Cartel FTO Designations: Heightened Risks for Corporations Operating in Latin America

The Trump Administration’s recent designation of eight international criminal organizations as foreign terrorist organizations (FTOs) has increased litigation risk for companies doing business in Latin America.  Companies need to understand these new risks and how they can be mitigated.

The new risk concerns drug cartels and terrorism – two things that most companies think they avoid entirely.  On February 20, 2025, the U.S. Department of State designated eight international criminal organizations as FTOs.  Among these organizations are drug cartels with substantial ties to Mexico, such as the Sinaloa Cartel, as well as other organizations with roots and networks throughout Latin America.  These designations expose companies operating legitimate businesses in Mexico and other Latin American countries to significantly increased legal risk.

FTO designation authority has existed for nearly thirty years and has typically been associated with violent terrorist organizations such as Al Qaeda, ISIS, and Boko Haram and with rebel groups such as the New Irish Republican Army, Spain’s ETA, and the Shining Path.  Organizations designated as FTOs generally operated far from American borders and had few connections with the United States or American businesses. 

Now, however, companies operating throughout Latin America may wish to consider the legal and commercial implications of FTO designations, as many FTO-designated cartels have embedded themselves in industries such as mining, logistics and transportation, agriculture, and telecommunications.  For example, companies in the automotive industry that source parts from Mexico might consider mitigating risk by vetting suppliers and manufacturers to ensure they face no indirect exposure to cartel-controlled supply chain networks.  Similarly, agricultural companies are also vulnerable to liability risks, as cartels have historically exerted influence over farms, production facilities, and transportation routes.  Financial institutions also stand to face unprecedented liability risks due to a variety of statutory requirements. 

What does this “indirect exposure” look like?  In cases dealing with terrorism in other parts of the world, companies are sometimes accused of doing business with entities suspected of being fronts for FTOs.  Other times, companies are accused of paying protection money to FTOs and those working for them to avoid death or assault, only to be accused later of being a terrorism funding source.  Whatever the allegation, the cost for being seen as collaborating with FTOs can be severe.

Criminal Liability

Companies that engage with FTOs, including by providing material support or resources, may face criminal liability. See 18 U.S.C. § 2339B.  “Material support or resources” is construed broadly to include tangible and intangible property, financial services, lodging, training, expert advice or assistance, safehouses, communications equipment, facilities, personnel, and transportation. See 18 U.S.C. § 2339A(b)(1).  This means that a chemical company that knowingly sells a necessary fentanyl precursor to a member of an FTO-designated cartel has potentially provided material support to an FTO.Download the Spanish version of this blog post here.