The Treasury Department’s Office of Foreign Assets Control (OFAC) is investigating Airbnb’s compliance with U.S. sanctions on Cuba, the company revealed this week. The company said that it had received cautionary letters from OFAC and could face “significant” lawsuits and fines.
Airbnb disclosed the OFAC investigation in a filing to the Securities and Exchange Commission on Monday as part of its preparation for an initial public offering scheduled for next month.
"Depending upon OFAC's assessment of the Cuba review,” the filing stated, “we could be subject to potentially significant monetary civil penalties and litigation, and our brand and reputation could be materially adversely affected."
As the world's pioneering Internet rental platform company, Airbnb opened operations in Cuba in April 2015, four months after President Obama announced a new policy of positive engagement with Cuba. In March 2016, Airbnb CEO Brian Chesky accompanied the President on his history-making trip to Havana, and participated in an “Entrepreneurship and Opportunity Event” Obama held with members of Cuba’s growing private sector.
As U.S. travelers flocked to Cuba under Obama’s policy of normalizing relations, the company quickly expanded operations, quadrupling Cuban listings to 4,000 in its first year of operations and expanding to 22,000 property listings in 2017. By mid 2019, according to the “Economic Eye on Cuba” website, Airbnb represented some 36,400 listings and had generated approximately $47 million in gross revenues over the first four years of operations—providing a major stimulus for the expansion of Cuba’s private sector.
For U.S. visitors to Cuba, Airbnb’s services have gained traction as the Trump administration has progressively imposed restrictions on travel. In a new round of sanctions in September, the State Department issued a “Cuba Prohibited Accommodations List” of more than 400 Cuban hotel properties where U.S. citizens can no longer book a room. The restrictions on hotel lodging effectively leaves private homes known as casas particulares, many of them Airbnb-represented, as the only accommodations where U.S. travelers can, at present, legally stay on the island.
According to Airbnb, OFAC’s current investigation was generated by an internal compliance audit the company conducted last year to ascertain whether it was adhering to U.S. government sanctions and restrictions on business transactions in Cuba and the Ukraine. The company’s self-evaluation, the Wall Street Journal reported, focused on “compliance with OFAC’s sanctions programs, particularly its business in Cuba and the company’s compliance with restrictions on transactions with specifically designated nationals.”
Airbnb reported that it had voluntarily disclosed its internal compliance evaluation to OFAC in September. "We maintain policies and procedures to implement these internal controls, which we periodically assess and update to the extent we identify compliance gaps," Airbnb stated in its SEC filing. "As our business continues to grow and regulations change, we may be required to make additional investments in our internal controls or modify our business."