• First sanctions imposed on Brazilian and Portuguese companies and individuals
• Mexico’s CIBanco, Intercam and Vector targeted by earlier designations
• AML and corruption concerns could trigger terrorism-related enforcement

On 5 June 2026, the United States officially designated Brazil’s largest transnational organized crime groups, the First Capital Command (Primeiro Comando da Capital, “PCC”) and Red Command (Comando Vermelho, “CV”), as Foreign Terrorist Organizations (“FTOs”) and Specially Designated Global Terrorists (“SDGTs”).

Brazil will hold presidential and legislative elections in October 2026 and these measures should be understood as part of a broader US enforcement strategy in Latin America, aligned with the “America First” posture in the Western Hemisphere.

For financial institutions, investors, and companies operating in, or otherwise linked to, jurisdictions where these groups are active, the designations create additional due diligence obligations and may expose them to global sanctions, anti-money laundering enforcement actions, and asset seizures.

On 1 July 2026, the Trump administration announced sanctions against two Brazilian nationals, three companies based in Brazil, and one Portuguese company for alleged links to a PCC money laundering network. This reportedly was the first example of the new designations leading to direct measures against individuals and companies, including the blocking of assets in the US, restrictions on transactions involving sanctioned parties, and possible consequences for financial institutions alleged to facilitate transactions with them.

Western Hemisphere enforcement push

While the US policy in Latin America has long been shaped by the “War on Drugs,” the second Trump administration has accelerated the use of counterterrorism narratives and tools against transnational organized crime.

On 20 January 2025, President Trump issued an executive order directing the federal government to pursue the “total elimination” of cartels and transnational criminal organizations. The same executive order also created a process for designating international narcotics cartels and transnational criminal organizations as FTOs or SDGTs.

A FTO designation is issued by the State Department, applies only to foreign organizations, and creates a basis for criminal enforcement, including material-support liability, which means potential criminal exposure for knowingly providing support, resources, services, or assistance to a designated organization. A SDGT designation may apply to both individuals and organizations and is primarily designated to impose financial sanctions, including asset blocking under US jurisdiction.

In response to Trump’s executive order, the Attorney General instructed the Department of Justice (“DOJ”) to treat cartels and criminal organizations “as threats to US sovereignty”. The DOJ directed prosecutors to prioritize the most serious available charges, including terrorism, racketeering, sanctions, and economic-restrictions offenses. It also redirected resources toward foreign bribery, money laundering, asset seizure and forfeiture, and task-force operations targeting these groups’ financial and logistical infrastructure. Enforcement of the Foreign Corrupt Practices Act (“FCPA”) also was aligned with this framework, as the administration narrowed future enforcement priorities toward bribery cases linked to cartels or transnational criminal organizations.

FTO designations across Latin America

From February to September 2025, the US Department of State designated several transnational criminal organizations active in Mexico, Colombia, Venezuela, Ecuador, El Salvador, and Haiti as FTOs and SDGTs.

Serious consequences have already been experienced in Mexico. On 25 June 2025, the US Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) prohibited certain fund transfers involving CIBanco SA (“CiBanco”), Intercam Banco SA (“Intercam”), and Vector Casa de Bolsa SA (“Vector”). This measure followed allegations that the institutions had facilitated money laundering or payments connected to several designated groups, including the Beltrán Leyva Cartel, the Jalisco New Generation Cartel, the Gulf Cartel, and the Sinaloa Cartel.

On the following day, Mexican regulators placed CIBanco and Intercam under temporary managerial intervention. On 15 July 2025, it was announced that Mexico’s National Banking and Securities Commission (“CNBV”) had fined CIBanco, Intercam, and Vector a combined MXN 185 million (USD 10.6 million) for administrative compliance failures.

In October 2025, CIBanco had entered liquidation. Two months later, the Mexican government revoked Vector’s authorization to organize and operate as a brokerage firm. Mexican authorities also approved Intercam’s restructuring following the sale of a significant portion of its operations to KPTL México Bank SA, as part of efforts to address the consequences of the US enforcement action.

