With the US administration taking unprecedented steps to designate certain international drug cartels as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs), the ripple effects are being felt across Latin America. In this article Amalia Coyle navigates through the complexities the designations pose for organizations operating in the region, highlighting how the expanded scope of compliance risks demands increased vigilance. Amelia shares insights into the heightened scrutiny and regulatory challenges that businesses facing indirect connections to cartels or Transnational Criminal Organizations (TCOs) might encounter, urging a re-evaluation of international, national, and corporate strategies within this tumultuous environment.
The terrorist designations
Since assuming office for his second term, US President Donald Trump has wasted little time rekindling one of the country’s longest running and, at times, most controversial campaigns: the “War on Drugs.” In a leaked notice to congressional committees delivered in early October 2025, the Trump Administration informed Congress that the US was involved in an “armed conflict” with drug cartels and identified members of these groups as “unlawful combatants,” unprecedented rhetoric for the US campaign against drug trafficking organizations.
The administration’s self-described war against the cartels began on January 20, 2025, the same day as Trump’s inauguration, when he signed Executive Order 14157 designating certain international cartels and other organizations as Foreign Terrorist Organizations (“FTOs”) and Specially Designated Global Terrorists (“SDGTs”). President Trump has publicly stated that these organizations posed an “unacceptable national security risk,” declaring a national emergency to deal with these threats. The EO emphasized concerns regarding drug trafficking by Mexican cartels at the US southern border, as well as “campaigns of violence and terror” by other transnational criminal organizations (“TCOs”) operating in the Western Hemisphere.
Though often related, the FTO designation is issued by the US Department of State, while the SDGT designation is issued by the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). On February 20, 2025, the Trump Administration officially designated eight transnational organizations as both FTOs and SDGTs. These included six Mexico-based cartels – the Cártel de Sinaloa (“Sinaloa Cartel”), Cártel de Jalisco Nueva Generación (“CJNG”), Cártel del Noreste (also known as Los Zetas), La Nueva Familia Michoacana, Cártel de Golfo (“Gulf Cartel”), and Cárteles Unidos – as well as Tren de Aragua, originating in Venezuela, and Mara Salvatrucha (“MS-13”), operating across Central and North America. Three other Latin American organizations – Barrio 18, based in Central America, and Los Choneros and Los Lobos, both based in Ecuador – were later designated as FTOs and SDGTs in September 2025. OFAC has since imposed additional SDGT designations on several other cartels and factions, including Los Viagras, based in Mexico (August 14, 2025); Los Mayos, a faction of the Sinaloa Cartel (September 18, 2025); and the Cartel de los Soles, a criminal group allegedly headed by high-ranking members of the Venezuelan Armed Forces and the government of Nicolás Maduro (July 25, 2025). On November 24, 2025, the Department of State also designated the Cartel de los Soles as an FTO.
Increased scope of enforcement
Many of these entities were already subject to property blocking sanctions and US entry ineligibility. However, the FTO and SDGT designations significantly expand the scope of law enforcement actions available to the US government. Notably, under federal criminal law, US persons are prohibited from knowingly providing material support or resources to FTOs. The designations also subject foreign financial institutions to secondary sanctions risks for conducting or facilitating transactions on behalf of SDGTs and extend immigration-related restrictions to persons found to be associated with designated organizations.
Pursuant to Executive Order 14157, the US Department of Justice (“DOJ”) has increased its prosecution of individuals and companies associated with FTOs, with US Attorney General Pam Bondi highlighting the “total elimination” of cartels as a priority for law enforcement. These efforts have included elevating and expanding the resources of Joint Task Force Vulcan, an initiative launched in 2019 to target MS-13, and Joint Task Force Alpha, an interagency program targeting human trafficking and smuggling networks. The DOJ has also eliminated the requirement for individual US Attorneys’ Offices to require approval from the central DOJ for charges. In May 2025, the DOJ first prosecuted Mexican nationals under charges of providing material support for terrorism due to the new FTO designations. US authorities charged Pedro Inzunza Noriega and Pedro Inzunza Coronel, both alleged leaders of the Sinaloa Cartel, with narco-terrorism and material support of terrorism in connection with drug trafficking. Another Mexican national, Maria Del Rosario Navarro-Sanchez, was also charged with providing material support to the CJNG, also in May 2025.
