The Trump Administration’s recent designation of eight international criminal organizations as foreign terrorist organizations (FTOs) has increased litigation risk for companies doing business in Latin America. Companies need to understand these new risks and how they can be mitigated.
The new risk concerns drug cartels and terrorism – two things that most companies think they avoid entirely. On February 20, 2025, the U.S. Department of State designated eight international criminal organizations as FTOs. Among these organizations are drug cartels with substantial ties to Mexico, such as the Sinaloa Cartel, as well as other organizations with roots and networks throughout Latin America. These designations expose companies operating legitimate businesses in Mexico and other Latin American countries to significantly increased legal risk.
FTO designation authority has existed for nearly thirty years and has typically been associated with violent terrorist organizations such as Al Qaeda, ISIS, and Boko Haram and with rebel groups such as the New Irish Republican Army, Spain’s ETA, and the Shining Path. Organizations designated as FTOs generally operated far from American borders and had few connections with the United States or American businesses.
Now, however, companies operating throughout Latin America may wish to consider the legal and commercial implications of FTO designations, as many FTO-designated cartels have embedded themselves in industries such as mining, logistics and transportation, agriculture, and telecommunications. For example, companies in the automotive industry that source parts from Mexico might consider mitigating risk by vetting suppliers and manufacturers to ensure they face no indirect exposure to cartel-controlled supply chain networks. Similarly, agricultural companies are also vulnerable to liability risks, as cartels have historically exerted influence over farms, production facilities, and transportation routes. Financial institutions also stand to face unprecedented liability risks due to a variety of statutory requirements.
What does this “indirect exposure” look like? In cases dealing with terrorism in other parts of the world, companies are sometimes accused of doing business with entities suspected of being fronts for FTOs. Other times, companies are accused of paying protection money to FTOs and those working for them to avoid death or assault, only to be accused later of being a terrorism funding source. Whatever the allegation, the cost for being seen as collaborating with FTOs can be severe.
Criminal Liability
Companies that engage with FTOs, including by providing material support or resources, may face criminal liability. See 18 U.S.C. § 2339B. “Material support or resources” is construed broadly to include tangible and intangible property, financial services, lodging, training, expert advice or assistance, safehouses, communications equipment, facilities, personnel, and transportation. See 18 U.S.C. § 2339A(b)(1). This means that a logistics company that rents a vehicle that is then used to transport illicit substances has potentially provided material support to an FTO in the form of “transportation.” A telecommunications provider that knowingly sells a burner phone to an FTO member may have provided material support by way of “communications equipment.” The same applies to a leasing company knowingly renting a warehouse, apartment, or even storage locker to a member of an FTO, as “lodging,” “safehouses,” and “facilities” are material support. Organizations engaging in philanthropy or that support organizations providing humanitarian aid may also be subject to unique liability risks.
Material support also includes extortion payments or any other payments in exchange for permission from an FTO to operate in a territory—a practice in which cartels have long engaged. These payments can expose companies to serious criminal liability. For example, in 2022, French cement maker Lafarge S.A. pled guilty to providing financial support to ISIS in exchange for permission to operate a cement plant in Syria from 2013 to 2014. As a result, Lafarge paid criminal fines and forfeiture totaling $777.78 million.[1]
To be held liable for material support to terrorism, a company must have known the organization in question was an FTO or engaged in terrorist activities, or have “exhibited deliberate indifference” to such facts. See Weiss v. Nat’l Westminster Bank PLC, 768 F.3d 202, 208 (2d Cir. 2014). However, prosecutors do not have to show that defendants intended to further an FTO’s illegal activities or participated in committing an act of terrorism. In other words, a business or an individual may be criminally liable for providing support even for lawful activities of an FTO. For instance, in Holder v. Humanitarian L. Project, the U.S. Supreme Court held that material support includes training for humanitarian relief and peaceful dispute resolution, in part because “foreign terrorist organizations do not maintain legitimate financial firewalls between those funds raised for civil, nonviolent activities, and those ultimately used to support violent, terrorist operations.” 561 U.S. 1, 29–31 (2010). Similarly, donating money to the “nonviolent wing” of an FTO subjects the donator to criminal liability even if the money was earmarked for the organization’s ongoing social welfare activities. See Boim v. Holy Land Found. for Relief & Dev., 549 F.3d 685, 698 (7th Cir. 2008).
