New US sanctions on Cuba may look like another step in the countries’ fraught history. As Kathy Nugent of LexisNexis Risk Solutions explains, global operators can’t simply adhere to domestic laws, but must assess these sanctions and ask — what are we willing to risk?
On May 1, President Donald Trump issued Executive Order 14404, introducing new Cuba-related authorities under the International Emergency Economic Powers Act (IEEPA) and expanding measures tied to the national emergency declared earlier this year in Executive Order 14380.
At first glance, this may appear to be another incremental step in a long-established Cuba policy. In practice, it materially raises the stakes for non-US firms and financial institutions that operate under different regulatory regimes but still do business with or depend on access to the US or its financial ecosystem.
This is not just a Cuba story. It is a story about jurisdictional divergence, enforcement reach and the growing conflict-of-laws challenges facing global organizations.
What the executive order actually does and why it is different
The order complements OFAC’s long-standing Cuban assets control regulations with a broad IEEPA-based designation framework targeting certain foreign persons connected to Cuba. It authorizes the blocking of property and interests in property of foreign persons determined by the secretary of state or the secretary of the Treasury to be operating in or supporting key sectors of the Cuban economy, including energy, defense, metals and mining, financial services and security.
It also permits action against current or former leaders or officials from the government of Cuba, as well as individuals and entities that materially assist, sponsor or otherwise support the government of Cuba or persons blocked under the order. This introduces an important nuance. The order does not only capture support to already designated parties but extends to support for the Cuban government, defined broadly to include its agencies, instrumentalities, controlled entities and persons acting for or on its behalf.
Crucially, the order introduces secondary exposure for foreign financial institutions that conduct or facilitate significant transactions for or on behalf of persons blocked under the order. The Treasury may prohibit or impose strict conditions on the opening or maintenance of US correspondent or payable-through accounts and may also impose full blocking measures on the foreign financial institution itself.
In practical terms, conduct that occurs entirely outside the US can now create designation risk for foreign persons and secondary exposure for foreign financial institutions, including potential restrictions on access to American financial infrastructure.
Diverging regulatory regimes
This is where challenges become more pronounced, particularly for close American allies and other major economies that may face the consequences of the extraterritorial application of these measures.
Jurisdictions such as Canada, the EU and the UK maintain frameworks that do not mirror US restrictions on Cuba. In some cases, their laws explicitly permit commercial activity with Cuba that American law restricts or prohibits.
That divergence is not new. What is new is how clearly the pressure point is defined: access to the US financial system.
The executive order allows the Treasury Department to target foreign banks and intermediaries even where the underlying Cuba-related activity may be lawful under local law and without a clear jurisdictional nexus to the US, as long as the activity involves persons blocked under the order or meets the new designation criteria. This creates a familiar but increasingly acute dilemma for global firms: local legality vs. exposure to US measures.
Why Canada, the EU and the UK should pay attention now
For firms headquartered in these jurisdictions, particularly financial institutions, the order raises operational and strategic questions beyond purely legal considerations.
Access to US dollar clearing and correspondent banking remains a strategic dependency. Many multinational organizations expect seamless dollar-based services even if only part of their business touches the US. At the same time, enforcement activity has increasingly focused on facilitation, indirect support and financial intermediation rather than purely direct dealings.
The order explicitly extends exposure to entities that facilitate transactions for restricted parties, a concept authorities have historically interpreted broadly. Compliance frameworks built solely around domestic obligations are therefore no longer sufficient for institutions with exposure to the US market.
Many segments of the financial sector are affected beyond banks. The order includes a broad definition of foreign financial institutions, from banks and money service businesses to dealers in precious metals, stones or jewels and everything in between.
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This executive order reinforces trends financial crime compliance leaders have been navigating for years. Regulatory risk is not confined by geography. Exposure flows through correspondent networks, payment rails, trade finance, insurance or securities activities. Being compliant under local law does not insulate institutions from American enforcement risk or broader exposure. For a non-US actor, the relevant risks go beyond civil enforcement. They may include designation risk involving correspondent banking restrictions or blocking measures.
Financial institutions continue to serve as the primary enforcement leverage. Access to liquidity and financial infrastructure remains the central pressure point.
Risk assessments need to be scenario-based rather than purely rules-based. Institutions should be asking not only whether an activity is permissible today but what happens if a counterparty, sector or jurisdiction becomes tomorrow’s enforcement focus.
Going forward, it is crucial for organizations to monitor new Cuba-related designations and assess ownership and control links to detect indirect exposure throughout business relationships. This is particularly important because the order targets not only listed persons but also support to the government of Cuba and dealings that may be interpreted as material assistance.
What this means in practice
For institutions operating across jurisdictions, this does not necessarily mean adding layers of controls. It means aligning risk appetite with geopolitical reality.
Country risk assessments should explicitly consider foreign exposure, not only domestic requirements. Customer due diligence should extend beyond direct ownership to include sectoral exposure and facilitation risk. Transaction monitoring and screening programs should be capable of identifying indirect Cuba exposure, particularly through trade-related activity and intermediated payments. Governance models must allow for rapid escalation when US policy shifts, even if local regulators have not yet acted.
For foreign financial institutions, exposure to these measures should be assessed through three layers of analysis. First, is the activity lawful under domestic law? Second, does the activity have a nexus to the United States, requiring strict compliance with applicable rules? Third, even without a direct link, could the activity expose the institution to secondary measures such as asset freezes or correspondent account restrictions?
That third question is where the practical impact of the order is likely to be felt most acutely.
How allies push back
Canada, the EU and the UK are not passive in the face of extraterritorial measures.
The EU relies on its blocking statute, a regulation originally introduced in response to US restrictions on Cuba. It prohibits EU persons from complying with certain foreign measures, nullifies related foreign judgments within the EU and allows EU companies to seek damages caused by their application. Limited exemptions exist but only where noncompliance would seriously damage EU or national interests.
Canada has a parallel framework in the Foreign Extraterritorial Measures Act, which allows the government to block the enforcement of certain foreign measures in Canada and restrict compliance by Canadian entities. Like the EU statute, it is sovereignty driven and explicitly designed to counter the extraterritorial reach of American action, particularly those related to Cuba.
The UK retained similar protections post-Brexit, preserving the principle that foreign rules should not automatically dictate lawful activity within UK jurisdiction.
Beyond the Western Hemisphere, other major economies are also developing legal defenses against the extraterritorial effects of certain US measures. Following publication of the order, China announced implementation of its blocking statute for the first time in response to separate actions against Chinese companies imposed under Iran-related authorities. India has also reportedly been exploring a similar mechanism.
These approaches matter legally and politically. They establish formal resistance, preserve policy autonomy and provide a basis for domestic remedies. They also deepen regulatory fragmentation and introduce complex compliance challenges.
In practice, blocking statutes do not restore access to US correspondent accounts, US dollar liquidity or unblock assets. They can prevent legal compulsion but cannot neutralize economic dependence. For institutions with meaningful exposure to the US, the ultimate risk is not whether compliance is lawful locally but whether access to the system can be lost. That imbalance explains why firms continue to navigate between conflicting legal obligations even when protective frameworks exist.
The bigger signal
The Cuba executive order sends a broader message to global markets. Regulatory divergence is tolerated until it is not.
When national security considerations intensify, exposure often expands, not only against primary targets but also against those who enable access, liquidity or legitimacy. For global operators, this does not require alignment with American foreign policy. It does require a clear-eyed assessment of exposure to these measures.
Kathy Nugent is director of market planning, US financial crime compliance at LexisNexis Risk Solutions. She is a certified anti-money laundering specialist who previously served in AML roles at BNY Mellon. 
