Impact of Recent U.S. Designations of Foreign Terrorist Organizations on Companies Doing Business in Mexico, El Salvador and Venezuela

Introduction

The Trump Administration recently designated several prominent Mexican drug cartels and two other criminal organizations as Foreign Terrorist Organizations (FTOs). This designation, among other things, exposes to criminal prosecution anyone who provides something of value to these newly-designated FTOs for “material support” of an FTO under 18 U.S.C. 2339B. The incorporation of these organizations into the list of FTOs has far-reaching significance for companies with business operations in Mexico, El Salvador, and Venezuela, the principal operational jurisdictions of these FTOs. This article explores the practical implications of this new ruling for companies doing business in jurisdictions in which the FTOs operate, the questions companies should be asking their legal counsel, and the steps businesses and their employees need to take to ensure compliance and to avoid severe penalties.

Overview of the FTO Designation

On January 20, 2025, an executive order signed by President Donald Trump directed the State Department to recommend specific international cartels and transnational criminal organizations for designation as FTOs. Secretary of State Rubio subsequently designated, effective February 20, 2025, eight criminal organizations, including the six major Mexican drug cartels, as FTOs. The administration also designated two other non-Mexican transnational criminal organizations, La Mara Salvatrucha (commonly referred to as “MS-13”) (El Salvador) and Tren de Aragua (Venezuela) as FTOs. These are not the first Latin American organizations to be designated FTOs; both the FARC (Colombia) and the Shining Path (Peru), leftist narco-terrorist groups that funded their operations principally through cocaine trafficking and hostage taking, were previously designated, although the FARC was recently de-listed.

What Constitutes Material Support?

Material support includes a wide range of activities and resources, such as:

• Financial Services: Providing banking services, loans, or financial transactions to entities or individuals linked to an FTO.
• Transportation: Offering transportation services that facilitate the movement of cartel members or their goods.
• Communication Equipment: Supplying communication devices or services that could be used by the cartel.
• Goods and Services: Providing any goods, including food, clothing, or medical supplies, that could aid the cartel's operations.

These examples underscore that nearly all contact with an FTO can give rise to liability, which in turn emphasizes the importance of rigorous due diligence and compliance measures to ensure that business activities do not inadvertently support FTOs. Companies must be vigilant in their operations and continuously monitor their transactions and partnerships to avoid severe legal repercussions.

Guidance From the Past

The vast majority of material support cases are brought against individuals who are avowed members of an FTO, on the theory that the “material support” provided by the individual defendant derives from their actions in support of the organization’s terrorist aims. In the conventionally understood context of terrorism in the form of Islamic Jihad as pursued by Al Qaeda and ISIS, for example, the application is obvious: think of the suicide bomber. However in a very small number of cases, prosecutions under U.S. anti-terrorism law have implicated third-party non-members – corporations – pursuing commercial interests.

Chiquita

Between 1997 and 2004, Chiquita paid over $1.7 million to Colombia’s United Self-Defense Forces (AUC), a rightist paramilitary group ideologically opposed to the FARC. Chiquita claimed the payments were protection money to safeguard its employees and operations in Colombia’s volatile banana-growing regions. In 2001, when the U.S. designated the AUC as an FTO, those protections payments became illegal. The U.S. Department of Justice (DOJ) brought charges against Chiquita – albeit under a different provision of the Federal Anti-Terrorism Act and not under the material support statute – and it ultimately pled guilty and paid a $25 million fine.

Lafarge

Most relevant here, in October 2022, the U.S. Department of Justice (DOJ) announced its first-ever prosecution of a corporation for material support to terrorism under 18 U.S.C. Section 2339B of the ATA. Lafarge SA and its Syrian subsidiary, Lafarge Cement Syria SA, pled guilty to charges of conspiring to provide material support to the terrorist organizations ISIS and the al-Nusrah Front (ANF) as part of their business operations in Syria. Lafarge agreed to pay $778 million in fines and forfeitures as a part of its plea deal. Notably, instead of paying ISIS and ANF protection or extortion fees, Lafarge was paying these organizations to stifle competition in their cement distribution business.

This case illustrates in particular the extensive reach of U.S. jurisdiction under the statute, which can extend to foreign companies operating overseas, even if those companies face enforcement actions in their home countries. Jurisdiction in this case was established through a single wire transfer made by Lafarge from Paris via a U.S. intermediary bank, along with the use of U.S. email accounts by Lafarge executives

It is important to note that in both Chiquita and Lafarge civil lawsuits were filed following these enforcement actions and each company ultimately paid damages to the alleged victims of the FTOs in question, adding an additional layer of exposure arising from the companies’ entanglement with them.

The Significance of the Present Designations

To the extent they readily can be discerned, this administration’s priorities appear to emphasize border security and trade protectionism. Coupled with the administration’s explanation that its 180-day “pause” of investigation and prosecution of violations of the Foreign Corrupt Practices Act (the “FCPA”) was motivated at least in part by the view that the statute places U.S. businesses at a disadvantage globally, these designations would not appear to be made for the purpose of exposing U.S. companies to criminal sanction (although the administration may be indifferent to, or may even welcome, imposing such consequences on foreign companies competing with U.S. businesses). Irrespective of the underlying purpose of the designations, however, they have several profound implications for companies operating in Mexico, El Salvador, Venezuela, and any other jurisdictions in which the FTOs operate. Because it is widely understood that, particularly in Mexico, these FTOs have penetrated into daily life and have pervasive influence over the movement of goods and people, the likelihood of contact between business interests and cartel members is high, and payments to the cartels for, among other things, protection and safe passage, are common. This development criminalizes any such transaction.

Questions Companies Should Be Asking

Given the extensive implications of the FTO designations, U.S. companies should consult their legal counsel to address several critical questions:

1. What constitutes "material support" under the current regulations, and which of our business activities could potentially be classified as such?
2. How can we enhance our due diligence and compliance protocols to ensure that we are not inadvertently engaging with cartel-affiliated entities or individuals?
3. What are the potential civil liabilities under the Anti-Terrorism Act, and how can we mitigate these risks?
4. What steps should we take if we suspect that we have unknowingly engaged in transactions with a designated FTO?
5. What training and reporting mechanisms should we establish for our employees and agents to ensure they are aware of the legal risks and can identify potential red flags?

How Dechert Can Help

This expansion of U.S. anti-terror law necessitates heightened vigilance and robust compliance efforts from companies with operations in Latin America. By asking the right questions, seeking legal guidance, and implementing stringent risk management protocols, companies can mitigate exposure to legal and financial liabilities while maintaining their commitment to lawful business practices. The lawyers at Dechert can help. We know this statute and these organizations well. Many of us are former prosecutors with lengthy experience working with U.S. law enforcement to build prosecutions under the Material Support statute, including prosecutions of FTO members and supporters in Latin America. We also have extensive knowledge and experience handling civil cases under the ATA. Through proactive measures and thorough compliance strategies, we can help businesses identify risks, navigate this complex legal environment, and safeguard their operations against the heightened scrutiny associated with these new designations.