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Scott Ware
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In Baseball and Business, Don't Run Afoul of OFAC

THE OFFICE OF FOREIGN ASSETS CONTROL: In the highly-regulated environment of U.S. government sanctions, baseball teams, Cuban players and businesses large and small face serious penalties if they don’t play by the rules. This is no game. 

Baseball fans need no introduction to Yasiel Puig and Yoenis Cespedes. Both have been in the post-season spotlight – Puig as the dynamic rookie for the Los Angeles Dodgers and Cespedes in his second year as star slugger for the Oakland A’s.

Puig and Cespedes are two of 21 Cuban-born players in Major League Baseball. Next season, Jose Abreu, the most recent Cuban defector seeking big money to play baseball in America, will likely join their ranks. A bidding war this winter could land Abreu a contract in the $60-70 million range.

The emergence of these players and the huge sums being spent on them also call attention to an off-the-field story: the maze of political and financial regulations that teams and players must navigate because of the U.S. economic embargo with Cuba.

The New York Yankees, for one, have run afoul of the rule, but it is not just sports teams: Businesses from Walmart to ESPN to Playboy Enterprises have found themselves subject to large fines and reputational damage because of missteps involving Cuba or other U.S.-sanctioned countries.

The U.S. government agency that enforces economic and trade sanctions is the Office of Foreign Assets Control, better known as OFAC. As government agencies go, it is not exactly a household name. But its rulemaking has a broad reach. As TrustedPeer’s Saskia Reitbroek notes in OFAC Compliance and Sanctions, OFAC enforces laws that apply to all U.S. businesses, large or small, in regards to:

  • Countries and regions targeted for sanctions by the U.S. government.
  • Companies owned, controlled or acting on behalf of targeted countries.
  • Foreign individuals or entities targeted because they are involved in terrorism, narcotics trafficking or weapons of mass destruction.

Collectively, the individuals and companies targeted by OFAC are called "specially designated nationals," or SDNs. OFAC publishes a list of 6,000 SDNs worldwide. OFAC prohibits transactions with these SDNs, no matter where they are. Consider these examples:

  • A U.S. insurance company issues a property insurance policy to an international corporation that maintains a factory in Iran.
  • A U.S. broker-dealer opens a margin account and executes trades for a new customer and subsequently learns the customer is a "specially designated national."
  • A U.S. exporter sends licensed goods to Myanmar, but pays a dock fee not allowed under the sanction program.
  • Employees of a U.S. magazine paid for their hotel and other expenses while on a photo shoot in Cuba, but without the license OFAC requires for certain activities or business dealings.

For Cuban baseball players, the sanctions means they cannot sign with an American team unless they defect and establish citizenship in another country, such as Mexico or Haiti. Then, they can petition OFAC to be "unblocked" national. Once under contract, they face tight restrictions on money they can remit to Cuba. Then, they can petition OFAC to be an "unblocked" national.

For U.S. teams, it means they must carefully abide by restrictions on contact with players still on Cuban soil. This summer, Cuba’s national sports agency relaxed its rules to allow Cuban players to sign contracts in Europe and Asia. But not in the United States.  

That’s where the big money awaits, but only for defectors willing to leave their native country with the door firmly shut behind them.

Read more on Cuban players and their paths to the big leagues in America here.

Learn more about OFAC, read OFAC Compliance and Sanctions, by TrustedPeer Expert Saskia Rietbroek here.