FCPA Changes & Terrorist Designations for Cartels Create Dangerous New Math in Latin America

We’re just weeks into President Donald Trump‘s second term and his focus on immigration, cartels and drug and human trafficking is clear. Also clear is that Latin America, particularly Mexico, is in the crosshairs for enforcement with Trump’s executive order to designate several cartels as foreign terrorist organizations (FTOs). 

Eight cartels operating throughout Mexico, Colombia, Honduras, Guatemala, Venezuela and El Salvador have been designated as FTOs. Given the pervasiveness of cartel activity in these countries and the Trump Administration’s focus on curbing illegal immigration and combating drug and human trafficking, companies operating in Latin America now face new and heightened risks as a result of these designations and, more generally, should anticipate increased enforcement of US criminal laws in ways that could implicate them.

Current US regulatory framework 

Trump’s executive order resulted in several cartels being designated as FTOs or specially designated global terrorists (SDGTs): Tren de Aragua, Mara Salvatrucha (MS-13), Cártel de Sinaloa, Cártel de Jalisco Nueva Generación (CJNG), Cárteles Unidos, Cártel del Noreste, Cártel del Golfo and La Nueva Familia Michoacana. The FTO designation is significant in that it creates both criminal and civil liability for companies providing material support to designated entities under the Anti-Terrorism Act (ATA).

(A “significant transnational criminal organization” is defined in 31 C.F.R. § 590.312 as “a group of persons that includes one or more foreign persons; that engages in or facilitates an ongoing pattern of serious criminal activity involving the jurisdictions of at least two foreign states, or one foreign state and the United States; and that threatens the national security, foreign policy, or economy of the United States.”)

ATA: Criminal and civil liability                 

The ATA establishes criminal liability for companies and individuals providing material support to designated FTOs. “Material support” is broadly defined as providing an FTO with any property (tangible or intangible) or services, including currency, financial services, lodging, personnel and transportation. Those providing material support to the FTO may face criminal sanctions, as illustrated most recently by United States v. Lafarge. In 2022, Lafarge pleaded guilty to conspiring to provide material support in the form of nearly $6 million in illicit payments to multiple FTOs in Syria (including ISIS) and was sentenced to probation and financial penalties totaling nearly $778 million.

Notably, FTO restrictions apply to US companies and individuals and to non-US companies and individuals. As a result of these new designations that target cartels in Latin America, both US and non-US companies face an increased risk of criminal prosecution under the ATA.

Under the civil liability provisions of the ATA, a US national injured as a result of an act of international terrorism may sue to recover threefold the damages the person sustains. A company can be liable to the victim under the direct liability provision of the ATA (§ 2333 (a)) for engaging in an act of international terrorism by providing material support to an FTO, or under the aiding and abetting provision (§ 2333(d)), for knowingly providing substantial assistance to the perpetrators of an attack committed, planned, or authorized by an FTO. The courts are still defining the contours of ATA aiding and abetting liability, with the Supreme Court recently in with the 2023 Twitter  v. Taamneh decision, but it is important to note that a wide range of multinational companies operating in Iraq and Afghanistan have been sued under these ATA provisions based on claims that they indirectly provided protection payments or other assistance to FTOs or organizations affiliated with FTOs.

Potential FCPA risk

On the heels of  E.O. 14157, on Feb. 5, Attorney General Pam Bondi issued a memorandum to DOJ personnel that highlights the use of terrorism charges to prosecute members and associates of cartels and TCOs. However, the memo also identifies other laws to use in addressing cartel activity. In particular, it directs the DOJ Criminal Division’s FCPA unit to “prioritize investigations related to foreign bribery that facilitates the criminal operations of Cartels and TCOs, and shift focus away from investigations and cases that do not involve such a connection.” Examples of priority cases “include bribery of foreign officials to facilitate human smuggling and the trafficking of narcotics and firearms.”

