From criminals to terrorists: implications of the U.S. designation of Mexican cartels

On January 20, 2025, President Trump signed an executive order instructing the Department of State to designate specific Mexican drug cartels as Specially Designated Global Terrorists (“SDGTs”) and Foreign Terrorist Organisations (“FTOs”) within 14 days.

Less than a month later, on February 19, the U.S. government followed through, officially labelling some of the most notorious names in organised crime as terrorist groups: Mara Salvatrucha, “Cártel de Sinaloa”, “Cártel Jalisco Nueva Generación”, “Cártel del Noreste”, “La Nueva Familia Michoacana”, “Cártel del Golfo”, and “Cárteles Unidos”.

This bold move marks a fundamental change in how these groups are viewed—not just as criminals, but as terrorist actors capable of destabilising regions and exercising territorial control through asymmetric warfare.

The implications of these designations are far-reaching with severe consequences for both FTO´s and SDGT´s, and U.S. persons (or even companies operating outside the U.S.) that interact or provide “material support” to them.

Bear in mind that the U.S. has extraterritorial jurisdiction almost over any entity (including subsidiaries, affiliated companies, companies that are listed or have assets in the U.S., companies that make transactions to the U.S. or even due to the existence of a single financial transaction through the U.S. financial system).

The impact on terrorists (FTO and SDGTs)

The consequences for the FTOs are:

• Material support: It’s a crime to provide “material support or resources” (directly or indirectly) to an FTO or receive military training from or on behalf of an FTO
• Entry restrictions: Foreign members of an FTO are not permitted to enter the U.S. and may be deported
• Control transactions: Financial institutions that become aware that they have possession of or control over funds in which an FTO or its agent has an interest must retain possession of or control over the funds and report the funds to the U.S. Department of the Treasury.

The implications for the SDGTs are:

• Asset blocking: The assets and rights of designated persons or entities in the U.S. may be blocked by the Office of Foreign Assets Control (OFAC)
• Prohibition against transactions: Persons in the U.S. are not permitted to engage in transactions with blocked assets
• Prohibition against evasion: Any attempt to evade, circumvent, or violate the prohibitions, including conspiracy to infringe them, is prohibited
• Sanctions: Civil and criminal penalties may be imposed for violations.

Impact on Mexican companies under U.S. extraterritorial reach

For Mexican companies, the risks are substantial:

• Criminal liability: Risk of prosecution for providing “material support” (directly or indirectly) to FTOs
• Monetary penalties: If OFAC determines that a violation has occurred as part of its enforcement process (giving material support directly or indirectly)
• Sanctions on financial institutions: For processing transactions linked to FTO’s
• Increase in costs: Rise in operational costs due to audits, security, and risk detection technology
• Reputational risk: Importance of transparency and regulatory compliance to avoid any investigation, sanctions, and reputational damage
• Operational risk: Other companies will avoid doing business with a company under investigation or sanctioned for giving material support
• Civil laws and penalties: Possibility of multiple lawsuits by American victims against companies that have provided “material support”.

Mitigation measures

To effectively mitigate risk, Mexican companies must act swiftly and strategically, bearing in mind the extraterritorial scope of U.S. law. This means aligning their compliance efforts not only with Mexican regulations but also with U.S. standards. It’s essential to ensure that their compliance programmes meet the requirements set by OFAC. Companies should consider the following core components outlined by OFAC: (i) management commitment, (ii) risk assessment, (iii) internal controls, (iv) testing and auditing, and (v) training.

To meet both compliance standards, businesses should conduct thorough risk assessments across their entire value chain, with special focus on partners in high-risk sectors such as logistics and finance. This includes implementing robust ‘know your customer’ and ‘know your supplier’ procedures to ensure that clients, suppliers, and third parties are not influenced or infiltrated by designated organisations.

Companies should also implement targeted and periodic training programmes for employees—especially those in departments such as procurement, sales, and third-party relations—who are more likely to encounter compliance-related risks.

Finally, companies must conduct annual internal audits to assess the effectiveness of their compliance controls, identify potential gaps, and ensure corrective measures are promptly implemented.

The mentioned designation marks the beginning of a new regulatory and legal era with global implications. Mexican companies—particularly those operating in sectors or regions with heightened exposure—must adapt rapidly, strengthen their compliance frameworks, and commit to full transparency. In this new era, doing business safely means knowing exactly who you’re dealing with—and ensuring your company is not exposed to legal or reputational risk.

This article was guest written by Luis Mancera, Rafael Fuentes and Alma Armenta from Spanish firm Perez-Llorca.