In the case of Brazil, the US designation order was officially announced by Secretary of State Marco Rubio on 28 May 2026, shortly after Brazilian Senator Flávio Bolsonaro, son of former President Jair Bolsonaro and a presidential candidate in Brazil’s next general elections, visited Washington and publicly urged US authorities to classify these groups as terrorist organizations. On the same day, Brazilian authorities coincidentally launched the second phase of Operation Hidden Carbon (Operação Carbono Oculto), the most extensive investigation against organized crime in the country’s history.

The designations quickly reverberated across Brazil’s public and private sectors. On 29 May, Brazil’s presidency convened an emergency meeting with officials from the Ministry of Finance, the Ministry of Justice and Public Security, the Federal Police, the Ministry of Foreign Affairs, and presidential advisers to assess the scope of the US measure and define the tone of the Brazilian government’s response.

Increased due diligence and risk management requirements

After the US designations officially entered into force on 5 June 2026, Brazil’s largest law firms reported an increase in requests from companies seeking information and procedures to strengthen compliance and governance controls aimed at preventing alleged links to organized crime.

In parallel, these designations have been criticized by high-ranking Brazilian officials and experts in organized crime, public security, anti-money laundering, and compliance. These critics argued that they could complicate and slow down Brazil’s bilateral cooperation with the US and other partners, particularly if certain exchanges are shifted from police or law enforcement channels to more restricted national security channels.

Concerns have also been raised that the measure could affect Brazil’s sovereignty, complicate regional cooperation, and generate broader institutional consequences, especially in a context where debates over organized crime and public security are often captured by electoral agendas.

The designations place companies and financial institutions within a broader enforcement framework that connects existing organized crime, sanctions, illicit-finance, terrorism-financing, corruption, tax, trade, and logistics risks under a single national-security lens. As a result, transactions or counterparties previously treated primarily as anti-money laundering or anti-corruption concerns may now trigger terrorism-related enforcement consequences. Experts have cautioned that comparable approaches in Mexico, Colombia, and El Salvador have not necessarily weakened organized crime and may instead create additional legal, diplomatic, and market risks.

Once adopted, and regardless of whether it is universally accepted, a terrorist designation – especially one issued by the US – creates a cascading effect that can extend well beyond the designating country’s legal system.

It will prompt governments, law enforcement agencies, financial institutions and businesses to adopt enhanced scrutiny, compliance controls and risk-management measures for any company or individual with operations, business partners or investments in countries where the designated groups are active.

Although international declarations, resolutions, and sectoral treaties under the United Nations have articulated certain conditions and core elements associated with “terrorism”, no single standardized definition exists under international law. In practice, sovereign states maintain the discretion to define and label “terrorism” within their own jurisdictions. Thus, when a country designates an organization or individual as terrorist, it is making a sovereign and political decision based on how it perceives a threat for national security, foreign policy, sanctions, criminal law, or counterterrorism purposes.

Some countries may not adopt the same classification, apply the same legal consequences, or agree that the designation is appropriate. Other states may follow suit, not necessarily because they fully share the same understanding of terrorism, but for strategic, diplomatic, security, or economic reasons.

For decades, the US Foreign Terrorist Organization List has operated as one of the most visible signals in global counterterrorism policy, often influencing how other countries, international institutions, financial institutions, and private actors assess terrorist-related risk.

Key Implications

For the private sector, key implications of the designations can be identified across the following areas:

• Financial sector and market-risk exposure. The most immediate effects of the designations may fall less on criminal organizations themselves and more on companies, financial institutions, investors, and compliance programs. The financial sector and companies are likely to be among the most directly affected, as the measure generates a “cascade risk” across business chains and create a particular exposure for banks, payment platforms, insurers, investors, and other actors connected to US-linked financial infrastructure. Banks may close accounts, correspondent institutions may block or reject transactions, investors may require enhanced disclosures, insurers may reprice or restrict coverage, multinational customers may terminate contracts, and boards may demand proof that management has mapped potential exposure to designated groups.

