How the US terrorist designation of Mexican cartels is reshaping the risk landscape for business

The designation, made at the start Trump's second term, empowers the US Department of Justice (DOJ) to pursue legal action against those providing material support to these designated groups.  This liability can arise from seemingly legitimate business activities. Companies need to reassess their criminal liability to anti-money laundering laws and exposure to terrorism-financing risks.

The criminal puzzle

The term "cartel" is a misnomer. It suggests an organised criminal group that is focused solely on drug trafficking, has an agreed market share with rivals, and has a clearly defined sphere of operations. However, the reality of OCGs in Mexico is far more intricate.

The groups are now involved in a wide array of illicit and "legal" activities, fiercely contesting spheres of influence through turf wars and internecine conflict. This fluid and complex operational environment means that businesses can inadvertently find themselves doing business with designated entities.

While groups such as the Sinaloa and Jalisco New Generation (CJNG) Cartels were among the initial groups designated in Trump’s executive order, other significant actors such as the Santa Rosa de Lima Cartel, the Juárez Cartel, and the Tijuana Cartel may soon be added to the list.

Material support and legal exposure

Understanding what constitutes “material support” is critical. Liability can arise even if a company unknowingly supports a designated group or shows “deliberate indifference” to its status or activities — even if that support is legal in nature. Prosecutors do not need to prove intent to support terrorism or involvement in illegal activities.

The most cited example of indirect support - and a likely area of focus for regulators - is companies making extortion payments (derecho de piso) to a criminal group. This practice is prevalent across multiple sectors, especially mining and oil and gas, where companies are periodically subjected to extortion demands.

A significant challenge lies in verifying the identity of the extorting group, as smaller actors often claim ties to larger, well-known OCGs to gain credibility. Given the complexity and geographic extent of organised crime in Mexico, sector exposure varies significantly by region. The level of risk depends on each group’s dominant activities by location, the economic strengths of individual states, and specific vulnerabilities within supply chains.

Control Risks has identified several preliminary cases of private sector exposure in key hotspots.

Navigating indirect links

Moving forward, key developments for businesses to monitor include the specifics of DOJ enforcement strategies and whether the initial focus will be on targeting companies linked to OCGs or dismantling major organised crime schemes. The Trump administration is likely to start with high-profile cases, followed by more targeted enforcement.

The Office of Foreign Assets Control (OFAC) has already taken action, confirming that OCGs in Mexico are operating binational fuel theft networks with shell companies in Texas. Recently  three Mexican nationals and two Mexico-based companies involved in these activities were sanctioned,  when Mexico’s Anti-Corruption Ministry linked them to Pemex customs officials working with the Jalisco New Generation Cartel (CJNG) in fuel theft operations (huachicoleo fiscal) by systematically failing to report hydrocarbon imports and exports. This highlights the interconnectedness of these illicit operations.

The US Treasury has also warned of potential secondary sanctions for entities engaging with penalised companies.

Despite growing urgency, some companies are hesitant to implement proactive measures due to uncertainty around enforcement. However, Control Risks' sources indicate that the DOJ is actively preparing cases, with the first expected in later this year.  One politically expedient priority will likely involve Canadian entities operating in Mexico, considering recent US-Canada tensions.

Law & disorder

Beyond direct extortion payments, a significant immediate risk stemsfrom inadvertent links to OCGs through third party relationships, such as subcontractors, logistics providers or labour unions. In many regions of Mexico, OCGs influence these actors through coercion, infiltration, or mutually beneficial arrangements. Consequently, businesses can be face exposure simply by hiring contractors who, in turn, have ties to OGG-linked companies or the groups themselves.

This risk is exacerbated by challenging due diligence environments.  The prevalence of Middlemen (colloquially known as gestores), opaque corporate structures and falsified documents often conceal links to OCGs. Seemingly legitimate providers often act as fronts or engage in illicit activities like fuel smuggling or extortion rackets, making it difficult to detect indirect connections.

From penalties to public perception

The consequences of violating the designation can be severe. Penalties for knowingly providing material support to Foreign Terrorist Organizations (FTOs) include fines and imprisonment —potentially up to a life sentence if a casualty occurs. Financial institutions failing to freeze assets associated with designated groups face civil penalties of at least $50,000 USD per violation or twice the amount that should have been frozen.

A significant but often overlooked risk is civil litigation. In the early 2000s in Colombia, a company admitted to paying a designated FTO and has faced lawsuits in US courts from victims claiming the funds contributed to human rights abuses. Similar cases may emerge in Mexico, brought for example by victims of OCG-related violence or families of fentanyl overdose victims in the US.

Furthermore, public exposure resulting from the Trump Administration's pronouncements can inflict serious reputational damage on companies perceived to have links to FTOs, even if these connections are unintentional.

Paper trails

The US designation of Mexican organised criminal groups as foreign terrorist organisations sends a clear message: Global companies with operations or supply chains in Mexico must adopt a proactive approach to mitigate their risk exposure.

Understanding the  the key institutions involved in enforcement — including the US Department of Justice and US state attorneys, who have jurisdiction to pursue cases under terrorism-financing laws—is crucial. Comprehensive documentation will be essential to withstand DOJ scrutiny and support due diligence in both civil and criminal cases.

Key steps include:

By taking these proactive steps, businesses can significantly reduce their exposure to the evolving risks associated with the US terrorist designation of Mexican organised criminal groups.