Several days after Bondi published that memo, Trump issued a separate executive order directing the AG to temporarily suspend FCPA investigations and enforcement while she prepares revised FCPA enforcement guidance in line with the new administration’s policy objectives. The AG may permit the initiation of new matters or enforcement actions during this 180-day pause under individual exceptions,  reviewing all existing FCPA activity and “tak[ing] appropriate action with respect to such matters to restore proper bounds on FCPA enforcement and preserve Presidential foreign policy prerogatives.” Thus, the Bondi memo directing use of the FCPA to address risks posed by cartels and TCOs remains in effect. Given the Trump Administration’s prioritization of cartels, it seems likely that FCPA enforcement, at least in the short term, will focus on activity in Mexico and Latin America and the intersection between corruption and cartel activity.

Potential money laundering risk

The Bondi memo also directs the DOJ Criminal Division’s Money Laundering and Asset Recovery Section to “prioritize investigations, prosecutions, and asset forfeiture actions that target activities of Cartels and TCOs.” Anti-money laundering (AML) laws have long been a tool used to combat cartel activity, as many of the criminal activities in which cartels engage (such as murder, kidnapping, smuggling and narcotics trafficking) are predicate acts for violations under the Money Laundering Control Act. Given the scope of the statute, corporations transacting with cartels and TCOs may also be ensnared in violations of that law.

De-centralization of the DOJ

The Bondi memo includes a significant procedural development: It seeks to decentralize DOJ enforcement, instead directing US attorneys’ offices to “lead the charge” against cartels and TCOs. For example, the memo suspends requirements of authorization by the Criminal Division for an investigation or prosecution associated with cartels and TCOs under the FCPA or Foreign Extortion Prevention Act (FEPA). Importantly, this kind of decentralization could give rise to an uptick of enforcement activity, as individual offices will pursue their own investigations and prosecutions.

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Pervasive cartel & TCO activity in Latin America

Though the Trump Administration’s focus is on prosecuting cartels and TCOs, the laws on which the DOJ will rely can create exposure for companies that interact, even unintentionally, with FTOs. In many parts of Latin America, such interactions can be extremely difficult to avoid when conducting ordinary business given the pervasive influence of cartels.

In a December 2024 report, the International Institute for Strategic Studies (IISS) observed that “[t]he Latin American transnational criminal landscape is undergoing a profound, violent evolution,” with cartels and TCOs not only diversifying their industry involvement but also expanding their reach across the globe. The IISS identified the Cártel de Sinaloa and CJNG as the dominant players in the region, facilitating many of the activities the Bondi memo highlights, such as supplying methamphetamine and fentanyl to a growing US market and controlling human trafficking corridors through Central America and Mexico.

The IISS report also highlighted risks in Latin American countries where these organizations have relatively new footholds, concluding that countries like Argentina and Uruguay “lack the necessary law-enforcement training, banking regulations, anti-money laundering and other legal frameworks, and overall situational awareness of the dynamics of the evolving criminal economies” to be able to adequately respond to these emerging threats.

Many of the newly designated cartels have infiltrated local government and facilitated rampant public corruption. For example, the Council on Foreign Relations reports that the Cártel de Sinaloa has “considerable influence in Mexican government and public institutions,” while the CJNG thrives in various criminal enterprises due to “its control over several Mexican ports.” In other countries, political leaders have helped shield and aid criminal organizations. For example, the Cártel de Sinaloa has closely aligned itself with the Colombia-based National Liberation Army in recent years and has received protection from the Maduro regime.

Potential impact on companies

Businesses with Latin American connections face unique enforcement threats considering these developments.

Operations in cartel- and TCO-controlled areas 

Companies that operate in remote or conflict-affected areas (for example, in the extractives, agriculture and telecommunications sectors) may come into contact with cartels and TCOs that have infiltrated economies, communities and local governments. Companies may face extortion demands from cartels or TCOs that threaten physical harm against employees and associated third parties unless protection payments are made.

