Offshore Relic: How Fidel Castro Kept $1 Billion Under the Radar

Offshore Relic: How Fidel Castro Kept $1 Billion Under the Radar

Classic cars aren’t the only antiques rolling around modern Cuba. Longtime strongman Fidel Castro left a global network of accounts behind that would be practically impossible to build today. The money will be even trickier to distribute to his heirs.
The days when foreign dictators could stuff Swiss accounts with cash in the event of sudden regime change ended years ago, but Fidel Castro left his kids plenty of assets to chase.
There might be as much as $1 billion in Cuban money hidden in various corporate shells and secret slush funds around the world. Most of it dates back decades.
And given the tight control Fidel kept over the entire country while his people starved, that money is going to be hard to find, much less roll into new vehicles.
A lot of this wealth may end up in permanent limbo -- an ironic scenario for a fortune that made full use of every cash laundering loophole the world could offer and even now technically doesn’t exist.
Ghost of the Cold War
Even a list of Fidel’s hypothetical offshore assets reads like a relic from the era of cross-border financial skullduggery designed to hide resources from national enemies as well as domestic watchdogs.
Castro didn’t exactly require protection from local tax and regulations. He made the rules and encouraged ambitious subordinates to hand him suitcases of U.S. dollars on festive occasions, all accounted for as “gifts” when recorded at all.
Between the flow of tribute and his control over just about every aspect of the Cuban economy, the working class hero had amassed at least $500 million by the time he officially retired with a round of purges a decade ago.
Since then, the fresh flows passed through brother Raul, who isn’t exactly famous for tightening the reins. If anything, the new regime has spread more of the wealth around domestically instead of handing it all to the man at the top.
Besides, the global financial net tightened around Cuba shortly after Raul took over. Back in the 1960s, it was easy to park big foreign currency reserves in Swiss banks under friends’ names or even anonymous numbered accounts.
But Europe forced the Swiss to verify account holder identities and reveal the names on demand decades ago, and in 2004 U.S. regulators fined UBS a cool $100 million for helping Havana launder close to $4 billion in paper dollars against standing economic sanctions.
Any other currency could have skirted the embargo, but there just aren’t that many convertible pesos floating around the planet.
Either way, the tougher U.S. stance on money flowing offshore and away from the IRS had the side effect of shutting the floodgates on Cuban transfers to traditional havens around the Caribbean and beyond. At this point, dollars that make it into Cuba need to keep circulating inside the country.
And getting them out of their current hiding places will trigger IRS tax treaty requirements forcing the institutions who run the transactions to report back to Washington.
While the rules have bent over the last few years, Cuba is still on the list of “specially designated” countries where companies and individuals are generally blocked from accessing dollar assets.
As long as that designation remains in play, Fidel’s assets may be as frozen as Libyan bank accounts back in the day or Russian oligarchs’ wealth now.
Raul and the next generation of Castros can take comfort in being rich. They just can’t get to it right now without some serious cross-border gymnastics.
Working assets or shells?
The real question in the meantime revolves around how much of the empire Fidel managed to move around in the precarious 2004-6 period and which of the overseas vehicles was actually set up as a functioning business.
Opposition research from 2005 laid out the best details known in that era, when Fidel was wrapping a purge of his primary holding group CIMEX, which ran at least 80 companies with a run rate approaching $1 billion a year.
Raul had his own umbrella group, GAESA, which operated at similar scale.
But CIMEX shows up in the Panama Papers as “defaulted” and off the global books as of January 2007, months after Fidel stepped down.
While the Swiss trust that officially owned CIMEX remains active, just about all of its once-sprawling web of subsidiaries -- mostly domiciled in the British Virgin Islands, Panama and the Bahamas -- wound down by the end of 2007 as well.
Once that link was severed, Fidel’s best-known paper trail vanished. It’s a dead end.
Maybe his kids can reach the assets now if they know where they are. As long as these are actual cash-generating enterprises and not just shells, they can even share in the accumulated dividends now that dad is dead.
They’d probably have to pay tax on dollar transactions because Uncle Sam is now watching the planet. Peso accounts are unlikely, but in that scenario odds are pretty good the tax agents in Havana won’t be looking too closely at the president’s nephews.
And if the shadow companies own Fidel’s portfolio of overseas real estate, the kids can probably travel the world rent-free as well. Occasional reports in the gossip columns indicate that they’ve been doing that for years, so nothing will change as long as management keeps turning a blind eye.
Management on all these companies was loyal enough to survive Fidel’s final purges, so unless the intervening decade has made the executives ambitious, the kids are probably taking charge of everything they can find.
There may be struggles and revolts here and there, but that’s what succession looks like in any shadow empire.
And GAESA doesn’t ping the Panama Papers at all. Whatever Raul has to feather his nest, it dropped off the record ten years ago and has yet to reemerge.
It’s not the classic clandestine offshore estate plan, but it’s a solid demonstration of why rich people in nebulous circumstances flocked to these holding structures in previous generations . . . and will do so again.

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