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Mexican Cartels as Foreign Terrorist Organizations: A New Era of Risk for Global Businesses
On January 20, 2025, President Trump issued an executive order titled “Designating Cartels and Other Organizations as Foreign Terrorist Organizations and Specially Designated Global Terrorists.” This directive instructs the Secretary of State to recommend within 14 days whether specific Mexican cartels—such as the Sinaloa Cartel and Jalisco New Generation Cartel (CJNG)—should be designated as Foreign Terrorist Organizations (FTOs) or Specially Designated Global Terrorists (SDGTs).
While the formal designations are forthcoming, this executive action signals an imminent and fundamental shift in U.S. enforcement strategies against cartels. Businesses operating in or with Mexico must prepare for an evolving legal and compliance environment that mirrors the approach taken toward groups like ISIS or al-Qaeda.
Cartels will no longer be seen solely as criminal organizations—they will be treated as terrorist threats. This means unprecedented liability risks, expanded enforcement actions, and severe penalties for any company—knowingly or unknowingly—engaging with cartel-linked entities.
The Legal and Compliance Fallout: Why Businesses Must Take This Seriously
The forthcoming designations will have far-reaching implications for businesses, especially those involved in manufacturing, agriculture, finance, mining, oil, logistics, and supply chains. Companies cannot afford to passively rely on existing FCPA/AML compliance programs to navigate this risk—they must be proactive, develop sophisticated strategies to mitigate this risk, and prevent entanglement with cartel-controlled operations.
1. Legal Exposure Under FTO Designation
Under the Immigration and Nationality Act, an organization can be designated as a FTO if:
- It is a foreign organization
- It engages in terrorist activity
- Its activities threaten U.S. nationals or U.S. national security
Once an entity is designated as a FTO, the legal and compliance landscape changes drastically:
- Material Support Liability: Under 18 U.S.C. § 2339B, providing “material support or resources” to a FTO is a federal crime. This includes not just direct financial aid, but also logistical services, financial transactions, and supply chain facilitation. The law defines “material support” broadly—including “financial services, transportation, lodging, and expert advice.”
- Narco-Terrorism Liability: 21 U.S.C. § 960a: This statute makes it a federal crime to provide anything of pecuniary value to a foreign terrorist organization if the transaction relates to drug trafficking. Given the dominance of Mexican cartels in the global drug trade, this law creates another powerful enforcement tool for U.S. prosecutors. If a company pays a cartel-affiliated logistics provider, sources materials from cartel-controlled farms, or facilitates financial transactions that benefit a cartel, they could face serious criminal liability under the narco-terrorism statute. The penalties are severe—including up to life imprisonment—meaning that once cartels receive FTO status, businesses must ensure that no direct or indirect payments are made to entities with cartel connections.
- Civil Liability for Financial Institutions: Banks and payment processors are legally required to identify, freeze, and report funds tied to FTOs. Failure to do so can result in civil penalties of twice the amount of the illicit transaction.
- JASTA and Aiding & Abetting Liability: Under the Justice Against Sponsors of Terrorism Act (JASTA), companies may face lawsuits if they “knowingly provide substantial assistance” to a FTO. While the 2023 Taamneh v. Twitter ruling narrowed the scope, any “conscious, voluntary, and culpable” support can still lead to crippling lawsuits.
2. SDGT Designation: Treasury Sanctions and Financial Restrictions
Beyond FTO status, the U.S. Treasury Department may also designate cartel-affiliated individuals and entities as Specially Designated Global Terrorists (SDGTs). If this occurs:
- All U.S. persons and entities are prohibited from transacting with SDGTs
- OFAC (Office of Foreign Assets Control) can impose severe monetary penalties on violators
- “50% Rule” Enforcement: If a company is 50% or more owned by an SDGT, it is also considered blocked, even if not explicitly listed. Businesses must ensure compliance not just with named entities, but also with those tied to them
Unlike FTO designations, which require seven days’ notice to Congress, SDGT designations can occur without warning. Companies must prepare now.
Industries at immediate risk and particularly vulnerable to these forthcoming designations, include:
Supply Chains, Manufacturing, Agriculture, & Mining– Companies sourcing goods from Mexico must vet suppliers extensively to ensure no indirect exposure to cartel-controlled networks. In particular, the automotive industry will be significantly affected from cars to parts. For the agricultural sectors, this would include items such as avocados, tequila, limes, and other produce, where cartels have historically exerted influence over farms, production facilities, and transportation routes.
Financial Institutions – Banks, lenders, investment firms, and cryptocurrency trading platforms must tighten sanctions compliance and enhance monitoring of high-risk transactions.
Real Estate & Construction – Cartels frequently launder money through real estate deals. Investors and developers must implement enhanced due diligence on buyers and partners.
Logistics & Transportation – Trucking, shipping, and air cargo firms must screen clients and cargo to prevent unwitting involvement in cartel smuggling operations.
