A year after the Trump Administration designated six Mexican cartels as foreign terrorist organizations, the compliance implications for multinationals are still coming into focus — and they are severe. Robert Johnston of Lowenstein Sandler and Brian Mich and Ulla Pentinpuro of Control Risks lay out the exposure: material support statutes with extraterritorial reach, FinCEN orders that have already forced three Mexican banks to cease operations and a DOJ that has signaled it will pursue companies from any jurisdiction acting against US interests. Colombia’s Chiquita Brands case offers a sobering preview of what enforcement could look like.
In February 2025, the Trump Administration designated six of Mexico’s most notorious drug cartels as foreign terrorist organizations (FTOs), declared that “international cartels constitute a national-security threat beyond that posed by traditional organized crime” and directed federal agencies to implement the terrorism designation against such international criminal organizations. This designation of cartels as FTOs is unprecedented, as historically the FTO designation has been reserved for organizations that use violence for political causes rather than economic gain.
This policy shift was a dramatic escalation in the US government’s war on drugs and opened a new legal front that US companies can no longer afford to ignore. The designation of cartels as FTOs under US law introduces an expanded framework of liability, elevating what were already complex corruption and security risks into the realm of terrorism finance, material support statutes and national security enforcement.
The DOJ’s subsequent guidelines for investigation and enforcement of the FCPA, published in June 2025, state that the DOJ will prioritize national security, which includes enforcement against involving FTOs/cartels, those distorting markets for US companies and those impacting critical assets. In addition, statements made recently by DOJ representatives underline that the department will pursue companies from any jurisdiction, including the US, if they act against US interests.
Under the Antiterrorism and Effective Death Penalty Act, providing “material support” to an FTO is a federal crime with stiff penalties that include up to 20 years in prison and significant fines. Importantly, the statute has extraterritorial application, and the term “material support” is not limited to cash or weapons and includes services, facilities, training, transportation and even inadvertently doing business with cartel-affiliated actors.
The implications are profound for US companies that source, invest or operate in high-risk Mexican states like Michoacán, Jalisco, Guerrero, Tamaulipas, Zacatecas and Guanajuato because paying “road taxes” or “right of way” payments, making ransom or protection payments or entering into business arrangements with cartel-affiliated or cartel-controlled third parties, such as logistics providers, could create liability for US and multinational companies for inadvertently aiding and abetting terrorism under US law.
Cartels & the Mexican economy
In Mexico, cartels have been deeply embedded in logistics, agriculture, energy and infrastructure for at least a decade. Businesses in these sectors are particularly vulnerable. For example, avocado exports from cartel-dominated Michoacán exceed $2.9 billion annually, with cartels profiting at a reported $770 million annually. The Mexican economy has also suffered due to fuel theft from state-owned Pemex pipelines. This theft, a key source of income for Mexican cartels, cost the Mexican treasury $55 billion during the presidency of Andrés Manuel López Obrador. In addition, Mexican organized criminal groups have expanded into a wide range of criminal schemes targeting ordinary civilians, including protection rackets, known locally as cobros de piso, that extort workers, small shopkeepers, farmers and truck drivers out of an estimated $1.1 billion per year. In October 2025, a leader of lime growers in Michoacán was killed after repeatedly denouncing criminal groups’ extortion demands on local farmers following an August shutdown of more than half the lime-packing warehouses in the Michoacán lowlands due to cartel demands for a cut of the income generated by lime growers and distributors. As evidence of the pervasiveness of organized criminal groups throughout the Mexican economy, these groups have risen to become Mexico’s fifth-largest “employer,” accounting for between 160,000 and 185,000 “employees.”
Trucking insurance in these areas has risen by up to 30%, and rerouting goods and enhanced security protocols now add 8% to 12% to logistics costs in Mexico, according to a report. These are not only operational burdens but also indicators of elevated national security exposure. As supply chains cross cartel-controlled corridors, companies must now review their risk assessments, recalibrate their third-party risk management programs, rethink their vendor screening, enhance KYC (Know Your Customer) protocols, monitor developments in the areas in which they are operating and consider localized security audits.
