Stonegate Bank Chief Executive David Seleski flew to Washington on Monday for a ceremony marking the reopening of the Cuban Embassy and resumption of diplomatic relations with the United States. Early the next day, he was on a plane to Havana to ink a historic deal of his own.
Pompano Beach-based Stonegate became the first U.S. bank to sign a correspondent banking deal with a Cuban bank since the Obama administration's opening toward Cuba was announced in December. Seleski told the Miami Herald on Thursday, in an interview from Havana, that Stonegate expects to fund its account with Cuba’s Banco Internacional de Comercio (BICSA) soon and should have it ready for transactions in three to four weeks.
Initially Stonegate, which became the banker for the Cuban Embassy in Washington in May, wants to concentrate on transactions involving those diplomatic accounts and U.S. companies trading with Cuba under exceptions to the embargo. Then it would like to handle transactions of travel companies and cruise lines authorized to do business in Cuba.
The goal, Seleski said, is to allow any transactions licensed by the U.S. government to flow through the account, including those of private companies in Cuba.
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The new correspondent relationship could eventually lead to some progress on the credit card issue. Although both MasterCard and American Express have said they’d be willing to let authorized American travelers use their cards to pay for expenses on the island, no U.S. bank has stepped up to support the cards, meaning they don’t work in Cuba.
“The big hurdle for the credit cards is no one had a correspondent relationship,” said Seleski.
Asked if Stonegate, a commercial bank, might issue its own credit cards or work with another bank that issues cards, Seleski responded: “We are working on other areas with Cuba.” He said he couldn’t be more specific at this point.
Before March 12, Cuba wasn’t really on the radar of Seleski or the Stonegate board.
But that day Seleski received a call from Ariel Pereda, a Stonegate customer and food distributor who exports to Cuba under one of the exceptions to the embargo. Pereda was lunching with Mark Wells, the State Department’s Cuba desk officer, and James Williams, president of Engage Cuba, an advocacy group working to end trade and travel restrictions for Cuba, and they were discussing the difficulties trying to find a bank to handle the accounts of the Cuban Interests Section.
At that point, the interests section had been without a banker for around a year, putting it on a cash basis and complicating receipt of fees for visas, passports and other documents. The lack of a banker was complicating ongoing talks to reopen embassies and restore diplomatic relations. Getting a new bank was one of the Cuban government’s priorities.
Seleski said he had been to the island several times with his customer, Pereda, so “there was some comfort level” with the idea of doing business with Cuba.
“We looked at the idea, we liked what we saw and we moved forward,” Seleski said. But he admits it’s a play for the future when there may no longer be an embargo and business opportunities really start to open up.
“A lot depends on the continued thawing of relations,” he said. “As long as things move forward on the political front over the next two years, then there will be more business opportunities.”
But other banks — wary of potential compliance headaches, fearing political backlash for doing business with the Cuban government or exercising caution because they don’t want to run afoul of U.S. sanctions that have resulted in huge fines for some foreign banks that have used U.S. dollars for business dealings with Cuba — have been reluctant to venture into Cuba even though new U.S. regulations would allow them to do so.
Seleski, who has met with BICSA officers and visited the bank’s branches, said he’s satisfied that Stonegate has all those areas covered.
Stonegate, he said, has segmented its Cuba business and has two employees who work full-time on Cuban regulatory compliance and other Cuba issues.
“The Cuba relationship is not that hard, not that complex,” he said. “It sounds bigger than it really is.”
Plus, he said, “The Cuban government is very, very conscious of following the rules. They don’t want problems.”
Seleski said he has been pleasantly surprised at “how sophisticated the Cuban banking system is. From an anti-money-laundering point of view, they’re actually more stringent than we are.”
In South Florida, there have been small protests and a weekly vigil outside Stonegate’s Coral Gables branch. Seleski is aware of them but they don’t give him pause, either. “We respect people’s opinions and their right to express their point of view. That’s what make this country great,” he said.
After Stonegate announced it would be handling the accounts of the former Cuban Interests Section, he said, it did lose “a few” customers. “But we also gained some customers who had nothing to do with Cuba but thought we were doing the right thing so it was actually a net positive,” Seleski said.
More recently, he said, some companies authorized to do business with Cuba have moved their business from other banks to Stonegate.
Although it might seem like Stonegate waited to make its announcement about its new correspondent banking deal until after diplomatic relations between the United States and Cuba were restored, Seleski said that’s not the case. He originally had been planning to sign the deal July 13 but had a scheduling conflict that pushed the signing until Tuesday.
But he’s well aware that Stonegate is playing a role in the historic rapprochement between Cuba and the United States. “We feel pretty strongly that this is the right thing,” he said. “It’s very gratifying to do something that could open up business opportunities in Cuba.”