Civil Liability
Engaging with FTOs also exposes companies to civil litigation in the United States. A U.S. law, the Anti-Terrorism Act (ATA), creates a private right of action allowing U.S. nationals injured by an act of international terrorism to sue both the principal wrongdoers and those who aid and abet or conspire with an FTO to commit terrorist acts. Defendants in ATA cases face treble damages and attorneys’ fees—which can lead to tremendous exposure, since hundreds of victims often sue simultaneously. Even if ATA claims against a company are eventually denied, such proceedings are likely to subject a company to years of costly litigation and widespread reputational damage.
Under the ATA’s secondary liability provisions, a company can be held liable for either aiding and abetting or conspiring with an FTO to commit an act of international terrorism. The ATA does not aim to punish businesses that are “innocent bystanders” for the “misuse of their goods and services” and requires a showing that a company “consciously and culpably” participates in an international terrorist act in a way that helps “it succeed.” Twitter, Inc. v. Taamneh, 598 U.S. 471, 493 (2023). However, a company does not need to know all of the specifics of a particular terrorist attack to be liable, as long as the attack was a “foreseeable risk” of its activities. Id. at 496. A company’s assistance can also be so “pervasive and systematic” that it may be held liable for all acts of the terrorist group. Id. at 506.
Plaintiffs increasingly use the secondary liability provisions of the ATA to sue “mainstream” businesses, including financial institutions, social-media companies, pharmaceutical companies, telecommunications companies, and industrials. In these cases, plaintiffs typically allege that the companies have provided services or sold goods to other companies or individuals linked to terrorist organizations. For instance, in Atchley v. AstraZeneca UK Ltd., victims of terrorism unsuccessfully alleged that pharmaceutical companies aided-and-abetted attacks organized and executed by Jaysh al-Mahdi, an Iraqi Shia militia and a designated FTO, by providing medical supplies to the Iraqi Ministry of Health, a purported front for the FTO. See 22 F.4th 204, 209–10 (D.C. Cir. 2022), cert. granted, judgment vacated, 144 S. Ct. 2675 (2024).
Even before the February 2025 FTO designations, plaintiffs tried to allege civil terrorism-related claims against financial institutions in connection with their transactions with Mexican drug cartels. For example, victims of drug cartels have brought ATA claims against global banks for laundering drug proceeds, including by opening USD-denominated accounts and accepting large cash deposits from individuals and entities that were known or suspected money launderers for the cartels without obtaining required know-your-customer information. Such actions were dismissed in part because the cartels were not FTOs at the time. With the new FTO designations, we expect a material increase in the number of civil ATA claims.
Key Takeaways
The new FTO designations pose increased litigation risk for companies doing business in Latin America. The options to be considered to mitigate these risks may include establishing clear internal guidelines, maintaining comprehensive record-keeping, and implementing heightened due diligence and protocols for screening customers and counterparties.
Specifically, options to strengthen measures to guard against unwitting or indirect involvement with cartels and other designated parties may include training employees to identify potential red flags when engaging with third parties, conducting thorough background checks of third parties and risk assessments of operations to identify potential high-risk areas, and maintaining robust compliance programs and policies. Companies may also wish to consider identifying suppliers, distributors, and logistics partners that implicate higher risk exposures to determine whether any assets may come from cartel operations. Other options to mitigate risks include monitoring changes in ownership, financial audits, and legal standing, as well as diligence to determine whether “shell” companies may be functioning as a front for cartel operations.
[1] Office of Public Affairs | Lafarge Pleads Guilty to Conspiring to Provide Material Support to Foreign Terrorist Organizations | United States Department of Justice