Crisis management plans should anticipate not just extortion or theft but potential military operations or unilateral US enforcement actions in Mexico, scenarios that are no longer far-fetched given the legal basis the FTO designation creates, the Trump Administration’s recent requests that Mexican authorities allow the US military to accompany Mexican law enforcement on drug trafficking raids conducted in Mexico and the US military’s arrest and extradition of Venezuelan President Nicolás Maduro earlier this year.
Impact on financial institutions and cross-border banking
On March 11, 2025, pursuant to the executive order’s directive, FinCEN issued a geographic targeting order (GTO) directing all financial institutions in border towns across California and Texas to file currency transaction reports (CTRs) with FinCEN at a $200 threshold (instead of the typical $10,000 threshold as required under the Bank Secrecy Act, as discussed below) in connection with any cash transactions. Filing a CTR also necessitates that the financial institution collect identifying information on the customer and verify their identity. The GTO was set to expire in September, but it was modified and extended to remain in force through March 6, 2026. We expect that regulatory scrutiny of cash-intensive businesses and cash transactions in the border region will continue beyond March 2026.
Similarly, financial institutions and companies linked to the US financial system are now required to freeze and report any assets tied to these FTOs, meaning every transaction and partner in Mexico must be vetted through a national security compliance lens. On June 25, FinCEN issued its first orders under the FEND Off Fentanyl Act, targeting three Mexican financial institutions: CIBanco S.A., Intercam Banco S.A. and Vector Casa de Bolsa, S.A. de C.V., alleging they laundered proceeds associated with illicit opioid manufacturing and trafficking, including of fentanyl. Ultimately, these three Mexican financial institutions ceased operations in the aftermath of the orders.
Colombia as a cautionary tale
In May 2025, the DOJ unsealed its first indictment against a foreign national for providing material support to a Mexican drug cartel that the Trump Administration recently designated an FTO. Specifically, María del Rosario Navarro-Sánchez of Mexico is alleged to have facilitated firearms, narcotics, cash and human trafficking on behalf of the Cartel de Jalisco Nueva Generación (CJNG). CJNG is one of eight Latin American criminal groups designated an FTO by the State Department pursuant to the executive order because of their threats to US national security interests by jeopardizing the border through money laundering, bribery, the extortion of migrants and acts of violence and intimidation. Under the same indictment, two other individuals were named for conspiracy to smuggle people across the border, drug possession and firearm and drug trafficking. All three defendants are fugitives.
In December 2025, the DOJ indicted two US citizens, a former Drug Enforcement Agency (DEA) special agent and his friend, on charges of narcoterrorism, terrorism, narcotics distribution and money laundering. Specifically, the two men are accused of laundering hundreds of thousands of dollars through cryptocurrency — and agreeing to launder millions more — related to CJNG’s cocaine sales and providing information related to the DEA’s financial operations, information sources and techniques and ongoing countertrafficking investigations in order to aid CJNG’s distribution and sale of illegal narcotics in the United States.
Beyond providing weapons and cash to cartels, it can be expected that future prosecutions against companies and individuals interacting with cartels will be predicated upon protection payments, safe passage payments, employment opportunities and other routine transactions with cartels and cartel-affiliated businesses that are somewhat commonplace in cartel-controlled areas of Mexico today. We have seen payments being funneled to FTOs via unions, gestores (consultants who manage government procedures) or even small local law firms.
What might upcoming enforcement look like? Colombia’s history in the 1990s and 2000s can be instructive.
From 1997 to 2004, Chiquita Brands International, through its Colombian subsidiary Banadex, made over $1.7 million in payments to the United Self-Defense Forces of Colombia (AUC) despite Office of Foreign Assets Control (OFAC) prohibitions and despite the fact that the US government designated AUC as an FTO in September 2001 and as an OFAC-sanctioned terrorist organization in October 2001.
The payments to the AUC were made in monthly installments following a 1997 meeting with the leader of the AUC during which Banadex senior executives were threatened with physical violence to the company’s personnel and property. Pursuant to a 2007 plea agreement with the DOJ, the company pleaded guilty to one felony count of engaging in transactions with an OFAC-sanctioned terrorist and paid a $25 million fine.
