Doing Business in High-Risk Jurisdictions: Litigation Risks Arising from Latin American FTO Designations

In an era of increasing global instability, companies are frequently operating in high-risk jurisdictions—regions facing volatility which pose serious operational challenges. For companies doing business in Latin America, the Trump Administration’s recent designations of several Latin American-linked cartels and transnational criminal organizations as foreign terrorist organizations (FTOs) is exposing companies operating in the region to unprecedented risks in the United States. 

In February 2025, the US 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. Historically, FTO designation has typically been associated with violent terrorist organizations operating far from US borders, with little connection to American businesses (Al Qaeda, ISIS, and Boko Haram). 

The most recent FTO designation are different: they target cartels deeply embedded in local Latin American economies across critical sectors such as mining, agriculture, and logistics. Engaging with FTOs, even indirectly, potentially exposes companies operating in Latin America to substantial criminal and civil risk in US courts.

Criminal Liability

Companies that engage with FTOs, including by providing material support or resources, may face criminal liability.[1] “Material support” is construed broadly, and even routine business interactions can become perilous. Importantly, this can include extortion payments or any other payments in exchange for permission from an FTO to operate in a territory, a practice common among cartels. 

This risk is real: 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, paying criminal fines and forfeiture totalling $777.78 million.[2]

Civil Liability

Engaging with FTOs may also subject companies to significant civil litigation risk in the US. The Anti-Terrorism Act (ATA) allows US 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. For more details on the ATA, see our previous blog post here.

With the recent FTO designations, a material increase in civil ATA claims is expected. The Camarena v. Caro-Quintero lawsuit filed against the Sinaloa Cartel just weeks post-designation is a preview of claims companies may face.[3] While this is a lawsuit directly against the cartel, plaintiffs may use the legal theories advanced in Camarena to sue and to seek to impose liability on legitimate businesses. 

Key Takeaways

The FTO designations earlier this year present a complex and still-emerging business risk. Given this evolving legal landscape, proactive measures are critical for companies doing business in Latin America. Enhanced due diligence and risk assessments, strong internal compliance controls, and vigilant financial and operational monitoring are essential steps to mitigate potentially substantial criminal and civil liabilities. 

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This blog post is part of an ongoing series exploring the legal, commercial, and strategic complexities of operating in conflict zones and high-risk jurisdictions. Contributors to this series include Freshfields attorneys Timothy Harkness, Kate Cooper, Joshua Kelly, Sylvia Noury, Alexandra van der Meulen,  Carsten Wendler, Piusha Bose, Maria Slobodchikova, Paige von Meheren, Jackson Myers, Heather Cameron, and Jordan McGuffee. Stay tuned for upcoming posts, and please reach out with topics, questions, or experiences you’d like us to cover as part of this ongoing conversation.

For a collection of related previous posts and webinars, please click this link.