Cartels, Foreign Terrorist Organizations, and the High Stakes for Businesses

The new Trump administration is focusing intensely on “cartels” and other transnational criminal organizations, particularly in the Western Hemisphere. Many of the entities designated as FTOs today are active in Latin America and the United States, and sometimes seek to extort money or have other dealings with legitimate businesses operating in their territories. The State Department’s designation of eight such entities will not only raise the pressure on the entities designated, but also will create new risks and pressures for companies operating in areas where these FTOs are active. Below, we summarize the recent developments and the ramifications of these designations for businesses.

FTO Cartel Designations

On January 20, 2025, President Trump signed an Executive Order (E.O.) that directed the Secretary of State to make a recommendation within 14 days regarding the designation of criminal cartels and other transnational criminal organizations as FTOs or as Specially Designated Global Terrorists (SDGTs). The E.O. specifically suggested Tren de Aragua (TdA) and La Mara Salvatrucha (MS-13) as potential designees but left specific determinations to the Secretary of State.

On February 20, 2025, the Federal Register published the State Department’s designation of eight organizations as both FTOs and SDGTs: (1) TdA (Venezuela); (2) MS-13 (founded by Salvadoran immigrants in the United States); (3) Cartel de Sinaloa (Sinaloa Cartel) (Mexico); (4) Cartel de Jalisco Nueva Generacion (Jalisco New Generation Cartel) (Mexico); (5) Cartel del Noreste (Northeast Cartel) (Mexico); (6) La Nueva Familia Michoacana (LNFM) (Mexico); (7) Carteles Unidos (United Cartels) (Mexico); and (8) Cartel del Golfo (CDG) (Mexico). With the exception of Carteles Unidos, each of these organizations had previously been designated pursuant to counter-narcotics or transnational organized crime sanctions authorities. 

FTO Designations

The Antiterrorism and Effective Death Penalty Act of 1996 (“Anti-Terrorism Act”) gives the Secretary of State authority to designate an organization as a “foreign terrorist organization” upon determining that (1) it is a foreign organization; (2) that engages in terrorist activity (including hijacking, assassination, or use of biological/chemical agents, among other activity) or terrorism (“premeditated, politically motivated violence” against civilians); and (3) the terrorist activity or terrorism threatens U.S. national security or U.S. nationals.  FTO designations must be noticed to leadership in Congress seven days before being published in the Federal Register, when the designations become effective. There are currently close to 80 entities listed as FTOs, including Al Qa’ida, Hamas, Hezbollah, the Islamic Revolutionary Guard Corps, and Boko Haram.

Many cartels are already designated under existing counter-narcotics or transnational criminal organization sanctions authorities, making them blocked persons, and making U.S. persons subject to civil and criminal penalties for transacting with them. FTO designations likewise require U.S. financial institutions to block any funds in which an FTO or its agent has an interest. However, FTO designations carry additional consequences, including additional potential criminal and civil liability for transactions with FTOs, and potential impacts to U.S. export controls.

Criminal Liability for Material Support

The Anti-Terrorism Act provides criminal liability for “[w]hoever knowingly provides material support or resources to a foreign terrorist organization or attempts or conspires to do so.” Material support includes the provision of any property, tangible or intangible, or service, including financial services, training, expert advice, personnel, or transportation. To be found guilty, the perpetrator must have knowledge that the entity (1) is a designated FTO; (2) has engaged or engages in terrorist activity; or (3) has engaged or engages in terrorism.

The statute provides extraterritorial jurisdiction over material support offenses, and provides that jurisdiction applies not only to U.S. nationals, permanent residents, and persons within the United States, but also to non-U.S. persons if they are subsequently brought into or found within the United States, or if they aid and abet or conspire with persons over whom the United States has jurisdiction pursuant to the statute. This means, for example, that non-U.S. companies could face criminal liability for providing material support to FTOs wholly outside the United States if those companies also operate within the United States or otherwise fall within the jurisdiction of the statute.

These risks were illustrated starkly in October 2022, when Lafarge S.A. (Lafarge), a French buildings material manufacturer, and its Syrian subsidiary, Lafarge Cement Syria S.A. (LCS), pled guilty in the Eastern District of New York (EDNY) to conspiring to provide material support and resources to the Islamic State of Iraq and al-Sham (ISIS) and the al-Nusrah Front (ANF) in Syria, both of which were designated FTOs. From 2013 to 2014, Lafarge and LCS paid ISIS and ANF the equivalent of approximately $5.92 million to protect their employees, ensure the continued operation of their cement plant in Northern Syria, and obtain advantages over their competitors in the Syrian market. The arrangements with ISIS and ANF provided for both fixed and variable payments based on LCS’s revenue and included the expectation that the terrorist groups would help suppress demand for competing cement products in areas they controlled. As part of Lafarge and LCS’ guilty plea, they paid $777.78 million in financial penalties.