In certain circumstances, companies may be able to argue that such payments qualify as duress payments and do not violate the law, but a continuing series of payments to protect assets as opposed to people can raise sanctions/FTO regime risk. The 2007 Chiquita Banana case is an example: Chiquita made protection payments for years to Autodefensas Unidas de Colombia (AUC), which the US government had designated as an FTO and SDGT. As a result, Chiquita pleaded guilty to engaging in transactions with an FTO and SDGT and agreed to pay a $25 million criminal fine (with five years’ probation thereafter) and implement and maintain an effective compliance and ethics program. In addition, Chiquita faced a long-running civil wrongful death case in which a jury in 2024 found Chiquita liable and awarded $38 million in damages.

Where local police, municipal officials or other officials controlled by a cartel or TCO facilitate payments to cartels, the payments can also raise FCPA risk for companies. In Miller & Chevalier’s 2024 Latin America corruption survey, respondents ranked municipal/local governments as the most corrupt government function in the region, with 67% of respondents — up five percentage points from 2020 — identifying significant corruption. Perceived corruption levels around the police have also remained consistently high, with 60% of respondents in the region identifying police corruption as “significant” in 2024.

The table below shows the regions in Mexico, Central and South America in which the eight newly designated TCOs are known to operate. 

Logistics and transport providers

Companies involved in logistics, transportation or air travel may also be susceptible to cartel risk. A cartel may attempt to use such providers to transport narcotics, weapons and people in connection with their criminal activities, and if providers fail to identify and prevent such transactions, their services could be seen as providing material support to an FTO, leading to civil or criminal liability.

If employees of such providers make payments to customs, immigration, port authorities or other officials to avoid inspections, speed customs clearance processes, avoid duties or obtain other advantages, those payments could give rise to FCPA liability. Providers accepting payment from cartels for these services or assisting in the transport of currency for a cartel or TCO may also face money-laundering charges. This risk is particularly pertinent to companies transporting from Mexico to the US, given the administration’s keen focus on the southern border.

Suppliers of materials 

Companies that produce products used by cartels and FTOs face risk as well. Producers of chemicals that could be used in the manufacture of narcotics, manufacturers of weapons purchased by cartels and producers of agricultural products used in the growing or harvesting of drugs could all be viewed as providing material support. Cartels often operate through front companies or intermediaries, making it difficult to identify direct or indirect ties. The impact to this industry may be the widest ranging, given the diversity of sourcing for materials used in producing illegal drugs — as well as the broad extension of cartels in recent years in facilitating transnational movement of such products.

Financial services

Terrorist groups regularly seek to use banks and non-bank financial institutions, such as money-services businesses (MSBs), to move funds around the world and to access US financial markets, and as a result, financial institutions and financial technology firms are particularly at risk.

Safeguards related to cartel/FTO risks

Companies operating where cartel activity is pervasive can significantly lower their risk exposure by implementing a robust set of internal controls and demonstrating a strong commitment to compliance and ethics. Companies operating in the region may want to consider:

• Implementing or enhancing strict AML, sanctions and counter-terrorism financing policies and maintaining appropriate FCPA-related policies and other measures.
• Developing clear crisis response protocols for handling extortion attempts, requests for support of bribes to relevant government officials or drug contamination in the supply chain, and for timely and adequate reporting and appropriate escalation of potential risks.
• Documenting business operations to defend against potential allegations of aiding and abetting cartels.
• Conducting and refreshing systematic background checks on employees, customers, partners and suppliers to identify links to criminal networks (in addition to other existing risks, such as FCPA and sanctions) and regularly updating processes to address evolving risks and legal requirements.
• Requiring appropriate counterparties to certify that they have their own screening procedures to identify and remediate potential connections to cartels or TCOs.
• When conducting risk assessments or human rights due diligence in conflict-affected and other challenging contexts, making specific inquiries with local stakeholders into cartel- and TCO-related risks, such as human trafficking and support to non-state armed groups.
• Consistently training employees to recognize and avoid cartel-related risks, including fraudulent schemes and red flags in transactions and any activities in the company’s value chain involving cartels or TCOs.

Remaining vigilant to pending announcements of FTO designations and increasing monitoring of activities in Latin America accordingly.