Trump Administration designates eight transnational organizations as Foreign Terrorist Organizations and Specially Designated Global Terrorists

Effective February 20, 2025, the Secretary of State designated eight Latin American organizations as Foreign Terrorist Organizations (FTOs) under Section 219 of the Immigration and Nationality Act (INA) and as Specially Designated Global Terrorists (SDGTs) under Executive Order 13224 (EO 13224).

The announcement follows Executive Order 14157 (EO 14157), issued by President Trump on his first day back in office, which vowed to combat certain international drug cartels for their “campaign of violence and terror.”

As described in our prior alert, that day-one executive order (EO) directed the Secretary of State, in consultation with the Secretary of the Treasury, the Attorney General, the Secretary of Homeland Security, and the Director of National Intelligence, to issue recommendations within 14 days for designating cartels and other transnational criminal organizations as FTOs or SDGTs.

The US Department of Justice has also amplified focus on the cartels, among other transnational criminal organizations, issuing a February 2025 memorandum (analyzed in our previous alert) that prioritizes prosecution of these groups with the goal of their “total elimination.”

Background

FTO designations

• Under Section 219 of the INA, the Secretary of State may designate an organization as an FTO if the Secretary of State finds that the organization is a foreign organization, engages in terrorist activity or terrorism, or “retains the capability and intent to engage in terrorist activity or terrorism,” and the terrorist activity threatens the security of US nationals or national security of the US.
  
  
• The statute also gives the Secretary of the Treasury authority to require US financial institutions to block financial transactions involving assets in their possession or control of an entity or agent of an entity designated as an FTO. A US financial institution that becomes aware that it has possession or control over funds in which an FTO (or its agent) has an interest is required to block or hold the funds and report them to the Office of Foreign Assets Control (OFAC). These prohibitions are contained in the Foreign Terrorist Organizations Sanctions Regulations, codified at 31 C.F.R. § 597.

SDGT designations

• The International Emergency Economic Powers Act (IEEPA), codified at 50 U.S.C. § 1701, grants the President broad authority to address unusual and extraordinary threats to the national security, foreign policy, and economy of the US. The President may use EOs to declare a national emergency pursuant to IEEPA. Less than a month after the September 11, 2001, terrorist attacks, President George W. Bush issued EO 13224, which found that terrorism and threats of terrorism committed by foreign terrorists constituted an unusual and extraordinary threat to US national security.
  
  
• In 2003, the US Department of the Treasury issued the Global Terrorism Sanctions Regulations, codified at 31 C.F.R. § 594, to implement EO 13224. Among other things, the regulations created the “SDGT” category, defined as comprising “any foreign person . . . designated pursuant” to EO 13224. The US has since designated hundreds of natural persons and entities as SDGTs.
  
  
• The regulations prohibit, absent a general license or other authorization, “any transaction or dealing by a United States person or within the United States in property or interests in property blocked pursuant to the order, including but not limited to the making or receiving of any contribution of funds, goods, or services to or for the benefit of a [SDGT].”

Immediate impact of the FTO and SDGT designations

The designated organizations (Cartels) are:

• Tren de Aragua (Aragua Train)
  
  
• Mara Salvatrucha (MS-13)
  
  
• Cartel de Sinaloa (Sinaloa Cartel, Mexican Federation, Guadalajara Cartel)
  
  
• Cartel de Jalisco Nueva Generacion (New Generation Cartel of Jalisco, CJNG, Jalisco New Generation Cartel)
  
  
• Cartel del Noreste (CDN, Northeast Cartel, Los Zetas)
  
  
• Cartel del Golfo (CDG, Gulf Cartel, Osiel Cardenas-Guillen Organization)
  
  
• La Nueva Familia Michoacana (LNFM), and
  
  
• Carteles Unidos (United Cartels, Tepalcatepec Cartel, Cartel de Tepalcatepec, The Grandfather Cartel, Cartel del Abuelo, Cartel de Los Reyes).