In an earlier 2007 case, Ohio-based Chiquita Brands International Inc. (Chiquita) pled guilty and paid a $25 million penalty in connection with making over $1.7 million in security payments to Autodefensas Unidas de Colombia (AUC) in Colombia, where Chiquita had banana plantations. Although the guilty plea related specifically to making payments to a SDGT, and was not predicated on the Anti-Terrorism Act, AUC at the time also was an FTO, and the case illustrates the risks of operating in areas where FTOs are active.

The Department of Justice’s (DOJ) enforcement priorities have been re-directed to support the E.O., which calls for the “total elimination” of transnational criminal organizations and cartels. It builds on a February 5, 2025 memorandum in which Attorney General Pam Bondi directed the DOJ to focus on prosecuting such entities, including in particular instructing DOJ’s Foreign Corrupt Practices Act Unit (FCPA Unit) and Money Laundering and Asset Recovery Section (MLARS) to focus on cases involving such entities. The Attorney General also suspended existing requirements for U.S. Attorney’s offices to obtain pre-approval before filing a range of terrorism-related charges (explicitly including material support for FTO charges under 18 U.S.C. § 2339B), as well as seeking search warrants and applying for material witness warrants related to such charges. (For more insight, please refer to our client alert on the February 5, 2025, memorandum and our client alert regarding the February 10, 2025, Executive Order Pausing FCPA Enforcement subject to Attorney General review.) We expect the DOJ will aggressively prosecute criminal cartels and transnational criminal organizations, whether designated as FTOs or not, and the individuals and entities that transact with them.

Civil Liability Under the Anti-Terrorism Act

The Anti-Terrorism Act also provides that U.S. nationals who are harmed by an act of international terrorism, or their estate, survivors, or heirs, may file a civil claim in any appropriate U.S. district court. In 2016, Congress passed the Justice Against Sponsors of Terrorism Act (JASTA), which added secondary liability to section 2333 by providing that if the act of international terrorism was done by an FTO, then the civil remedy extends to any person who aids and abets, by “knowingly providing substantial assistance,” or who conspires with the FTO. If successful, the victim can recover treble damages and attorney’s fees.

In 2014, a jury found Arab Bank PLC liable for claims brought under the pre-JASTA version of section 2333(a) by American citizens who were the victims or relatives of victims of Hamas-linked terrorist attacks in Israel. After the U.S. Court of Appeals for the Second Circuit vacated the judgment due to erroneous jury instructions related to the meaning of “international terrorism” and remanded the case to the district court, the parties concluded a settlement of the case.

Even outside the remedy provided by section 2333, civil claims may follow a criminal verdict for providing material support to terrorists. Following Chiquita’s guilty plea in the 2007 criminal case, and after almost 17 years of litigation, a jury found Chiquita liable in June 2024 in a civil suit for wrongful death filed on behalf of nine victims who were killed by the AUC. The jury awarded Chiquita to pay a total of $38.3 million to relatives of the victims.

U.S. Export Controls

Last year, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) updated the U.S. Export Administration Regulations (EAR) to prohibit exporting, reexporting, and transferring any item subject to the EAR, if a party to the transaction is on OFAC’s SDN List pursuant to a handful of named programs, including persons designated as an FTO or as an SDGT. Effectively, an FTO designation means that it is prohibited to export all items subject to the EAR to that person, even if U.S. sanctions do not prohibit the transactions. This prohibition also extends to those on the SDN List pursuant to U.S. Foreign Narcotics Kingpin, Transnational Criminal Organizations, Narcotics Trafficking, and Illicit Global Drug Trade sanctions. Seven of the eight cartels designated on February 20,2025 had previously been designated under these other authorities and thus were already subject to this EAR prohibition.  

Implications

• There have long been significant risks associated with operating in areas where cartels are active and embedded in the local economy, including for example through extortion from foreign businesses operating there, and the collection of “road taxes” for business traffic in their territories. Those risks and associated liability will grow in areas where the cartels are designated as FTOs. The E.O. emphasizes these risks when it describes how cartels and transnational organizations have infiltrated foreign governments and, “in certain portions of Mexico, function as quasi-governmental entities, controlling nearly all aspects of society.”
• U.S. entities and individuals are already prohibited from transacting with cartels that are designated under existing counter-narcotics or transnational criminal organization sanctions authorities. But an FTO designation implicates new tools for criminal enforcement, under the material support prohibition at 18 U.S.C. § 2339B, and also the DOJ’s new focus on prosecuting cartel-related offenses under this provision. Such criminal liability will extend to non-U.S. persons who aid and abet, or conspire with, persons who violate the statute, and even to non-U.S. persons who subsequently come within U.S. jurisdiction.
• Companies should survey their operations in countries with active cartels, particularly in the Western Hemisphere (which was specifically referenced in the E.O.), and assess their exposure in these regions. Companies should also assess their current compliance programs in light of these designations and incorporate additional diligence and other controls as needed.