• Compliance and legal exposure. Companies with significant US exposure may need to reassess compliance programs built around domestic regulatory requirements. This is especially relevant for sanctions screening, correspondent banking exposure, dollar-denominated transactions, mergers and acquisitions, geographic risk mapping, counterparty risk assessment, and third-party due diligence. US authorities may pursue asset freezes, seizure and forfeiture actions, criminal investigations, civil claims based on alleged material support, and restrictions on correspondent banking, dollar clearing, and access to international payment infrastructure. These powers may reach assets under US jurisdiction and, in certain circumstances, assets located abroad. Under US counterterrorism law, financial institutions must maintain control of funds linked to designated FTOs, its members, or its agents, report them to the US Treasury, and manage potential civil or regulatory exposure. US authorities may also seek injunctive relief against conduct viewed as facilitating or supporting a designated group. Executives, employees, intermediaries, beneficial owners, and agents may face investigation, arrest, extradition, or prosecution for knowingly providing or facilitating support to a designated group. Penalties can include fines and up to 20 years’ imprisonment, with higher sanctions where the conduct results in death. Separately, US nationals allegedly injured by an act of terrorism may even pursue civil claims under the Anti-Terrorism Act, including against persons or entities alleged to have knowingly provided substantial assistance to those responsible. Given the potential loss of banking relationships, frozen assets, and exclusion from payment systems, some experts have described the commercial consequences as a form of “financial death”.

• Cross-border and extraterritorial exposure. The designations of the PCC and CV as SDGTs and FTOs move organized crime exposure beyond traditional anti-drug and anti-money laundering concerns, placing it within a more severe sanctions and counterterrorism framework. The issue is therefore not limited to whether Brazilian law classifies these groups as terrorist organizations, or whether other countries agree with the US approach. Even without domestic recognition of the same classification, companies operating with a relevant US nexus may face heightened scrutiny where their transactions, counterparties, or supply chains are suspected of benefiting designated groups. They may also be affected through the decisions of banks, investors, insurers, customers, payment platforms, and commercial partners that are exposed to US rules or that align their risk standards with US enforcement expectations. That nexus may arise through dollar-denominated payments, correspondent banking relationships, American investors, securities listed in US markets, executives with US citizenship or residency, insurance arrangements, technology infrastructure, contracts with American counterparties, or transactions cleared through the US financial system.

• Global supply chains and logistics exposure. The transnational reach of these criminal groups also means that exposure may arise beyond direct Brazilian counterparties. Relevant risks may emerge across jurisdictions where these groups or their affiliates operate. As reported by the Anti-Corruption Report in relation to the earlier designations of Mexican criminal organisations, companies may face risk not only through who they contract with directly, but through how goods, funds, services, and intermediaries move across borders. They may not knowingly transact with PCC, CV, or any other designated group, but may still become exposed when risk moves through apparently legitimate market relationships, including suppliers several layers down the supply chain, customers, intermediaries, payment flows, investment vehicles, logistics providers, franchisees, local service providers, or hidden beneficial owners that are controlled by, benefit from, or channel value to a designated organization.

Since Operation Hidden Carbon revealed the depth to which organized crime has infiltrated Brazil’s formal economy through fuel distribution, fintech platforms, investment funds, real estate, logistics, and other opaque corporate structures, organized crime infiltration risks can no longer be treated as distant threats or generic adverse media concerns. In conjunction with US terrorist designations, these risks become more challenging, as they may trigger sanctions exposure, counterterrorism financing concerns, correspondent banking restrictions, contractual consequences, and enforcement action from foreign powers.

are not assessed solely by whether they can state that they have no direct relationship with the PCC, CV, or any other designated group. They must be able to show that relevant risks have been identified, assessed, escalated, mitigated, and, where necessary, addressed through appropriate contingency or response measures.

Exposure to PCC, CV, or other designated groups may arise indirectly through suppliers, customers, intermediaries, payment flows, logistics providers, investment vehicles, local service providers, or hidden beneficial owners. Companies must go beyond sanctions, politically exposed persons, and adverse-media screening and assess how ownership, control, financing, payments, logistics, supply chains, and local operations may create direct or indirect exposure. This does not require treating Brazilian, Latin American, or other counterparties in regions where these groups operate as inherently suspicious, but it does require due diligence that is more contextual, investigative, documented, continuously updated, and responsive to risks that extend across borders.

In practical terms, companies should focus on the following priorities.

