President Trump Issues Executive Order Signaling a Push to Designate Drug Cartels as Foreign Terrorist Organizations

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On his first day in office, President Trump issued an executive order declaring a national emergency and establishing a process for designating certain international cartels and other organizations as Foreign Terrorist Organizations or Specially Designated Global Terrorists.[1] The designation of drug cartels as Foreign Terrorist Organizations (“FTO”), a label traditionally reserved for terrorist organizations like Al Qaeda, Boko Haram, and ISIS, would further increase the risks of U.S. and non-U.S. companies operating in certain countries in Latin America whose business operations may at times come into contact with cartel activity. For example, companies may face legal exposure by making ransom payments, paying protection money, or knowingly engaging in business dealings with companies owned by cartels.

Background

Foreign Terrorist Organizations

Section 219 of the Immigration and Nationality Act authorizes the president to “designate an organization as a foreign terrorist organization” if he concludes that “the organization is a foreign organization,” “the organization engages in terrorist activity,” and “the terrorist activity or terrorism of the organization threatens the security of United States nationals or the national security of the United States.”[2] Once an organization is designated as an FTO, “the Secretary of the Treasury may require United States financial institutions possessing or controlling any assets [of that organization] to block all financial transactions involving those assets.”[3]

Pursuant to this statute, the State Department maintains a list of FTOs.[4] There are currently 68 organizations on this list. The two most recent additions were made in 2021, when the State Department added FARC and Segunda Marquetalia (both Colombian) to the list.

Specially Designated Global Terrorists

Pursuant to the International Emergency Economic Powers Act, President George W. Bush issued an Executive Order 13224 (2001) sanctioning various individuals and entities as terrorists and authorizing the Secretary of State and the Secretary of the Treasury to make additional designations. OFAC implements the executive order under its Specially Designated Global Terrorists (SDGTs) program and maintains the names of SDGTs on its Specially Designated Nationals (SDN) List.

The Executive Order

President Trump’s January 20, 2025 executive order states that it is “the policy of the United States to ensure the total elimination of these organizations’ presence in the United States and their ability to threaten the territory, safety, and security of the United States through their extraterritorial command-and-control structures, thereby protecting the American people and the territorial integrity of the United States.” The order provides that, within 14 days, the Secretary of State, in consultation with the Secretary of the Treasury, the Attorney General, the Secretary of Homeland Security and the Director of National Intelligence, shall make a recommendation regarding the designation of any cartel or other organization as an FTO or a SDGT. Presumably, once such a recommendation is made, President Trump will consider what further action to take, including making the designations.

Analysis

Although prior administrations and members of Congress across the political spectrum have considered designating drug cartels as FTOs, they have not done so. Such a designation would expand the potential legal exposure of both U.S. and foreign businesses (and their executives) whose business operations may come into contact with designated cartels.

OFAC has sanctioned numerous drug cartels and associated companies and individuals, and accordingly placed their names on the SDN List. OFAC’s power to sanction drug cartels stems primarily from its authorities under its Significant Narcotics Traffickers program (pursuant to Executive Order 12978) and its authority under the Kingpin Act.[5] These designations have included, among others, major Mexican cartels involved in manufacturing and trafficking fentanyl.[6] U.S. persons are prohibited from engaging in virtually all transactions with SDNs, and non-U.S. persons are generally prohibited from engaging in transactions with SDNs that involve a U.S. nexus, such as the processing of payments through the U.S. financial system.[7] U.S. and non-U.S. persons face the risk of civil and criminal penalties for violative transactions with SDNs. Moreover, as in other sanctions programs, non-U.S. persons who provide material support to SDNs are at risk of being sanctioned themselves and placed on the SDN List.[8]

Even if a cartel is already on the SDN List, an FTO designation—which has historically been reserved for terrorist organizations like Al-Qaeda, Boko Haram, Hezbollah, and the Islamic State—would further increase the legal risk to any person or entity that knowingly engages with the designated entity. Specifically, 18 U.S.C. § 2339B prohibits persons from knowingly providing material support or resources to a foreign terrorist organization, and from attempting or conspiring to do so. “Material support” includes any tangible or intangible property, including currency, financial services and other monetary instruments. The violator must know that the organization receiving material support is a designated terrorist organization, such as ISIS, but does not need to share the goals or beliefs of that organization.

While transactions with an SDN are only prohibited if they are conducted by U.S. persons or there is some other nexus to the United States, the material support statute has extraterritorial reach.[9] In effect, if a Mexican national who is an executive of a Mexican company knowingly directs the company to engage in dealings with a cartel that has been designated an FTO, she could potentially be charged with material support for terrorism if she later entered the United States on vacation. The implications of the broad definition of “material support,” combined with the extraterritorial reach of the statute, are significant in light of the broad range of circumstances in which businesses operating in or with Mexico may encounter cartel activities. These can include making ransom or extortion payments or making payments to a company that a cartel owns.