The first seven Cartels have previously been designated under other sanctions programs – such as the Foreign Narcotics Kingpin Sanctions Regulations or the Transnational Criminal Organizations Sanctions Regulations – and, therefore, are already required to be included in companies’ sanctions and counterparty due diligence controls. The eighth entity, Carteles Unidos, has not yet been identified on any existing list.

Given these developments, companies are encouraged to consider screening Carteles Unidos and its aliases against counterparties and, where there is a potential match, consider applying enhanced due diligence procedures. Companies with a “true match” (not a false positive) hit for Carteles Unidos are required to immediately cease transactions involving the entity.

Companies should also consider confirming that customers, partners, suppliers, and transactions, for example, are already being screened against sanctions lists. US financial institutions in possession or control of funds in which a designated FTO (or its agent) has an interest are required to block, or hold, the funds and report them to the OFAC.

These screening and blocking requirements should be fulfilled apart from any requirements under the Mexican Federal anti-money laundering (AML) and prevention of financing for terrorism activities laws and regulations.

Larger effects of the designations and the Trump Administration’s fight against the Cartels

The designations have far-reaching business and legal implications for US financial institutions and other companies, especially those operating in certain industries and regions and/or having supply chains in Latin America.

Specific compliance obligations implicated by designating the Cartels include those in connection with countering the financing of terrorism (CFT), AML obligations under the Bank Secrecy Act (BSA), and US trade and economic sanctions.

Areas of potential impact to be considered following the designations include the following.

Enhanced due diligence and compliance

The following discussion and recommendations generally pertain to US companies (including financial institutions), non-US companies with personnel or operations in the US, non-US companies with US persons located anywhere, and any company or financial institution engaged with a US correspondent bank.

Given the Cartels’ reported quasi-government function in Mexico, according to the EO 14157, as well as their reported involvement in certain key legitimate industries – eg, agriculture, transportation, restaurant, real estate – financial institutions and other companies should ensure that their sanctions screening procedures are current, adequately assess risk relative to existing AML and sanctions compliance programs, and, if necessary, nimbly adapt controls. For example:

Sanctions screening

Companies, including financial institutions, are encouraged to ensure that their sanctions screening procedures are current and robust. This includes screening the new names and aliases of the Cartels against existing customers, contractors, employees, and other counterparties. Importantly, companies should be aware that property and interests in property of entities directly or indirectly owned by 50 percent or more in the aggregate by one or more blocked persons are considered blocked. Thus, companies subject to US jurisdiction are encouraged to exercise caution when dealing with entities that may not be sanctioned but could be subject to some level of ownership or control by a sanctioned entity.

Risk-based AML/CFT programs

Implementing or revising a risk-based AML/CFT program – including Know Your Customer (KYC) and due diligence measures, tailored to specific industries, locations, products, and services – is crucial to prevent facilitating or supporting Cartel activities. Specifically, financial institutions may need to conduct enhanced due diligence from disparate sources, including through public-private partnership intelligence gathering to identify Cartel affiliates.

Additionally, with respect to the newly designated Cartels, companies may wish to conduct “lookback” reviews for any historical touchpoints (through transactions or customer relationships) as a way to refresh their risk ratings with respect to specific customers, product lines, or types of transactions.

Ongoing transaction monitoring

Additional steps uniquely designed to detect specific red flags or typologies of Cartel activity may include:[1]

• Reviewing and identifying any acutely high-risk supply chain touchpoints, such as where local governmental approvals for ongoing operations and/or transportation of goods and products are required
  
  
• Applying heightened scrutiny to customers who are involved in shipping petroleum products or pre-cursor chemicals for fentanyl, or those who purchase such products or manufacturing equipment either directly from China-based suppliers or indirectly through intermediary “chemical brokers”
  
  
• Identifying transactions that may not reflect a typical market price for the volume and type of goods at issue for customers in industries or geographic areas with a known Cartel presence

Companies will also want to ensure they have appropriate controls to comply with detailed regulatory requirements for blocking or freezing funds involving the Cartels pursuant to any SDGT designation (and financial institutions must do so for either SDGT or FTO designations).

