Cuba Executive Order Exposes Non-U.S. Companies And Financial Institutions To Significant New Sanctions Risk

Key Points

• On May 1, 2026, President Trump issued an E.O. pursuant to IEEPA authorizing the imposition of sanctions on non-U.S. inpiduals and entities, including foreign financial institutions, engaged in certain conduct related to Cuba.
• The May 1 E.O. introduces significant secondary sanctions risk arising from business dealings in or with Cuba.
• Sectors of the Cuban economy currently targeted by the E.O. are energy, defense and related materiel, metals and mining, financial services, and security.
• Foreign financial institutions face sanctions risk for conducting or facilitating any “significant transaction” for or on behalf of any person blocked pursuant to the E.O.
• The scope of certain exclusions from the E.O.’s delegated authority is uncertain at this time, and the interrelation between the E.O. and the longstanding Cuba embargo may give rise to compliance challenges.

Historical Context of the May 1 E.O.

The May 1 Executive Order (E.O.) significantly expands the authority of the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC), and the U.S. Department of State to sanction foreign companies and financial institutions for their Cuba-related dealings. The E.O. addresses the “policies, practices, and actions of the Government of Cuba,” which are not only “designed to harm the United States” but also “repugnant to the moral and political values of free and democratic societies.” Cuba is already subject to a comprehensive U.S. trade embargo pursuant to the decades-old Cuban Assets Control Regulations (CACR), which is based primarily on the International Emergency Economic Powers Act’s (IEEPA) predecessor statute, the Trading With the Enemy Act (TWEA).

Under the CACR, OFAC historically has only rarely designated inpiduals and entities to the Specially Designated Nationals and Blocked Persons List (SDN List). Moreover, such designations have generally targeted Cuban inpiduals and Cuba-owned businesses determined to meet the CACR’s definition of “Cuban national.” The regulations do not generally authorize the designation of inpiduals and entities other than Cuban nationals, and the CACR’s complex legislative framework imposes practical and legal limits on the administration’s ability to amend the regulations.

By acting pursuant to a new national emergency under IEEPA, which President Trump declared earlier this year in E.O. 14380, the administration can exercise the full range of IEEPA authorities, including the authority to impose blocking and other sanctions against non-U.S. persons determined to have engaged in certain conduct or to meet specified criteria.

New Cuba-Related Targeting Authority

The Cuba-related designation criteria under the E.O. are similar to those introduced in recent years with respect to other sanctions programs, including Iran, Russia, Venezuela and North Korea. For example, under Section 2 of the E.O., OFAC and the U.S. Department of State are each authorized to designate non-U.S. persons for operating or having operated in the energy, defense and related materiel, metals and mining, financial services or security sector of the Cuban economy, or any other sector of the Cuban economy, as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State. OFAC’s recent record of designating companies for operating in various sectors of the Russian Federation economy indicates that a company could be designated under the E.O. on the basis of exporting relevant goods or services to a determined sector of the Cuban economy, irrespective of whether the company has any physical presence in the country.

Non-U.S. persons also may be designated for providing material support to the Government of Cuba, or for being responsible for or complicit in, or having directly or indirectly engaged in or attempted to engage in, significant human rights abuse or corruption in Cuba.

In addition, Section 4 of the E.O. authorizes the Treasury (but not the Department of State) to impose sanctions on foreign financial institutions for conducting or facilitating any significant transaction or transactions for or on behalf of any person whose property or interests in property are blocked pursuant to the E.O. In particular, such foreign financial institutions may be subject to blocking sanctions, or so-called “CAPTA” sanctions that prohibit the opening of, or prohibit or impose strict conditions on the maintenance of, correspondent accounts or payable-through accounts in the United States.

Some Exclusions Apply

Sections 2(b) and 4(c) of the E.O. include language that appears to limit the scope of delegated authority to impose sanctions on the basis of, or bring enforcement actions with respect to, certain activities currently authorized pursuant to the CACR. However, it is unclear how these exclusions will operate in practice. For example, the CACR includes numerous general licenses that authorize a range of financial transactions, exports and services, but these licenses are subject to important conditions and limitations. For example, the CACR authorizes certain remittances to be sent to Cuba, but only by persons subject to U.S. jurisdiction. Also, the CACR authorizes the exportation or reexportation of certain items to Cuba, including agricultural commodities, but only to the extent licensed or otherwise authorized by the U.S. Department of Commerce. It is unclear how these requirements would apply to the activities of non-U.S. persons acting outside of the United States.

