On 20 February 2025, the United States (U.S.) Department of State designated eight international cartels as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs). The designation of international cartels as FTOs and SDGTs has substantially increased compliance risks for both U.S and foreign businesses. Below are the key takeaways of this action:
- Seven of the eight designated organizations were already subject to blocking sanctions under the Specially Designated Nationals and Blocked Persons (SDNTK) and the Transnational Criminal Organizations (TCO) authorities. The U.S. Department of State identified and designated only one organization that was not previously sanctioned under any authority.
- The designation of international cartels as FTOs exposes anyone who knowingly provides material support to FTOs to risks of extraterritorial criminal liability and creates potential civil liability to U.S. victims of terrorism.
- Businesses that directly or indirectly engage in activities in jurisdictions in which these designated cartels operate should undertake additional due diligence to assess compliance, reputational, and supply chain risks to entities that have potential links with the designated organizations. Many of these FTOs are interwoven in certain sectors of the Mexican economy and government which are likely to impact the scope and nature of the risks that businesses face.
Background
These designations were made pursuant to Executive Order (E.O.) 14157 of January 20, 2025, “Designating Cartels and Other Organizations as Foreign Terrorist Organizations and Specially Designated Global Terrorists,” which is part of the new administration’s broader focus on curbing the flow of illicit drugs — namely fentanyl — into the United States. The E.O. created a process by which drug trafficking cartels and other organizations can be designated as FTOs, consistent with section 219 of the Immigration and Nationality Act, or as SDGTs, consistent with International Emergency Economic Powers Act and E.O. 13224 of September 23, 2001, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism,” as amended.[1]
The E.O. referred to the risk associated with operating in areas where the designated organizations are present, stating that “[i]n certain portions of Mexico, they function as quasi-governmental entities, controlling nearly all aspects of society.” These statements underscore reports[2] of criminal organizations in Mexico demanding extortion payments to large firms and small businesses that operate in certain areas of the country, highlighting the increased difficulty of corporations and financial institutions to operate in Mexico without intervention from organized crime.
As part of the effort to remedy the risks that these criminal organizations pose for the United States, the U.S. Department of Justice issued a memorandum[3] on February 5, 2025, that outlined several areas of action that will result in heightened enforcement against drug trafficking organizations. These areas of action include the direction of additional resources to the prosecution of drug cartels and transnational criminal organizations (TCOs), removing bureaucratic impediments for aggressive prosecutions, the creation of a joint task force to address the issue, and pursuing legislative changes that would facilitate the investigation and prosecution of these organizations.
Targeted Organizations
Those designated as FTOs and SDGTs on February 20, 2025, include organizations that had been designated previously under the Treasury Department’s Office of Foreign Assets Control (OFAC) SDNTK and the TCO sanctions lists. Table A below captures these previous and most recent designations:
Table A: Designated Organizations
| Organization Name | FTO Designation Date | SDGT Designation Date | SDNTK/EO 14059 Designation Date | TCO Designation Date | |
| 1 | Tren de Aragua | February 20, 2025 | February 20, 2025 | NA | July 11, 2024[4] |
| 2 | Mara Salvatrucha | February 20, 2025 | February 20, 2025 | NA | June 5, 2013[5] |
| 3 | Cártel de Sinaloa | February 20, 2025 | February 20, 2025 | April 15, 2009[6] | NA |
| 4 | Cártel Jalisco Nueva Generación | February 20, 2025 | February 20, 2025 | April 8, 2015[7] | NA |
| 5 | Cárteles Unidos | February 20, 2025 | February 20, 2025 | NA | NA |
| 6 | Los Zetas, a.k.a. Cártel del Noreste | February 20, 2025 | February 20, 2025 | April 15, 2009[8] | July 24, 2011[9] |
| 7 | Cártel del Golfo | February 20, 2025 | February 20, 2025 | June 1, 2007[10] | NA |
| 8 | La Nueva Familia Michoacana | February 20, 2025 | February 20, 2025 | April 15, 2009[11] | NA |
Implications of the New Designations
As noted in Table A above, each of the organizations designated on February 20, 2025, except for Cárteles Unidos, were already subject to blocking sanctions in the United States:
- Four of the designated organizations — Cártel de Sinaloa, Cártel Jalisco Nueva Generación, Cártel del Golfo, and Nueva Familia Michoacana — were already on the Specially Designated Nationals and Blocked Persons List (SDN List) of the U.S. Department of the Treasury pursuant to the authorities provided in the Foreign Narcotics Kingpin Act or E.O.14059, “Imposing Sanctions on Foreign Persons Involved in the Global Illicit Drug Trade;”
- Two organizations — Tren de Aragua and Mara Salvatrucha — had been designated previously pursuant to E.O. 13581, “Blocking Property of Transnational Criminal Organizations;” and
- One organization — Los Zetas — was already designated under all three of these authorities.
