On January 20, 2025, President Trump issued an executive order titled “Designating Cartels and Other Organizations as Foreign Terrorist Organizations and Specially Designated Global Terrorists.” The order directs the Secretary of State within 14 days, i.e., by February 3, “to make a recommendation regarding the designation of any cartel or other organization” as “a Foreign Terrorist Organization [FTO]” or “Specially Designated Global Terrorist [SDGT].” 

In light of the Order and potentially forthcoming designations, companies with operations in Mexico and Latin America in particular should pay close attention to the potential compliance and legal risks that may emerge. Notably, the Order itself explicitly notes that “In certain portions of Mexico, [cartels] function as quasi-governmental entities, controlling nearly all aspects of society.” Earlier, in 2022, a group of U.S. senators, including now Secretary of State Marco Rubio, introduced a resolution in the U.S. Congress stating that “cartels now control 30 to 35 percent of Mexican territory.” Whether these pronouncements are accurate or not, they are evidence of the current U.S. Executive Branch’s views on cartels and their influence in Mexico and will likely inform the forthcoming designations and the U.S.’s enforcement approach going forward. 

Below, we discuss some of the legal and compliance implications of the potential FTO and SDGT designations.

I. Legal Overview

A. FTOs

The Immigration and Nationality Act authorizes the Secretary of State to designate an organization as an FTO if the organization is a “foreign organization” that “engages in terrorist activity,” which threatens U.S. nationals or the security of the United States.¹ Seven days prior to making a designation, the Secretary must notify members of Congress via a classified communication of the intent to designate an organization as an FTO.² Seven days after providing this notification, the Secretary must publish the designation in the Federal Register, and the designation then becomes effective.³ 

The designation of an entity as an FTO has legal and compliance implications for anyone potentially doing business with the entity. 

Civil Liability for Financial Institutions. As to civil liability, federal law requires “any financial institution that becomes aware that it has possession of, or control over, any funds in which a foreign terrorist organization, or its agent, has an interest to (A) retain possession of, or maintain control over, such funds; and (B) report to the Secretary the existence of such funds in accordance with regulations issued by the Secretary.”⁴ Failure to do so subjects the financial institution to civil penalties of up to twice the amount that the institution should have retained possession or control of.⁵

JASTA. Further, the Anti-Terrorism Act (ATA) allows a U.S. national to seek recovery—in the form of treble damages—for an injury to his person or property “by reason of an act of international terrorism.”⁶ As originally enacted, the ATA allowed recovery only against defendants who themselves committed acts of international terrorism; however, in 2016 the statute was amended with the enactment of the Justice Against Sponsors of Terrorism Act (JASTA). JASTA allows civil plaintiffs to bring actions against anyone who “aids and abets, by knowingly providing substantial assistance,” or conspires with, a person who commits an act of international terrorism “planned, committed, or authorized” by an FTO.⁷ Following JASTA’s passage, plaintiffs used JASTA to bring aiding and abetting claims against numerous banks, government contractors, healthcare companies, and social media companies for allegedly aiding FTOs. In 2023, however, in Taamneh v. Twitter, 598 U.S. 471 (2023), the Supreme Court clarified JASTA’s reach, holding that JASTA liability requires “conscious, voluntary, and culpable participation in another’s wrongdoing” and therefore could not be used to impose liability on social media companies for allegedly aiding and abetting ISIS attacks in Europe based on ISIS’s use of their platforms to post videos and other content. The fallout from Taamneh continues to play out in the lower courts, but it appears to limit many of the expansive theories JASTA plaintiffs previously relied on, although at least some risk of civil liability remains under the “conscious, voluntary, and culpable” standard. 

The “Material Support” Statute. It is a federal crime to provide “material support or resources” to an FTO. 18 U.S.C. § 2339B. The statute broadly defines “material support or resources” as “any property, tangible or intangible, or service, including currency or monetary instruments or financial securities, financial services, lodging, training, expert advice or assistance, safehouses, false documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel (1 or more individuals who maybe or include oneself), and transportation, except medicine or religious materials.”⁸

Other Legal Consequences. Representatives and members of a designated FTO, if they are aliens, are inadmissible to and, in certain circumstances, removable from the United States. See 8 U.S.C. §§ 1182 (a)(3)(B)(i)(IV)-(V), 1227 (a)(1)(A)). Finally, FTOs are subject to the full range of “blocking” prohibitions discussed below in the context of SDGTs.

B. SDGTs

The U.S. Treasury Department may also designate persons or entities as SDGTs. “U.S. persons”—a term that includes U.S. citizens and permanent resident aliens regardless of where they are located, all persons and entities within the United States, and all U.S.-incorporated entities and their foreign branches—are prohibited, or “blocked,” from transacting with SDGTs. If a person or entity violates these prohibitions, intentionally or not, the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) can impose civil monetary penalties. “Willful” violations can be criminally prosecuted by the U.S. Department of Justice. 