Criminal, regulatory, and civil exposure and other risks

Regulatory exposure: The OFAC applies a strict liability standard when assessing sanctions violations. The maximum civil monetary penalty for violations of most sanctions programs is $377,700 per transaction, or twice the amount of the underlying transaction, whichever is greater.[2]

Criminal penalties for willful violations of the Global Terrorism Sanctions Regulations: The maximum penalties for a criminal violation are 20 years' imprisonment and a $1,000,000 fine.

Criminal penalties for material support of terrorism: Under 18 U.S.C. § 2339B, knowingly providing – or knowingly attempting or conspiring to provide – material support or resources to an FTO is a crime ordinarily punishable by up to 20 years' imprisonment. Unlawful support broadly includes activities such as providing financial services, services relating to currency, monetary instruments, or financial securities, lodging, training, and transportation. The US has extraterritorial jurisdiction to prosecute persons material supporting FTOs outside the US. For instance, US dollar-denominated transactions clearing through banks or correspondent accounts in the US are one way to establish jurisdiction.

Civil liability: Any financial institution that fails to block funds in which an FTO (or its agent) has an interest and report such blockage to the Secretary of the Treasury is also subject under 18 U.S.C. § 2339B to a civil monetary penalty of $50,000 per violation of twice the amount the financial institution was required to block, whichever is greater. Violations of the Global Terrorism Sanctions Regulations are subject to a civil monetary penalty under 50 U.S.C. § 1705(b) of $250,000 or twice the amount of the transaction that served as the basis for the violation.

Furthermore, the Anti-Terrorism Act, as amended (ATA), allows US nationals injured by acts of international terrorism to sue for damages. Companies could face significant civil litigation risk for knowingly providing substantial assistance to the Cartels.

Secondary sanctions and travel: The US has from time to time relied on “secondary” sanctions to deter and punish non-US entities. These sanctions may be imposed on foreign financial institutions determined to have conducted or facilitated any “significant” transaction with FTOs or SDGTs. Additionally, EO 13224 restricts travel for persons who meet the EO’s criteria. Certain exemptions available under IEEPA (eg, personal communications, humanitarian donations, information or informational materials, and travel) do not apply to SDGTs or transactions with SDGTs.

Additionally, although not directly applicable to the Cartels designations, Congress has required publicly traded companies (issuers) or their affiliates to disclose certain activities involving entities designated under the SDGT program in their reports on Form 10-K and/or 10-Q. With the executive branch squarely behind the elimination of certain international cartels, Congress could create a similar public company reporting requirement with respect to known transactions with cartels. Because these are publicly filed documents, companies with such knowledge face potentially significant reputational risk.

Conclusion

The designation of these eight Latin American Cartels as FTOs and SDGTs marks a significant escalation in the US government’s efforts to combat international drug trafficking and terrorism. Financial institutions and other businesses are encouraged to take immediate steps to comply and mitigate potential legal and financial risks, while reassessing their exposure longer term.

For more information

For further information and assistance, please contact our National Security and Global Trade, White Collar Defense, Global Investigations, and Government Enforcement, and Financial Services teams. Our rapid-response task force is available to provide guidance on sanctions, CFT, and AML related to the FTO and SDGT designations.

 

^{[1] In its June 2024 “Supplemental Advisory on the Procurement of Precursor Chemicals and Manufacturing Equipment Used for the Synthesis of Illicit Fentanyl and Other Synthetic Opioids,” the Financial Crimes Enforcement Network (FinCEN) published a broad list of red flags indicative of illegal fentanyl trade or laundering the proceeds from such trade, which built on FinCEN’s original 2019 advisory. Additionally, in November 2022, the international AML/CFT standard setting body, the Financial Action Task Force, published a report for its member nations (which includes the US) highlighting a “comprehensive list of proposed actions to strengthen measures to address [the] deadly [fentanyl] trade and risk indicators for operational authorities.”}

^{[2] The maximum civil penalty for a violation of the Foreign Narcotics Kingpin Designation Act is $1,876,699.}