Since February 2025, OFAC has also imposed secondary sanctions on various Mexico-based companies for their alleged support of designated FTOs, including laundering money and smuggling illicit oil (including diesel) on behalf of cartels. The companies targeted by secondary sanctions operate across a wide range of sectors, including construction, advertising, wholesale trade, recreational, transportation, petroleum and natural gas, beauty, household goods, and tourism.‘
Special measures against Mexican banks connected to cartels
In parallel with efforts by the DOJ and OFAC, in June 2025, the US Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) imposed a special measure against three Mexican financial institutions designating them as being of “primary money laundering concern” in connection with illegal opioid trafficking by the CJNG, Gulf Cartel, and affiliates of the Sinaloa Cartel. The order prohibited all transmittal of funds between any covered US financial institution and the three designated entities: CIBanco SA IBM (“CIBanco”) and Intercam Banco SA IBM (“Intercam”), both Mexico City-based commercial banks, and Vector Casa de Bolsa SA de CV, a San Pedro Garza García-based brokerage firm. The designation of CIBanco came as a particular shock to the Mexican financial sector, given that CIBanco accounts for over a quarter of Mexico’s fiduciary market and serves as the trustee for a majority of Mexico’s private equity certificates and real estate investment trusts. FinCEN asserted that the institutions “played a longstanding and vital role” in laundering millions of dollars on behalf of Mexico-based cartels and processed payments for fentanyl precursor chemicals sourced from China.
The Mexican government and the three institutions initially rejected the allegations, claiming FinCEN did not present sufficient evidence. Nevertheless, following the orders, the National Banking and Securities Commission (“CNBV”), Mexico’s primary financial regulator, appointed temporary administrators at the three institutions and transferred the trust businesses of CIBanco and Intercam to Mexican development banks to ensure continuity of services. The three institutions have since been effectively dismantled, with key assets sold off to other banks and financial services providers, including the acquisition of CIBanco’s trust business by Mexican financial services company Grupo Multiva in August 2025. After several extensions, the FinCEN orders officially took effect on October 20, 2025, blocking the three institutions from conducting business with any companies in the US.
Trump’s mounting military campaign
The Trump Administration has complemented its regulatory efforts against the cartels with increasingly aggressive maritime military efforts. Since September 2025, US forces have carried out at least 21 lethal strikes in South American waters against alleged drug-carrying vessels, most of them ostensibly linked to Venezuelan cartels, describing the targets of these attacks as “terrorists.” The Trump Administration has accused Venezuelan President Nicolás Maduro – who was indicted by the DOJ during Trump’s previous administration in 2020 with narco-terrorism, corruption, and drug trafficking – of being one of the largest narcotraffickers in the world and has likened the recent military actions to those employed in the War on Terror in the early 2000s. Notably, the administration has raised the reward for Maduro’s arrest to USD 50 million, twice that offered for the capture of Osama bin Laden in the wake of September 11, 2001. In early October 2025, CNN reported that the DOJ’s Office of Legal Counsel had produced a classified legal opinion justifying the use of deadly force against an undisclosed list of cartels – broader even than those publicly designated as FTOs – because of the alleged imminent threat they pose to the US. The Trump Administration has since continued to build up the US military presence in the Caribbean and as of November 2025 is even considering potential land strikes within Venezuela.
