On January 20, 2025, President Trump issued an executive order declaring a national emergency and initiating a process to classify certain cartels and international drug trafficking organizations as Foreign Terrorist Organizations (FTOs) or Specially Designated Global Terrorists (SDGTs). This sanctions policy aims to intensify compliance measures, increase business risk management, and impose stricter legal consequences.

Designating cartels as FTOs or SDGTs creates significant legal risks for businesses operating in Mexico and the United States, potentially leading to severe financial penalties, regulatory scrutiny, and compliance violations. Consequences include civil and criminal penalties, asset freezes, restrictions on financial transactions, exclusion from federal contracts, prosecution under federal law, and imprisonment. The executive order directs U.S. agencies to recommend which cartels should be designated under this anti-terrorism framework, marking a significant shift in U.S. security and compliance policies.

What Has Changed With This New Executive Order?

The designation of cartels as terrorist organizations represents a strategic shift in U.S. foreign policy and business regulations. This expansion allows for:

Stronger Financial and Legal Sanctions

• Asset Freezes: Affecting cartels and businesses with financial ties to them.
• Legal Sanctions: Increased criminal liability for companies that engage with designated entities.
• Law Enforcement & Military Action: Increased anti-terrorism enforcement, expanding legal justifications for coercive action.

Business Adaptation: Compliance & Risk Mitigation Strategies

As Mexican cartels are now Foreign Terrorist Organizations, businesses with supply chain exposure in Mexico or those with U.S. financial ties must implement stronger compliance and risk management policies. Key focus areas include:

Strengthening Sanctions Compliance

• Regulatory Audits: Ensure compliance with U.S. OFAC regulations.
• Automated Risk Detection: AI-driven monitoring for suspicious transactions.
• Compliance Training: Update teams on anti-money laundering (AML) and counter-terrorism financing (CTF) policies.

Supply Chain Risk Management

• Supplier Due Diligence: Conduct comprehensive background checks.
• Traceability Solutions: Use blockchain and AI to verify supply chain integrity.
• Diversification: Shift logistics away from cartel-controlled areas.

Corporate Reputation & Compliance Risk

• Transparency Policies: Publicly demonstrate legal compliance and ethical business practices.
• Strategic Communications: Engage investors and partners with clear compliance reports.
• Reputational Risk Monitoring: Track brand perception in relation to cartel and terrorism-related sanctions.

Human Capital Protection

• Enhanced Security Measures: Adjust operational security in high-risk regions.
• Employee Training on Compliance Risks: Teach teams to identify illicit financial flows.
• Crisis Response Planning: Develop strategies to handle legal inquiries and sanctions-related issues.

Mergers & Acquisitions (M&A) Considerations

• Due Diligence on Sanctioned Entities: Prevent legal exposure by screening acquisitions.
• Asset Risk Valuations: Assess business value in sanctioned regions.
• Conservative Investment Strategies: Avoid high-risk financial entanglements.

Strengthening Cybersecurity & Data Protection

• Cybersecurity Infrastructure Investment: Prevent data breaches linked to cartel activities.
• Financial Transaction Monitoring: Identify AML and fraud risks.
• Cyber Threat Simulations: Enhance corporate security preparedness.

Anti-Money Laundering (AML) & Financial Compliance

• Know Your Customer (KYC) Protocols: Implement advanced identity verification.
• Transaction Monitoring: Detect terrorist financing risks.
• Internal Compliance Audits: Regularly assess financial and regulatory adherence.

Conclusion: Ensuring Business Continuity & Risk Mitigation

The designation of Mexican cartels as FTOs brings new challenges for businesses in Mexico and the U.S.. Companies must:

• Adapt to evolving compliance frameworks.
• Implement proactive legal and financial safeguards.
• Strengthen supply chain security.

By focusing on regulatory compliance, AML risk management, and cyber protection, businesses can protect assets, sustain global partnerships, and mitigate legal risks linked to U.S. terrorism sanctions.