Terrorism Sanctions and Mexico: Impacts of Recent U.S. Sanctions Escalations on Compliance Risks in U.S.-Mexico Business

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The U.S. Department of State’s recent decision to designate six Mexican cartels as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs) changes the legal risk profile for companies engaged in U.S.-Mexico trade. This Client Alert highlights new risks and considerations for entities with Mexico operations.

The decision followed Executive Order 14157 of January 20, 2025. The U.S. government first announced its intention to use counterterrorism sanctions against Mexican cartels in November 2019. By designating cartels using counterterrorism authorities, the U.S. government is tapping its ability to use aggressive counterterrorism tools to disrupt financial networks, limit access to international resources, and impose more severe legal consequences for dealings with cartels.

Designated Mexican Cartels

• Sinaloa Cartel: “A transnational organization based in Sinaloa, Mexico.”
• Jalisco New Generation Cartel (CJNG): “A transnational organization with a presence in nearly every part of Mexico.”
• Gulf Cartel: “A violent transnational organization based in northeast Mexico.”
• Northeast Cartel: “Formerly known as Los Zetas,” “a transnational organization based in northeastern Mexico.”
• La Nueva Familia Michoacana: “The successor of the La Familia Michoacana, a violent transnational organization based in the Pacific coast state of Michoacan with operations in the Mexican states Guerrero, Morelos, and Mexico.”
• United Cartels: “A violent transnational organization that formed from an alliance of multiple cartels and other groups in Michoacán, Mexico.”

The U.S. Department of State also designated two non-Mexican cartels: Tren de Aragua and Mara Salvatrucha (MS-13).

With the exception of United Cartels, all the designated cartels were sanctioned prior to February 2025 under various U.S. sanctions authorities targeting transnational crime and narcotics trafficking.

FTO and SDGT Designations

All six Mexican cartels were designated as FTOs and SDGTs.

FTOs are foreign organizations that are designated by the U.S. Department of State pursuant to section 219 of the Immigration and Nationality Act. To be designated as an FTO an organization must: (1) be foreign; (2) engage in or have the capability and intent to engage in terrorist activity or terrorism; and (3) pose a threat to U.S. nationals or U.S. national security, including defense, foreign relations, and economic interests.

SDGTs are foreign persons that are designated by the U.S. Department of State and/or the U.S. Department of the Treasury pursuant to Executive Order 13224 and the International Emergency Economic Powers Act.

Implications of the Designations

U.S. and non-U.S. persons must be aware that any transaction involving an FTO or SDGT carries significant legal risks, even if the transaction is unrelated to terrorist activities. It is unlawful for any person subject to U.S. jurisdiction to knowingly provide material support or resources to an FTO. Companies that may interact with FTOs could also face civil lawsuits in the United States under the Anti-Terrorism Act.

U.S. authorities have not defined cartels. Contrary to certain other designated entities, cartels are not registered entities with organized corporate structures. It is unclear how enforcement authorities will determine whether a person or entity is effectively part of a cartel and therefore sanctioned. Companies should expect legal uncertainty and enhanced due diligence requirements.

Further, Secretary of State Marco Rubio stated that the new terrorism designations provide additional “tools” to law enforcement dealing with Mexican cartels. This may include the Terrorist Finance Tracking Program (TFTP), which allows U.S. authorities to search SWIFT, the Belgium-based financial messaging service that transmits global financial transaction data, based on information that identifies an individual or entity as related to suspected terrorist activity.

How to Mitigate Risk

Businesses and financial institutions must implement strong compliance measures to ensure they identify and screen transactions involving FTOs or SDGTs. Given the broad scope of U.S. sanctions laws and their extraterritorial reach, proactive steps are essential to avoid inadvertent violations. Key risk mitigation strategies include:

Comprehensive Risk Assessments: Organizations should conduct thorough reviews of their business operations, financial transactions, supply chains, and partnerships to identify any direct or indirect exposure to designated entities. Due diligence should extend to third-party vendors and counterparties. Consider formal and informal connections to a cartel and potential affiliations.

Implement or Enhance Sanctions Compliance Programs: Businesses and financial institutions must implement and maintain sanctions compliance programs that incorporate policies, internal controls, and monitoring systems designed to detect and prevent transactions with prohibited entities. Regular audits and updates to compliance frameworks are necessary to adapt to evolving sanctions regulations.