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February 24, 2025 / Law Alert

Cartel terrorist designation may require legitimate businesses to prepare

On Feb. 20, 2025, the U.S. State Department designated Mexican drug cartels MS-13 and Tren de Aragua as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs). This designation, published in the Federal Register, follows Attorney General Pam Bondi’s Feb. 5, 2025 memorandum titled "Total Elimination of Cartels and Transnational Criminal Organizations." This memorandum was issued in response to President Trump's Jan. 20, 2025 Executive Order directing federal agencies to designate certain cartels and organizations as FTOs or SDGTs.

The FTO and SDGT designation has significant implications for companies, particularly those operating in regions and industries vulnerable to money laundering, corruption and cross-border trade. The designation is aimed at disrupting finances through sanctions, criminal prosecutions, asset freezes and travel bans on criminal organization members and associates, but here’s how legitimate businesses may be affected:

1. Increased scrutiny on financial transactions

  • Banks and financial institutions will face heightened oversight regarding transactions linked to cartels and transnational criminal organizations (TCOs).
  • Companies engaged in cross-border trade could be subject to stricter due diligence requirements, particularly if they operate in regions with high cartel activity.

2. Tougher enforcement of Anti-Money Laundering (AML) laws

  • The DOJ’s Money Laundering and Asset Recovery Section (MLARS) is now prioritizing cartel-related cases. This means stricter enforcement of AML regulations, particularly for businesses in finance, real estate and logistics.
  • Companies involved in international payments, cryptocurrency and high-value assets may see increased scrutiny over transactions linked to cartel-related money laundering schemes.

3. Foreign Corrupt Practices Act (FCPA) & bribery crackdowns

  • The Bondi Memorandum prioritizes the investigation of foreign bribery that facilitates the criminal operations of cartels and TCOs while shifting away from foreign bribery investigations that do not involve such a connection.
  • Companies operating in Latin America, particularly in industries like energy, construction and mining, could face heightened legal risks if they have any exposure to cartel-related bribery or corruption.

4. Supply chain risks for companies in affected industries

  • Manufacturers, logistics providers and agricultural businesses operating in Mexico and Central America must be cautious about potential cartel ties in their supply chains.
  • Increased enforcement against human trafficking via Joint Task Force Alpha means companies in the hospitality, agriculture and manufacturing sectors could face stricter labor law compliance requirements.

5. Legal and compliance costs may increase

  • Companies may need to invest more in compliance programs to avoid being inadvertently linked to cartel activities.
  • Legal teams must be prepared for greater DOJ scrutiny of financial transactions, supply chains and third-party relationships.

Key takeaway

The FTO and SDGT designations target criminal organizations, but the ripple effects extend to legitimate businesses, especially those dealing with cross-border transactions, financial services or industries with high cartel exposure. Companies must strengthen AML and FCPA programs, review compliance policies and ensure they are not inadvertently linked to high-risk entities to mitigate potential legal risks.

For more information, please contact John Amaya, Corey Norton, Ned Searby, or any member of Porter Wright's Investigations or International Business & Trade groups.