Notably, under OFAC’s “50 percent rule,” an entity is considered blocked if it is owned 50 percent or more by one or more blocked persons. Thus, even if an entity is not itself listed as an SDGT, U.S. persons can be prohibited from transacting with it depending on its ownership. For that reason, when conducting KYC or third-party due diligence, the incorporation of screening tools that consider an entity’s ownership structure can be essential to an effective compliance program.  

OFAC may, in some instances, issue general or specific licenses allowing certain kinds of transactions despite the SDGT designation. For example, after the U.S. Treasury Department designated the Yemeni-group Ansarallah (a/k/a the “Houthis”) as an SDGT in 2024, OFAC issued five categories of general licenses to allow entities to continue to provide humanitarian aid and commercial goods in Yemen. These licenses allowed for transactions involving (1) agriculture, medicine, and medical devices; (2) telecommunications, mail, and certain internet communications; (3) personal remittances; (4) refined petroleum products (including fuel); and (5) operation and use of ports and airports for import of goods.

II. A Cautionary Tale 

While it may be easy to think “we would never do business with an FTO,” a recent case provides a stark example of the need for an objective assessment, or re-assessment, of compliance programs and legal and reputational risk in light of the new potential FTO designations. In 2022, the U.S. Department of Justice announced that an international cement manufacturer and its Syrian subsidiary had pled guilty to providing material support and resources to ISIS and the al-Nusrah Front, both FTOs, and agreed to pay criminal fines and forfeiture totaling $778 million.⁹

Notably, as alleged, the company’s activity in Syria began before the Syrian civil war and before ISIS and al-Nusrah took control of large swaths of Syrian territory. Prior to those events, the company had built, at a cost of $680 million, and begun operating a cement plant in Syria. After the war began, the area around the plant became controlled by armed groups, including the FTOs. Using third-party intermediaries, the cement manufacturer and its Syrian subsidiary paid these groups to protect their employees, to ensure the plant could continue to operate, and, in the words of the government, “to obtain economic advantage over their competitors in the Syrian cement market.” The payments included purchasing raw-materials from ISIS-controlled suppliers, paying the groups to allow employees to get through checkpoints controlled by the groups, and eventually paying “taxes” to the groups based on the volume of cement that the companies sold. 

III. Takeaways 

In light of the pending potential FTO and SDGT designations, companies should consider the following:

• Companies with operations in an area that becomes subject to control or influence by an FTO or SDGT (either because the FTO/SDGT gains control of the territory or an entity or person that has influence in the territory is designated as an FTO/SDGT) should promptly re-assess legal, operational, and personal safety risks. 
• Many of the issues that companies currently look at in anti-bribery and sanctions compliance will be useful in any such re-assessment. These issues include (i) extensive third-party diligence, (ii) establishing or examining controls related to payments to third-parties, and (iii) establishing or reassessing controls related to “consultants” and other intermediaries.
• In particular, companies should evaluate internal controls related to obtaining necessary local government approvals or permits, including for building and operating their business, for traveling through an area, and for using ports, airfields or other transportation infrastructure, particularly in areas that may be subject to cartel control. 
• Given the broad definition of “material support,” however, this scrutiny should be even more exacting than in the anti-bribery context. 
• Companies should also consider requiring their personnel to promptly report any extortion or ransom demands by local actors, so the company can consider reporting those to the U.S. government.  
• Companies should document any such risk-based assessment and any additional compliance steps they take as a result of such an assessment. This documentation may prove valuable if and when an OFAC or DOJ inquiry arises (particularly given OFAC’s strict liability regime). 
• Companies should carefully monitor OFAC SDGT designations, as well as any licenses OFAC issues for humanitarian or commercial transactions. 
• Financial institutions in particular should consider enhanced due diligence for onboarding of customers from high-risk areas (keeping in mind OFAC’s 50 percent rule discussed above) and ensuring they have appropriate controls to identify and freeze any funds in their possession belonging to an FTO or SDGT. 

Brendan Quigley is a Litigation and Investigations partner. Before joining Baker Botts, he served as a federal prosecutor in the Southern District of New York, where his experience included leading multiple prosecutions and investigations under the “material support” statute discussed above and in sanctions and export control matters. Since entering private practice, he has represented clients in JASTA/ATA litigation in federal court; in DOJ investigations involving national security matters and the Bank Secrecy Act; and in assessing compliance and enforcement risks stemming from potential transactions. 

Joyce Adetutu is a Global Projects partner, specializing in international trade. She focuses on sanctions, customs, export controls, and national security for large-scale energy and technology transactions. Joyce advises non-U.S. entities on U.S. economic sanctions (OFAC) and CFIUS reviews, and on import/export controls. Her experience in negotiating large-scale transactions helps her balance legal risk with commercial opportunities.

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