The Department of Justice has previously charged companies with providing material support to terrorism if they knowingly make payments to FTOs. In 2007, Chiquita Brands International, Inc. pleaded guilty to material support for terrorism for making more than 100 “security payments” totaling over $1.7 million to the AUC, a Colombian paramilitary organization.[10] Chiquita agreed to pay a $25 million fine. In 2022, as we discussed in a prior client alert, French cement company Lafarge S.A. and its Syrian subsidiary pleaded guilty to material support for terrorism based on more than $6 million in payments to ISIS and another terrorist organization in exchange for protection and permission to operate a cement plant during the Syrian Civil War. Lafarge agreed to a $778 million fine.[11]

Separately, companies or individuals aid and abet or conspires with FTOs to commit acts of terrorism face potential civil liability. Under the Anti-Terrorism Act, “[a]ny national of the United States injured in his or her person, property, or business by reason of an act of international terrorism, or his or her estate, survivors, or heirs, may sue therefor in any appropriate district court of the United States and shall recover threefold the damages he or she sustains and the cost of the suit, including attorney's fees.”[12] 18 U.S.C. § 2333(a). Section 2333(c)(2) limits the reach of the statute to “an organization that had been designated as a foreign terrorist organization under section 219 of the Immigration and Nationality Act.” Designation of cartels as foreign terrorist organizations could expose banks and other commercial counterparties to the risk of litigation under the Anti-Terrorism Act. [13]

At this stage, it is unclear what additional designations will result from this executive order. In the event of additional designations, U.S. and non-U.S. companies that are engaged in business dealings in Mexico and other countries where the designated organizations are operating, and whose business operations may come into contact with cartel activity, should consider conducting or refreshing a risk assessment to identify potential areas of interaction with cartels, and associated individuals and businesses. Companies should also consider reviewing their due diligence policies and procedures to ensure that they are well-designed to detect higher risk activities that may involve cartels. Financial services firms should consider a risk-based approach to any designations and apply appropriate diligence in business sectors that the designated cartels are known to operate in.

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[1]        Designating Cartels And Other Organizations As Foreign Terrorist Organizations And Specially Designated Global Terrorists (“Executive Order”), The White House (Jan 20, 2025), https://www.whitehouse.gov/presidential-actions/2025/01/designating-cartels-and-other-organizations-as-foreign-terrorist-organizations-and-specially-designated-global-terrorists/.

[2]        8 U.S.C. § 1189(a)(1).

[3]        Id. § 1189(a)(2)(C).

[4]        Designated Foreign Terrorist Organizations, U.S. State Department, https://www.state.gov/foreign-terrorist-organizations/.

[5]        21 U.S.C. §§ 1901-1908 and 8 U.S.C. § 1182.

[6]        See, e.g., Treasury Sanctions Key Members of La Linea, a Group Involved in Trafficking Fentanyl into the United States, United States Department of the Treasury (October 31, 2024), https://home.treasury.gov/news/press-releases/jy2704.

[7]        BIS, OFAC, and DOJ Highlight That Sanctions and Export Controls Apply to Non-U.S. Companies and Individuals, Paul, Weiss Client Memorandum, March 12, 2024, https://www.paulweiss.com/practices/litigation/national-security-cfius-fara/publications/bis-ofac-and-doj-highlight-that-sanctions-and-export-controls-apply-to-non-us-companies-and-individuals?id=50638

[8]        Executive Order 14059 (“Imposing Sanctions on Foreign Persons Involved in the Global Illicit Drug Trade”), Section 1(b)(i).

[9]        18 U.S.C.§ 2339B(d).

[10]       Chiquita Brands International Pleads Guilty to Making Payments to a Designated Terrorist Organization And Agrees to Pay $25 Million Fine, Department of Justice (March 19, 2007), https://www.justice.gov/archive/opa/pr/2007/March/07_nsd_161.html.

[11]       Lafarge Pleads Guilty to Conspiring to Provide Material Support to Foreign Terrorist Organizations, Department of Justice (October 18, 2022), https://www.justice.gov/opa/pr/lafarge-pleads-guilty-conspiring-provide-material-support-foreign-terrorist-organizations; DOJ Brings First Terrorism Material Support Charge Against a Corporation, Underlining the Importance of Compliance When Operating in High-Risk Countries and of Robust M&A Due Diligence, Paul, Weiss, Rifkind, Wharton & Garrison LLP, October 20, 2022, https://paulweiss.com/practices/litigation/economic-sanctions-aml/publications/doj-brings-first-terrorism-material-support-charge-against-a-corporation?id=45105.

[12]       Second Circuit Vacates and Remands Judgment Against Arab Bank in Antiterrorism Act Lawsuit, Paul, Weiss Client Memorandum, February 12, 2018, https://www.paulweiss.com/practices/litigation/economic-sanctions-aml/publications/second-circuit-vacates-and-remands-judgment-against-arab-bank-in-antiterrorism-act-lawsuit?id=25954.

[13]       See, e.g. Linde v. Arab Bank PLC, 882 F.3d 314 (2d Cir. 2018) (reversing jury verdict against bank for providing financial services to terrorists and remanding for further proceedings).