Compliance implications for businesses operating in the US and abroad
The FTO and SDGT designation of cartels automatically heightens scrutiny of any businesses operating in areas where these groups hold influence and significantly lessens the likelihood of leniency for companies which may have indirect connections to cartels or TCOs through their partners, customers, providers, or employees. The statute defining what constitutes “providing material support or resources” is open to a fairly broad interpretation; it covers attempting, conspiring, or actually providing any service or tangible or intangible property, as well as concealing or disguising the nature, location, source, or ownership of such support or resources. Companies with supply chains in Mexico, Ecuador, Venezuela, or Central America – where the currently designated FTOs are based – face the greatest risk of civil or criminal penalties, especially those industries more susceptible to cartel control, such as extractives, agriculture, and transportation. Businesses involved in real estate and construction should also be wary of being caught in the enforcement crosshairs, as these are common vectors for money laundering by the cartels, not to mention financial institutions and fintech companies.
While the ‘material support or resources’ provisions for designated FTOs apply only to persons in the US or those subject to US jurisdiction, the Trump Administration’s decision to treat the cartels as terrorist organizations has had ripple effects in governments beyond the US. On October 21, 2025, Guatemala passed a new law similarly designating Barrio 18 and MS-13 as terrorist groups. The state governor of Rio de Janeiro, Brazil has also invoked Trump’s rhetoric against local gangs, describing them as “narco-terrorists,” and in early November asked that the US include Brazilian drug trafficking organization Comando Vermelho on its list of FTOs and SDGTs. As the US government continues to pursue its campaign against TCOs, other countries in the Americas region – especially those looking to avoid tariffs or remain on favorable terms with the Trump Administration – will face pressure to implement their own sanctions, as well as heighten regulatory scrutiny and prosecution efforts.
The Trump Administration’s decision to treat the cartels as terrorist organizations has had ripple effects in governments beyond the US.‘‘
Both US and foreign financial institutions currently face the risk of secondary sanctions, which includes the potential for OFAC to prohibit or restrict opening or maintaining correspondent accounts or payable-through accounts in the US. FinCEN’s recent measures against Mexican banks should also give pause to any institutions interacting with the US financial system. The forced dismantling of such a major player as CIBanco serves as an omen of the potentially ruinous outcomes financial institutions face for insufficient money laundering controls. If linked to designated FTOs or SDGTs, companies may suffer anything from ratings downgrades to severed business relationships, or in the extreme, license revocation and liquidation.
The current regulatory environment is changing at warp speed, and companies and their external advisors (outside counsel and compliance firms) must keep a close eye on the shifting designations in the region and err on the side of caution when it comes to interpreting whether they fall within the scope of these new orders. For companies and institutions operating in the Americas, a recommitment to strengthening internal compliance systems, AML policies and procedures, and reviewing existing relationships with a fine-tooth comb is highly warranted given the potential exposures. Increased due diligence on both current and future counterparties, through in-house teams or external providers, is crucial to avoid the potentially severe cost of noncompliance.
The forced dismantling of such a major player as CIBanco serves as an omen of the potentially ruinous outcomes financial institutions face for insufficient money laundering controls.‘‘
The future of Trump’s war on cartels
In light of the Trump administration’s escalating legal and regulatory actions, as well as the ramp-up of military activity against an unspecified list of cartels above and beyond those currently designated as FTOs, additional designations are probable in the future. Colombia is likely among the next targets, given the revocation of President Gustavo Petro’s US visa in September and subsequent sanctions imposed on him in October 2025 for his alleged role in enabling the drug trade. In its announcement of the sanctions, OFAC accused Petro of providing benefits to “narco-terrorist organizations” in Colombia, and of allying himself with Maduro and the Cartel de los Soles in Venezuela. These sanctions have already posed international challenges, recently evidenced when Petro traveled through Spain and officials at the Madrid-Barajas airport refused to refuel his plane because the airport’s aviation refueling company was reportedly concerned about breaching US sanctions.
Trump’s renewed war on the drug cartels gives no indications of waning anytime soon. All signs point to a widening enforcement lens and a progressively more stringent regulatory environment, making corporate compliance more complex – and more necessary – than ever.
