Designating Cartels as Terrorists: Potential Impact on U.S. Businesses
On his first day in office, President Trump signed an executive order (EO 14157) that sets in motion the designation of certain cartels and transnational crime gangs as terrorist organizations.
The President declared a national emergency, citing the “campaign of violence and terror” being waged by these organizations. The EO directs the Secretary of State, in consultation with the Secretary of the Treasury, the Attorney General, the Secretary of Homeland Security, and the Director of National Intelligence, to make a recommendation regarding the designation of any cartel or similar transnational organization as a Foreign Terrorist Organization (FTO) and/or a Specially Designated Global Terrorist (SDGT) within 14 days. President Trump is expected to make the designations in early February.
Historically, the “terrorist” label has been reserved for groups like al-Qaeda that are driven by an ideological agenda. Cartels, whose motivations are largely financial, do not fit the traditional “terrorist” profile. But cartels use similar tactics (such as extreme violence) to advance their goals and control the illicit drug trade. They pose an “unusual and extraordinary threat” to our national security, foreign policy, and the U.S. economy, according to the EO.
Legal Impact
Presently, the U.S. government can combat cartels through sanctions and criminal prosecutions. Designating cartels and transnational crime gangs as terrorist organizations would broaden the number of tools at the government’s disposal. One such tool is the ability to hold any individual or organization that supports terrorist organizations criminally and/or civilly liable.
Criminal liability
Providing material support or resources to a foreign terrorist organization is a federal felony that carries significant penalties.
The law likewise holds accountable anyone who conspires or attempts to provide support to terrorists. The statute (18 U.S.C. § 2339B(a)(1)) defines “material support or resources” as any property (tangible or intangible) or service, including currency, financial services, lodging, training, expert advice or assistance, false documentation, weapons, personnel, and transportation. To be held criminally liable under this statute, the violator must have knowledge that the organization has engaged or engages in terrorist activity or is a designated terrorist organization.
This criminal statute has extraterritorial reach. If a Mexican national knowingly deals with a cartel designated as an FTO, they can be charged with providing material support to a terrorist organization if they later enter the United States—even if the offending conduct occurred somewhere other than on American soil.
But U.S. companies with operations in Latin America can also face criminal liability if those operations encounter designated terrorist activity. Cartels are known for extortion and will threaten violence against businesses and employees, demanding payment. Those extortion payments help fund cartels and expose businesses to criminal liability.
Civil liability
U.S. companies that cross paths with cartels designated as FTOs can also face civil liability. Victims of terrorist acts can sue any person or entity who aids and abets terrorist organizations by knowingly providing substantial assistance, as well as any person who conspires with those who commit an act of international terrorism. 18 U.S.C. § 2333(d)(2).
The legal adventures of Chiquita Brands International Inc., a U.S. company with banana-producing operations in Colombia, offer a cautionary tale. In 2007, Chiquita pled guilty in federal court to making payments to a terrorist organization—the Autodefensas Unidas de Colombia (AUC), a violent paramilitary organization designated both an FTO and SDGT by the United States.
These payments, made by Chiquita’s wholly-owned Colombian subsidiary over the course of years, totaled $1.7 million and began after AUC leaders threatened physical harm to company personnel and property if they failed to make payments. Chiquita agreed to pay a $25 million criminal fine as part of its plea agreement with the Justice Department.
But there is more. Seventeen years later, in June of 2024, a federal jury found the fruit giant civilly liable for killings perpetrated by AUC during the span of years Chiquita made these extortion payments. The jury awarded families of eight men killed in Colombia a total of $38.3 million in damages. For the first time in history, a U.S. company was held responsible for injuries inflicted on foreign nationals by a terrorist organization.
Practical Impact on U.S. Businesses
What do the anticipated terrorist designations mean for U.S. businesses? Companies engaged in business dealings in Mexico and wider Latin America where these criminal organizations operate should diligently conduct risk assessments to identify potential areas of interaction with cartels and associated individuals and entities.
There is a heightened need for due diligence when dealing with third parties. Cartel activities extend beyond illicit markets into legitimate areas of the economy. They operate front companies in industries such as transportation, tourism, and agriculture that are connected to the drug trade and use the legal economy to launder money. This increases the risk for U.S. companies whose businesses and employees may encounter cartel activity in unlikely places.
American businesses with manufacturing operations, personnel, customers, supply chains, distribution networks, or that engage in financial transactions in Latin America should establish appropriate internal controls to ensure they have no direct or indirect connections to designated FTOs and further ensure that no unauthorized payments are being made. Internal controls may include background checks, cross-referencing information provided by the U.S. Department of Treasury’s Office of Foreign Asset Control, and continuous monitoring.
Financial institutions should take heed and identify financial activity that runs afoul of the material support statute. Any U.S. financial institution that becomes aware that it has possession of or control over any funds in which a designated FTO or its agent has interest must retain possession or control and report the funds to the Treasury Secretary.
U.S. gun stores and manufacturers may also face exposure if they knowingly supply designated FTOs with weapons. Hundreds of thousands of firearms flow from the United States into Mexico down the so-called “iron river” each year, and the U.S. has vowed to crack down on the trafficking of firearms to cartels in recent trade discussions.
Companies that learn of criminal misconduct can voluntarily self-report to the Department of Justice pursuant to its Corporate Enforcement Policy (CEP) and potentially mitigate their exposure.
If you have concerns about how this EO applies to your operations, the Woods Rogers Government & Special Investigations team can help. Please contact the authors of this alert, your Woods Rogers attorney, or any member of the team.
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