All property or interests in property of these seven previously designated organizations that were in the United States or within the possession or control of U.S. persons were already subject to an asset freeze. Additionally, U.S. persons were already generally prohibited from engaging in any transactions with them. Accordingly, persons subject to U.S. jurisdiction must ensure that any assets belonging to these organizations continue to be frozen.
In contrast, Cárteles Unidos had not previously been subject to any sanctions but is now designated as both an FTO and SDGT. This means that U.S. persons must block the assets of Cárteles Unidos (and its agents) and are prohibited in engaging in transactions with them.
In addition to the blocking sanctions and prohibition on engaging with these eight organizations, the recent designation of these international cartels as FTOs and SDGTs elevates the legal, financial, and reputational risk to all U.S. persons and foreign financial institutions (FFIs) associated with them in five significant ways:
- Introduces potential criminal liability for knowingly providing “material support or resources” (including financial services) to an FTO on an extraterritorial basis. “Material support or resources” is broadly defined to include “any property, tangible or intangible, or service, including currency or monetary instruments or financial securities, financial services, lodging, training, expert advice or assistance, safehouses, false documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel (1 or more individuals who may be or include oneself), and transportation, except medicine or religious materials.” (Emphasis added). [12][13]
- Presents so-called secondary sanctions risk to FFIs that have “knowingly conducted or facilitated any significant transaction on behalf of SDGTs;”[14]
- Exposes any person who aids and abets, by knowingly providing substantial assistance to, an FTO to the risk of civil lawsuits from victims of FTOs under the Anti-Terrorism Act;[15]
- Triggers a prohibition on exports (from the United States), reexports (from any country other than the United States), and transfers (within the same county other than the United States) of items subject to U.S. export controls to FTOs, unless a license is obtained from the U.S. Department of Commerce’s Bureau of Industry and Security; and
- Increases the potential reputational damage for entities that engage with terrorist organizations.
Key Considerations and Risk Mitigation Strategies
The designation of international cartels as FTOs and SDGTs has substantially increased the risks to which U.S. financial institutions, FFIs and other domestic and international corporates and individuals are exposed for directly or indirectly conducting business and/or transactions with these organizations. Although new civil and criminal risks stemming from the provision of material support to FTOs have increased for all entities, FFIs in particular now also face the risk of secondary sanctions and losing their access to U.S. correspondent relationships if they knowingly conduct or facilitate any significant transaction on behalf of a SDGT.
Moreover, these new designations—and the resulting prohibition on transactions involving FTOs—present new compliance considerations for financial institutions, given the complexity and difficulties of identifying “agents” of the designated FTOs, which may not be incorporated legal entities. Given this novel situation, it will be important for financial institutions to more carefully assess how drug trafficking organizations operate, and the ways in which these groups are embedded in Mexico’s government and economy by co-opting government officials or by forcing extortion payments to clients or partners that operate in certain sectors, such as agriculture,[16] freight transport, construction, and logging, among others.[17]
Additionally, it will be important for financial institutions to keep track of any guidance or actions that the Mexican government may issue in response to these designations. For example, on February 20, 2025, Mexican President Claudia Sheinbaum proposed reforms to target organizations that are involved in the supplying of weapons to drug trafficking organizations that operate in Mexico.[18] Although no action has been unveiled as of this date, actions like this proposal should be tracked and assessed by financial institutions that have operations or partners in Mexico.
In order to manage this risk exposure, protect the integrity of the international financial system, and ultimately safeguard U.S. interests, U.S. financial institutions, FFIs, and other vulnerable corporates that are at higher risk of transacting with cartel agents must consider taking additional risk mitigation measures. K2 Integrity recommends the following actions:
- Assess risk exposure to designated international cartels, recalibrate risk models to accurately reflect these designations, and evaluate the robustness of the controls environment in mitigating such exposure;
- Review financial crimes compliance policies and procedures to ensure they appropriately account for FTOs and SDGTs;
- Enhance internal controls related to transaction screening and monitoring by optimizing or introducing new rules and scenarios to more effectively detect potential matches;
- Establish enhanced financial intelligence capabilities to implement proactive, intelligence-driven approaches. This includes maximizing the strategic use of both internal and external data and conducting customer and network-level monitoring to identify new trends and patterns and refine risk models;
- Revamp, as necessary, know your customer (KYC)/counter party processes to ensure individuals and entities associated with international cartels are reasonably identified at onboarding and through customer refresh or periodic review measures by introducing additional controls for high-risk customers;
- Conduct additional due diligence for portions of the activities that are identified as high risk, such as cash-intensive businesses and multinational entities involved in cross-border trade that operate in locations with cartel presence;
- Strengthen record-keeping mechanisms to ensure documentation of all measures taken to identify the presence of FTOs or SDGTs are properly stored for at least 10 years, in line with the recently expanded record-keeping requirements of OFAC;
- Revise or create, as needed, an internal “gray list” to avoid onboarding, serving, or transacting with international cartels or associated persons; and
- Implement additional training for staff to inform them of recent changes in typologies, trends, and methods; raise awareness of red flags; and equip personnel with the skills to identify elevated risks associated with international cartels.