In June 2024, the families of AUC victims in Colombia were awarded $38.3 million in damages following a jury verdict by a federal jury in Florida. In the civil case, the jury rejected the company’s extortion defense, finding that the company had “knowingly provided substantial assistance to the AUC” to a degree sufficient to create a foreseeable risk of harm and that the company decided to continue operating in Colombia despite the compliance risks.
The Chiquita case is an important precedent for companies operating in Mexico today as it demonstrates that significant corporate legal exposure may not be limited to regulatory fines imposed by US government agencies. Additionally, it demonstrates that a credible threat to human life or to company property is not a valid defense for providing material support to FTOs.
Steps multinational companies operating in Mexico should take now
The designation of Mexican cartels as FTOs has not changed the cartels, but it has fundamentally changed the legal landscape for multinational companies operating in Mexico. Compliance programs must now speak the language of national security, and risk assessments must be recalibrated to account for terrorism finance exposure.
Enhance third-party risk management frameworks
The FCPA and other anti-corruption laws already obligate multinational companies to avoid corrupt interactions with government officials and to maintain accurate books and records, both of which already are compliance challenges in a jurisdiction like Mexico.
With the FTO designation, the stakes are further elevated, necessitating robust third-party risk management processes to ensure that processes built to comply with anti-corruption laws must now also screen for indirect links to terrorism. Payments made under duress to cartels, previously viewed through the lens of extortion, could now be prosecuted as terrorism-financing offenses.
Now, companies operating in Mexico need to go beyond anti-corruption compliance and cannot rely on their anti-corruption programs to identify cartel risk. Third parties should be screened not only for governmental connections but also for terrorism-related risk using OFAC lists and regional intelligence.
The recalibration of third-party risk management programs should focus on areas and industries in Mexico under cartel influence or control.
Review all local relationships and contracts
Suppliers, partners, logistics providers, landowners and financial institutions should be vetted for connections to FTO-designated groups. Multinational companies should look to build redundancy in supplier, vendor, partner and banking relationships in order to ensure operational resilience should a counterparty become subject to US sanctions or other forms of adverse regulatory action.
Implementing stringent contract clauses focused on anti-bribery, anti-corruption and anti-money laundering/counter terrorist financing compliance measures, alongside comprehensive audit protocols and internal escalation procedures, is essential for maintaining ethical standards and minimizing exposure to cartel influences.
Conduct regular audits
Regular audits of third parties will ensure transparency and compliance with legal requirements, reinforcing a commitment to ethical business practices. The frequency of audits will depend on the risk presented by the third party.
Ensure continued monitoring
Ongoing monitoring of third-party behavior and cartel activities in your company’s areas of operation is an essential tool to mitigate potential risks to operations and reputation. Companies should additionally ensure that different departments interacting with third parties do not operate in silos but rather share information and intelligence, enabling quick reactions if indicators of risks are identified.
Establish investigation protocols
Clear investigation protocols should be established to ensure a swift and effective response to potential cartel-related incidents, minimizing disruption and protecting stakeholders.
Conduct ongoing training
Comprehensive training programs on compliance, ethics and the identification of cartel-related risks will empower the organization to uphold its ethical standards. Training should be catered to the audience, ensuring, for example, differentiation between senior management teams and local operational teams.
Prepare for enforcement synergy
Recognize that terrorism-related enforcement will intersect with anti-corruption investigations. The DOJ and Treasury may collaborate more closely in targeting firms that “should have known” they were doing business with FTO-linked entities.
Reassess political risk insurance and crisis protocols
The risk of political unrest, retaliatory action from the Mexican government and threats to personnel now must be part of operational contingency planning.
Engage with counsel on cross-border regulatory strategy
If your operations touch Mexico, you may need specialized legal guidance to navigate the rapidly shifting terrain between commercial activity and national security exposure.
Diversify banking relationships
The CIBanco, Intercam and Vector actions and subsequent failures of those financial institutions following the FinCEN orders underscore the importance of diversifying banking relationships for all companies doing business in Mexico (not just financial institutions), so that companies engaged in cross-border trade do not find themselves unable to pay employees, vendors or counterparties in Mexico or otherwise unable to transfer funds across the border should their local banking institution be targeted by the US Treasury in a manner similar to those three Mexican financial institutions.
This article was originally published in Corporate Compliance Insights.