In addition, the CACR expressly precludes the issuance of licenses for certain transactions by U.S.-owned or controlled firms in third countries for the exportation of commodities to Cuba. Transactions related to the exportation of medicines or medical supplies are carved out of this limitation, although the carveout is itself limited by additional requirements. Future OFAC guidance may clarify the interrelation between the E.O. and the CACR. For example, OFAC might establish a new set of regulations to implement the E.O., such that the Cuba Sanctions Program (like the Iran Sanctions Program) consists of multiple, separate regulatory sets.

U.S. Policy Considerations and Risks

National Security Presidential Memorandum 5 (NSPM-5), which President Trump issued on June 30, 2025, articulates the goal of promoting political and economic liberalization and greater respect for human rights in Cuba through a range of policy measures to escalate pressure on the Cuban government. In addition to steps the U.S. government has since taken to implement NSPM-5, the U.S. military quarantine of “shadow fleet” vessels transporting Venezuelan oil in late 2025 and the subsequent removal of Nicolas Maduro from power in January 2026 have significantly impacted Cuba’s economy, which was heavily reliant on Venezuelan oil. The ongoing closure of the Strait of Hormuz resulting from the unresolved military conflict between the United States and Iran further complicates the geostrategic landscape.

Notably, the President’s issuance of the E.O. was not accompanied by an announcement that any sanctions have been imposed pursuant to it, and it is not clear how aggressively the administration will seek to use these new targeting authorities. The national emergency in E.O. 14380 articulates the administration’s view of relevant threats posed by the Cuban government, which include hosting and cooperating with U.S. adversaries such as Russia, China and designated terrorist groups, as well as persecution and torture of the Cuban people. The reference to targeting “Cuban regime officials” in the title of a White House fact sheet accompanying the E.O. creates further ambiguity about what conduct will meet the administration’s policy threshold for imposing sanctions. For example, it is unclear to what extent OFAC or the Department of State may focus on targets that provide direct support to the Cuban government. Similarly, it is unclear which factors the Treasury may consider to determine the “significance” of a foreign financial institution’s transactions, although OFAC has defined the term “significant transaction or transactions” relatively consistently across certain other sanctions programs.

Compliance Complications

While the most immediate impact of the E.O. will be felt by non-U.S. persons engaged in covered activities with Cuba, the introduction of IEEPA-based designation authorities may give rise to compliance challenges for U.S. companies and financial institutions as well. Consistent with other IEEPA-based sanctions, the blocking requirements and prohibitions of the E.O. apply to “United States persons”—a term defined to include entities formed under the laws of the United States (including foreign branches), but not foreign subsidiaries of such U.S. entities. In contrast, the prohibitions of the CACR apply more broadly to “persons subject to the jurisdiction of the United States,” defined to include entities owned or controlled by U.S. citizens, residents, or U.S. corporations, partnerships, associations or other organizations organized under U.S. law.

Accordingly, as “non-U.S. persons,” foreign subsidiaries of U.S. companies would not necessarily be prohibited from engaging in transactions with persons designated under the E.O., even though they are required to comply with the CACR. However, engaging in transactions with the target of a designation under the E.O. may give rise to significant compliance risks. First, the foreign subsidiary may inadvertently “cause” its U.S. parent or other U.S. persons to violate relevant prohibitions; and second, the foreign subsidiary’s dealings with the sanctioned person may give rise to the risk of being targeted by a future sanctions action under the E.O.

Given the significant new sanctions risks introduced by the E.O., companies should take proactive steps to assess their potential exposure and review their sanctions compliance policies and procedures. In particular, non-U.S. companies and financial institutions that operate in sectors of the Cuban economy identified in the E.O., or that have dealings with the Government of Cuba, should review their Cuba-related operations against the designation criteria of the E.O., and consider strategies to mitigate the risk of being targeted by a future action.

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