separate from the CACR, under the International Emergency Economic Powers Act (IEEPA). It says that under this sanctions program, the Secretary of the Treasury and the Secretary of State are empowered to impose sanctions on foreign persons determined to be involved in harmful activities to Cuba. FAQ 1252 clarifies that the CACR remains unaltered. As a separate sanctions program, all existing prohibitions and authorizations pursuant to the CACR remain in effect.

FAQ 1254

On May 7, 2026, OFAC designated GAESA, a Cuban military-controlled entity estimated to control at least 40% of the Cuban economy, pursuant to the EO. FAQ 1254 says that, generally, foreign persons, including FFIs, are subject to sanctions risk for transacting with GAESA.

FAQ 1254 clarifies that the US government does not seek to target such persons for engaging in transactions ordinarily incident and necessary to the wind down of transactions involving GAESA, or any entity directly or indirectly owned 50% or more by GAESA, through June 5, 2026. However, FAQ 1254 describes this as a “limited non-targeting posture” that does not authorize any transaction prohibited by the CACR, under which GAESA has been designated as a Specially Designated National or Blocked Person (SDN) since December 21, 2020.

FAQ 1254 advises foreign persons, including FFIs, to proceed with caution in any dealing with parties sanctioned under the EO, as actions to return assets to a sanctioned party or transfer then to another jurisdiction for use by the target could expose non-US persons to sanctions risk.

FAQS 1255 AND 1256

FAQs 1255 and 1256 clarify the scope of the sanctions threatened by the EO. Both FAQs note that the EO is separate from the CACR. Persons blocked or otherwise identified pursuant to the CACR are not automatically blocked under the EO, as they are two separate sanctions authorities. If persons sanctioned under the CACR are determined by the Secretary of the Treasury or the Secretary of State to meet the criteria outlined in the EO, they could be separately designated thereunder.

FAQ 1256 says that not all persons that operate or have operated in the five sectors of the Cuban economy identified in the EO are now sanctioned by OFAC pursuant to the EO. Rather, the EO authorizes the Treasury Secretary, in consultation with with the Secretary of State, to impose blocking sanctions on any foreign person determined to operate or have operated in those sectors of the Cuban economy. The key distinction is that, while foreign persons that operate or have operated in such sectors are not automatically sanctioned under the EO, the identification of these sectors now exposes such persons to sanctions risk.

RESPONSES BY CUBAN TRADING PARTNERS

The EO clearly contemplates the use of blocking sanctions against non-US persons outside of Cuba. Therefore, designations, and indeed the mere threat of designation under the sector-based sanctions, is likely to cause concern in jurisdictions with trade and investment relations with Cuba such as European Union, United Kingdom, Canada, and Mexico, where US sanctions on Cuba had not previously been applicable.

While the EU and UK have blocking statutes in place, the Blocking Statute (Council Regulation (EC) No 2271/96) and the Protection of Trading Interests, respectively, these authorities are not currently drafted to prohibit compliance with the EO. However, there remains a chance that a single person becomes designated under both the CACR and the EO, in which case there would be implications under these blocking statutes.

It remains to be seen whether these authorities will be amended, though doing so is not nearly as quick as the US president issuing an executive order. For example, amending the EU Blocking Statute would require reinitiating the EU legislative process, which usually starts with the European Commission proposing an amendment to the regulation itself or to its Annex, followed by adoption by the co-legislators (the European Parliament and the Council) under the ordinary legislative procedure.

If the change is limited to updating the Annex, this could also be done by a delegated act. This was done in 2018 when the European Commission included restrictive measures relating to Iran through a Delegated Regulation (EU) 2018/1100 of June 6, 2018, which shows that the EU can move rather quickly when it wants to capture new US measures.

The European Union and United Kingdom are not the only jurisdictions which have implemented blocking statutes limiting compliance with US sanctions on Cuba. Both Mexico and Canada, two material trading partners of the island, also have blocking statutes and therefore operators with touchpoints to those jurisdictions should consider that legislation.

KEY TAKEAWAYS

• The EO introduces new authorities under which individuals and entities already blocked under the CACR can now be designated pursuant to the EO, creating a secondary sanctions risk for non-US persons that did not previously apply.
• US persons relying on general or specific licenses will need to assess the impact of the EO on their existing activities and should be prepared to terminate or suspend the activity pending additional authorizations.
• Non-US financial institutions are likely to evaluate Cuba-related customers or counterparties more strictly in light of the new secondary sanctions authority. Non-US banks that process transactions for Cuban state-owned enterprises or industries targeted by the EO are also likely to increase diligence.
• Amendment of the EU or UK blocking statutes will further complicate the compliance framework.

Legal practice assistants Charlie Biggs and Victoria Desimoni contributed to this LawFlash.

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