• Map direct and indirect exposure across borders: Companies should treat this exposure as a cross-border issue, rather than as a risk confined to Brazil. They should identify where their business may intersect with sectors, territories, assets, logistics routes, counterparties, or third-party networks vulnerable to PCC, CV, or other organized crime groups designated as terrorist actors by the United States. This assessment should not be limited to direct customers and first-tier suppliers. It should also include distributors, franchisees, subcontractors, logistics providers, payment intermediaries, consultants, agents, local service providers, representatives, investment vehicles, lenders, guarantors, and joint-venture partners. The goal is to understand how exposure may move through the economy from one relationship to another and enter the company’s business ecosystem, including through formally legitimate relationships that may appear far removed from the original source of concern.

• Identify exposure before a crisis emerges: Companies should identify whether their operations, counterparties, or transaction flows create exposure to US jurisdiction or US-linked commercial pressure. This may arise through dollar-denominated payments, correspondent banking, US investors, customers, executives or board members, insurance arrangements, cloud or technology infrastructure, or transactions cleared through the US financial system. This assessment should be conducted proactively, before a bank blocks a payment, an insurer requests clarification, an investor raises concerns, a commercial partner demands urgent explanations, or regulators and law enforcement authorities begin scrutinizing the company’s operations.

• Reconstruct the beneficial ownership chain: Exposure to organized crime and designated groups often hides behind opacity in ownership, control, influence, or economic benefit. Companies should verify not only legal ownership, but also who effectively controls the relationship and who benefits from it. Where possible, enhanced due diligence should include a documented review of shareholders, directors, administrators, voting rights, nominee arrangements, related parties, family or personal links, financing arrangements, side agreements, repeated business associations, shared addresses, common representatives, powers of attorney, and unexplained changes in ownership, capital, activity, or control. Where the ownership story is incomplete, inconsistent, unverifiable, or commercially implausible, the relationship should be escalated and, if necessary, suspended or reconsidered.

• Always verify whether the business relationship makes commercial and operational sense: Due diligence should assess whether the transaction makes sense in light of the counterparty’s profile, capacity, geography, declared activity, and operational footprint. Companies should look for inconsistencies such as prices incompatible with the market, fragmented payments, third-party payments with no clear rationale, frequent changes in bank accounts, payment instructions inconsistent with the contracting party, intermediaries without a defined function, newly created companies with significant transaction volumes, logistics routes that do not match the commercial purpose, unexplained subcontracting, or divergence between what was contracted and what was actually delivered. Where possible, these indicators should not be assessed in isolation, but together with internal records, public and private databases, corporate registries, logistics records, and network analysis capable of identifying hidden links among suppliers, subcontractors, representatives, accounts, addresses, and individuals.

• Make monitoring, escalation, and documentation continuous: Due diligence cannot end at onboarding. Companies should adopt ongoing monitoring based on objective risk triggers, including changes in ownership, control, bank accounts, routes, pricing, transaction volumes, business purpose, local incidents, complaints, security events, or pressure for exceptions outside approved flows. Red flags should feed a structured process covering detection, qualification, registration, escalation, decision-making, remediation, and follow-up. Decisions should be documented with clear records of what was reviewed, who approved it, what evidence was considered, what exceptions were granted, and why the relationship was maintained, suspended, terminated, or reported. Where appropriate, companies should preserve evidence, restrict access to sensitive records, protect reporting persons and witnesses, and consider whether the matter requires reporting to competent authorities or financial intelligence channels.

• Align with global standards while reinforcing regional and national best practices: Companies should use global standards as a baseline, including the risk-based approach, customer and third-party due diligence, beneficial ownership verification, recordkeeping, enhanced due diligence for higher-risk situations, sanctions controls, suspicious activity escalation, and proportionate monitoring. However, these standards should not be applied as imported checklists detached from Brazilian and Latin American realities. They should be adapted to local risk patterns and reinforce good practices already present in regulated sectors and more mature companies in the region, including anti-corruption controls, anti-money laundering and counter-terrorist financing protocols, tax and invoice controls, procurement governance, segregation of duties, bank-account validation, third-party management, whistleblower channels, capacity-building trainings, internal investigations, and cooperation with competent authorities.

Because the influence of designated groups can extend through interconnected supply chains, ownership structures, payment flows, and commercial relationships, companies and individuals may face exposure even where no direct connection is apparent. Although businesses operating in affected countries and regions have long had to manage organized crime, corruption, and illicit finance risks, the possibility of severe sanctions, asset freezes, loss of banking access, and other enforcement consequences makes enhanced due diligence more urgent.