Recent press coverage suggests the U.S. government is poised to continue using foreign terrorist organization (FTO) designations to combat entities that historically were viewed as criminal—rather than terrorist—enterprises. According to leading Brazilian prosecutors and senior U.S. officials, the Trump Administration is likely to designate two of Brazil’s largest criminal organizations—the Primeiro Comando da Capital (PCC) and Comando Vermelho—as FTOs. Such designations would follow similar actions earlier this year that the Administration took against drug cartels and other criminal organizations across Mexico and Latin America. As such, these actions represent a significant escalation in Washington’s efforts to curb transnational organized crime. They also signal heightened litigation and regulatory risk for companies operating in Brazil and the wider Latin American region.
If finalized, the designations of PCC and Comando Vermelho may expand dramatically the potential criminal liability of companies under U.S. anti-terrorism statutes which prohibit providing material support to FTOs. U.S. courts have repeatedly held that “material support” can encompass what would otherwise be ordinary commercial transactions, like financial services, supply of goods, lodging, and transportation, and humanitarian aid, regardless of whether the support is intended for violent or nonviolent activities.[1] This risk can extend to business’s indirect involvement, such as dealings with suppliers or distributors linked to cartel-controlled networks, or making payments to third parties connected with these organizations.
The FTO label also opens the door to a U.S. courtroom, where American victims of violence by a designated FTO may bring Anti-Terrorism Act claims against companies alleged to have aided or abetted these groups—potentially exposing companies to treble damages, attorneys’ fees, and years of costly, reputationally-damaging litigation. Even businesses without direct U.S. presence may face suit, as U.S. courts have asserted jurisdiction over foreign entities if the conduct is sufficiently connected to the United States. For a more detailed analysis of these types of U.S. litigation risks, see our blog post here.
For companies in Brazil or the broader Latin America region, proactive mitigation is crucial. The recent federal police operation Carbono Oculto has reportedly uncovered significant links between the PCC’s criminal activities and legitimate economic sectors, including financial services. Given how quickly the legal framework may change, boards and legal teams should closely monitor developments in both the U.S. and Brazil, including ongoing policy debates and forthcoming official actions. Vigilance in compliance, robust due diligence, and adaptability in policies will be vital in the months ahead. Staying abreast of regulatory updates and enforcement trends will give businesses the best chance to anticipate and mitigate their risk as this legal landscape continues to evolve.
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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, Nabeel Yousef, Kate Cooper, Joshua Kelly, Sylvia Noury, Alexandra van der Meulen, Carsten Wendler, Matthew Haggans, Piusha Bose, Maria Slobodchikova, Paige von Meheren, Andrew Bulovsky, Jackson Myers, Heather Cameron, Elischke de Villiers, Keian Razipour, Omeed Askary, Jordan McGuffee, and Paloma Palmer. 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.
[1] See e.g. Holder v. Humanitarian L. Project, 561 U.S. 1, 29–31 (2010); see also Boim v. Holy Land Found. for Relief & Dev., 549 F.3d 685, 698 (7th Cir. 2008).
