Shortly after President Trump’s second inauguration, his executive branch took steps to further one of his signature promises: securing the southern border. While these actions primarily impact immigration laws, several executive orders, such as designating drug cartels and their affiliates as “terrorist organizations,” have increased the legal and compliance risk environment for both US and foreign companies.

While regulations pertaining to known terrorist organizations like ISIS and Al-Qaeda have been part of the global sanctions and anti-money laundering framework for quite some time, the addition of Mexican, Central and South American drug cartels to this list introduces new and complex risks for companies conducting cross-border business in these jurisdictions. To prevent violating these new requirements, companies should evaluate their Latin American operations and work to establish strong controls and compliance measures to ensure that they do not do business with or unwittingly provide material support to these organizations.

Below we provide an overview of the new directives and explain how businesses should prepare for the new regulations.

Executive Actions Look South

On his first day in office, President Trump issued a series of executive orders focused on this issue, including E.O. 14157, “Designating Cartels and Other Organizations as Foreign Terrorist Organizations and Specially Designated Global Terrorists”; E.O. 14161, “Protecting the United States From Foreign Terrorists and Other National Security and Public Safety Threats” and E.O. 14159, “Protecting the American People Against Invasion” (together, the January 20 E.O.s). And on February 5, her first day in charge of the Justice Department, Attorney General Pam Bondi issued several memoranda providing guidance on how the Department will shift its priorities and make additional resources available to reflect the administration’s focus on the southern border: the Bondi Memorandum regarding Charging, Plea Negotiations, and Sentencing and the Bondi Memorandum regarding Total Elimination of Cartels and Transnational Criminal Organizations (together, the Bondi Memoranda).

The Bondi Memoranda prioritize enforcement actions directed at, in part, the “total elimination of Cartels and Transnational Criminal Organizations (TCOs)” and the historic threats from widespread illegal immigration, dangerous cartels, transnational organized crime, gangs, human trafficking and smuggling, fentanyl and opioids, terrorism and other sources. To eradicate these threats, DOJ will enhance its focus on investigations related to immigration enforcement, human trafficking and smuggling, transnational organized crime and cartels and gangs. 

Specific to white collar enforcement, the Department will now be prioritizing investigations into companies that provide material support or resources to designated foreign terrorist organizations (FTOs) or bribe foreign government officials to facilitate the criminal operations of cartels and TCOs under the Foreign Corrupt Practices Act (FCPA). 

As the administration adds to the list of cartel-related entities that fall under these new designations, risk for companies doing business abroad will increase. For example, E.O. 14157 ordered the Secretary of the State to recommend additional cartels and organizations for designation as FTOs or Specially Designated Global Terrorists (SDGTs) with a focus, but not limitation, on cartels operating in certain portions of Mexico. While we await these designations, which the Secretary of State was supposed to have recommended on February 3, Congressman Chip Roy (TX-21) reintroduced the Drug Cartel Terrorist Designation Act, which would direct the designation of the Gulf Cartel, the Cartel Del Noreste, the Cartel de Sinaloa, and the Cartel Jalisco Nueva Generacion as FTOs and codify E.O. 14157 into law.

Increased Risk for Companies Operating in Mexico, Central and South America

While it is likely that at least some of the soon-to-be-designated entities already have sanctioned individuals under the US Department of Treasury’s Office of Foreign Asset Control’s regulations, we anticipate that the list will grow significantly. Making the matter more complicated, however, is that cartels, their affiliated entities and the persons that control these organizations have embedded themselves across many business areas in Latin America. So, the designation as an FTO is significant for several reasons:

How Companies Should Prepare

The combination of these new areas of risk and DOJ’s new focus on FTOs, TCOs, and SDGTs has important implications for companies conducting business internationally, particularly in Mexico and other parts of Latin America where cartels that are (or will be) designated as FTOs and TCOs are active. But that is not to say the companies cannot do business in the region. Rather, the risk can be mitigated and managed through robust policies, internal controls and compliance procedures. For example, companies should:

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