New Business Risk – U.S. Designation of Mexican Drug Cartels as Foreign Terrorist Organizations

What Changed

On January 20, 2025, U.S. President Donald Trump signed an executive order under the International Emergency Economic Powers Act (50 U.S. Code § 1701) and the Immigration and Nationality Act (8 U.S. Code § 1101) to designate drug cartels as Foreign Terrorist Organizations (FTOs). The order directs the Secretary of State, in consultation with the Secretaries of Treasury and Homeland Security, the Attorney General and the Director of National Intelligence, to assess whether specific Mexican drug cartels should be classified as FTOs or Specially Designated Global Terrorists (SDGTs). On February 19, 2025, Secretary of State Marco Rubio issued notice in the Federal Register officially designating six Mexican drug cartels as FTOs, to include Mexico’s two largest organized crime groups, the Jalisco New Generation and Sinaloa cartels. While the U.S. has previously imposed sanctions under the Emergency Economic Powers Act on foreign individuals and entities involved in the drug trade, this marks the first time the FTO designation has been considered for Mexican drug cartels. 

New Risk

The designation of Mexican drug cartels as FTOs poses new risks for U.S. and international businesses operating in or conducting business with Mexico. This new risk exposure could impact a wide range of industries, including consulting, insurance, construction, communications, transportation, manufacturing, mining, petroleum and financial services, as well as companies sourcing goods from Mexico. Under 18 U.S. Code § 2339B, it is a federal crime for any person in the U.S. or subject to U.S. jurisdiction to knowingly provide “material support or resources” to a designated FTO. According to 18 U.S. Code § 2339A(b)(1), “material support or resources” includes “any property, tangible or intangible, or service, including currency or monetary instruments or financial securities, financial services, lodging, training, expert advice or assistance, safehouses, false documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel and transportation, except medicine or religious materials.” In addition, 21 U.S. Code § 960a makes it a federal crime to provide anything of monetary value to an FTO.

The potential exposure to risks surrounding U.S. designation of FTOs is real. For example, Chiquita banana pled guilty and was fined $25 million by the U.S. Department of Justice for paying money to a Colombian terrorist group that had been designated as an FTO. Standard Chartered Bank paid over $1 billion in fines to the U.S. Department of Justice related to charges it facilitated financial transactions that aided the Taliban. 

The Challenge

The U.S. counts Mexico as its top trading partner. American companies do around $855 billion worth of business with Mexican companies each year. The statute’s broad language over, for example “expert advice or assistance,” can potentially make compliance challenging. In addition, the very nature of how drug cartels covertly operate to influence or outright control businesses and enterprises in Mexico, and the use of shell companies by cartels to attempt to conceal their activities, can make it difficult to evaluate if your company transactions or funds involve a cartel member. 

How We Can Help 

Our experienced investigation team offers a diverse skill set tailored to help businesses navigate and mitigate risks associated with the new FTO designations. We provide:

Background Checks on Business Partners

It is time to take a close look at your company suppliers and vendors in Mexico and to fully identify the owners and stakeholders. Identifying any current or future risks allows your company to make an assessment and determination on mitigation. Our investigators have over three decades of experience investigating Mexican drug cartels and have conducted 17,000 + investigations to help clients identify and mitigate business risks.

Supply Chain Audit

A step towards compliance is to map out your company suppliers, distributors and logistics partners in Mexico to identify high risks and red flags. We specialize in leveraging open-source intelligence to uncover key facts and provide expert insights that are critical for making informed decisions about your supply chain exposure.

Third-Party Screening

Our team includes experts in compliance, financial crime investigations, law enforcement, forensic analysis, data analytics and cyber investigations. We specialize in uncovering risks and red flags, identifying shell companies, detecting suspicious activity and irregular transactions and exposing activities consistent with cartel business entanglements.