The High Cost of Compliance Failures: A Warning
Several companies have already faced significant penalties for engaging with designated terrorist organizations:
- Lafarge S.A. (France) – Paid $778 million in fines for providing financial support to ISIS to keep its cement operations running in Syria.
- Chiquita Brands International (U.S.) – Fined $25 million for making protection payments to a Colombian terrorist group.
- Standard Chartered Bank (United Kingdom): Penalized over $1 billion for processing transactions linked to Taliban-affiliated entities
Each of these cases sent shockwaves through the corporate world, yet businesses today are still dangerously underestimating the reach of Mexican cartels.
With Mexican cartels poised to receive the same designations, the next Lafarge, Chiquita, or Standard Chartered could be any company with ties—direct or indirect—to cartel-controlled territories.
Six Immediate Actions Businesses Must Take
1. Conduct a Comprehensive Supply Chain Audit
To have complete visibility into the supply chain, businesses need to identify vulnerabilities and immediately cut any ties to high-risk entities, map out every supplier, distributor, and logistics partner, and identify high-risk regions or counterparties. If there’s a blind spot, the company could already be exposed.
2. Deep-Dive Investigations on Business Partners
Conduct forensic audits and background checks on key suppliers and vendors by tracking financial flows, uncovering hidden exposures, and identifying owners, stakeholders, and their affiliations. Additionally, conduct asset tracing to prevent corporate funds from indirectly supporting cartel operations
3. Strengthen Third-Party Screening
Go beyond standard checks—use intelligence-driven investigations to uncover hidden risks. Cartels frequently use shell companies that appear legitimate. Intelligence-driven vetting—beyond cursory forms and online checks—should be standard practice. Regularly consult law enforcement databases, open-source intelligence, and specialized risk reports.
4. Implement AI-Driven Compliance Tools
Use real-time monitoring systems to flag suspicious transactions and counterparties.
While traditional compliance checks can’t match the cartels’ speed and adaptive strategies, leveraging AI and data analytics to flag suspicious patterns, cross-reference sanction lists, and monitor transactions in real time can help businesses keep up.
5. Train Employees to Recognize Compliance Red Flags
From procurement officers to accounting teams, everyone must learn the hallmarks of potential cartel involvement—like irregular payment structures, unusually rapid product turnover, or sudden changes in supply chain ownership.
6. Develop a Crisis Management Plan
Even the best compliance measures can falter if a cartel link emerges. Have legal counsel, PR teams, and executive leadership ready to respond decisively to government inquiries or media scrutiny.
The Bottom Line: There Is No Room for Error
With the executive order now in place, the U.S. government has signaled an aggressive new approach to combating Mexican cartels. Once official designations take effect, businesses face a compliance minefield where even indirect exposure to cartel-linked entities can lead to severe legal, financial, and reputational consequences.
The time for proactive engagement is now: Partnering with a third party investigative and compliance expert can help businesses overcome this new challenge. We, at Guidepost, work proactively to help businesses identify and mitigate supply chain and financial risks. Our team of seasoned investigative experts, including those in our Mexico City office, have deep cartel intelligence and enforcement experience. With tailored compliance solutions and immediate risk assessments, we’ll help you navigate the evolving FTO enforcement landscape. Understand the risk, take appropriate action, and ensure your company and personnel are “fireproofed.”
More About our Author:
Louis J. Milione is a recognized expert in transnational criminal investigations, and corporate compliance. He served as a DEA Special Agent for nearly 25 years, leading some of DOJ’s most significant and sensitive investigations into transnational criminal organizations. During his career, Milione founded and led DEA’s first Narco-Terrorism Group, targeting transnational cartels with terrorist links operating across Central America, South America, Africa, Europe, Asia and the Middle East. He also played a key role in developing 21 U.S.C. § 960a, the Narco-Terrorism Statute, which is now a critical enforcement tool against drug-trafficking organizations with ties to terrorism.
From 2021 to 2023, Milione served as DEA’s Deputy Administrator, overseeing DEA’s worldwide operations and leading more than 10,000 personnel in 334 offices across the globe. Today, he is the President of Global Investigations and Regulatory Compliance at Guidepost Solutions, where he leads teams of former DOJ, DEA, HSI, and FBI experts dedicated to helping businesses navigate the evolving cartel enforcement landscape.
Louis J Milione
President, Global Investigations + Regulatory Compliance
With more than twenty-five years of public and private sector experience, Louis J. Milione returns to Guidepost Solutions as President of Global Investigations and Regulatory Compliance having just served as the Drug Enforcement Administration (DEA) Principal Deputy Administrator from 2021 to 2023. As the DEA’s second in command, Mr. Milione led an agency of more than 10,000 public servants – including 5,000 Special Agents, 800 Intelligence Analysts and 700 Diversion Investigators – who work in DEA’s 334 offices around the globe.
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