Our team of experts at K2 Integrity, with extensive experience working on matters related to FTOs and SDGTs, coupled with deep understanding of anti-money laundering, countering the financing of terrorism, and counter proliferation financing (AML/CFT/CPF) and sanctions requirements in the United States and Mexico, stand ready to assist you and your organization in navigating developments related to these recent designations and protecting your organization.
[1] Executive Order 14157, “Designating Cartels and Other Organizations as Foreign Terrorist Organizations and Specially Designted Global Terrorists” (January 20, 2025), available at https://www.federalregister.gov/documents/2025/01/29/2025-02004/designating-cartels-and-other-organizations-as-foreign-terrorist-organizations-and-specially
[2] AP News Report, “Extortion and gang violence are hitting even big corporations and business leaders in Mexico” (July 31, 2024), available at https://apnews.com/article/mexico-gang-cartels-extortion-corporations-nuevo-laredo-aaca6d35532e6cef30e172920fe6d7d3
[3] U.S. Department of Justice Memorandum, “Total Elimination of Cartels and Transnational Criminal Organizations” (February 5, 2025), available at https://www.justice.gov/ag/media/1388546/dl?inline
[4] U.S. Department of the Treasury Designation Press Release, “Treasury Sanctions Tren de Aragua as Transnational Criminal Organization” (July 11, 2024), available at https://home.treasury.gov/news/press-releases/jy2459
[5] U.S. Department of the Treasury Designation Press Release, “Treasury Sanctions Significant Members Of MS-13” (June 5, 2013), available at https://home.treasury.gov/news/press-releases/jl1971
[6] White House Fact Sheet on the Kingpin Act, “Overview of the Foreign Narcotics Kingpin Designation Act” (April 15, 2009), available at https://obamawhitehouse.archives.gov/the-press-office/fact-sheet-overview-foreign-narcotics-kingpin-designation-act
[7] U.S. Department of the Treasury Designation Press Release, “Treasury Sanctions Two Major Mexican Drug Organizations and Two of Their Leaders” (April 8, 2015), available at https://home.treasury.gov/news/press-releases/jl10020
[8] White House Fact Sheet on the Kingpin Act, “Overview of the Foreign Narcotics Kingpin Designation Act” (April 15, 2009), available at https://obamawhitehouse.archives.gov/the-press-office/fact-sheet-overview-foreign-narcotics-kingpin-designation-act
[9] Executive Order 13581, “Blocking Property of Transnational Criminal Organizations” (July 24, 2011), available at https://ofac.treasury.gov/media/7551/download?inline
[10] White House Kingpin Designation, “Letter to Congressional Leaders Transmitting Designations Under the Kingpin Act” (June 1, 2007), available at https://www.govinfo.gov/content/pkg/PPP-2007-book1/pdf/PPP-2007-book1-doc-pg679-2.pdf
[11]White House Fact Sheet on the Kingpin Act, “Overview of the Foreign Narcotics Kingpin Designation Act” (April 15, 2009), available at https://obamawhitehouse.archives.gov/the-press-office/fact-sheet-overview-foreign-narcotics-kingpin-designation-act
[12] 18 U.S.C. § 2339B, available at https://uscode.house.gov/view.xhtml?req=(title:18%20section:2339B%20edition:prelim);
[13] The U.S. prosecutors may bring actions against both individual and entities who provide material support to FTOs. As demonstrated in Lafarge v. U.S.A., businesses that engage with FTOs may be prosecuted by U.S. authorities for an activity that completely took place outside of the United States. In 2022, Lafarge S.A., a French company, plead guilty in the Eastern District of New York to conspiring to provide material support and resources to two FTOs [where]. As a result, Lafarge was sentenced to terms of probation and to pay financial penalties, including criminal fines of $90.78 million and forfeiture of $687 million, totaling $777.78 million.
[14] Executive Order 13886, “Modernizing Sanctions To Combat Terrorism” (September 9, 2019), available at https://www.govinfo.gov/content/pkg/DCPD-201900601/pdf/DCPD-201900601.pdf
[15] 18 U.S.C. § 2333, available at https://uscode.house.gov/view.xhtml?req=(title:18%20section:2333%20edition:prelim)%20OR%20(granuleid:USC-prelim-title18-section2333)&f=treesort&edition=prelim&num=0&jumpTo=true
[16] NPR News Report, “Mexican drug cartels are getting into the avocado and lime business” (February 19, 2022), available at https://www.npr.org/2022/02/19/1081948884/mexican-drug-cartels-are-getting-into-the-avocado-and-lime-business
[17] The Washington Post report, “How Mexico’s cartel infiltrated the tortilla business” (May 23, 2024), available at https://www.washingtonpost.com/world/2024/05/23/mexico-cartels-tortilla-exortion-crime/
[18] CNN Report, “Mexico’s Sheinbaum vows to protect national sovereignty as US cracks down on cartels in tis territory” (February 20, 2025), available at https://www.cnn.com/2025/02/20/americas/mexico-national-sovereignty-sheinbaum-intl-latam/index.html